During the summer of 1997 it was announced that Medica Premier had unilaterally withdrawn as a 1998 (and beyond) healthcare option for University of Minnesota employees. Many employees chose Medica Premier because of its low cost and the access to their physicians that it afforded and, therefore, this unilateral action came as a blow to many, particularly those who had developed strong relationships with physicians in the Medica Premier plan. Some of the physicians involved would no longer be part of any plan offered to employees, and in some instances in order to maintain relationships with their physicians employees would have to join the State Health Plan and incur almost usurious increases in healthcare costs. Equally of concern was that the costs of choosing the State Health Plan for those now in it would increase substantially, out of proportion to those in other plans.

There are a number of anomalies in healthcare contracts for the coming year. For instance, while some plans have greatly increased costs to consumers, others actually result in decreased costs due to increased University contribution. For a family on the State Health Plan in 1997, to stay on that plan in 1998 would mean an increase in monthly costs of $94.71, which translates into an increase of $1136.52 per year. For a similar family currently on Medica Premier, the monthly costs increase $162.62 per month, translating into $1951.44 per year. These extremely high costs suggested to the Committee that the providers are telling us that they really don't want to provide the service and if it is priced high enough, no one will buy. A logical conclusion is that next year will see new, dramatic changes that will be equally bad for the consumer.

Committee Deliberations: The Committee met on October 3rd and October 6th to discuss potential options for relief, and on October 13th to prepare its final report. This fast timeline was necessitated by the fact that the open window for benefit enrolment begins on October 15th and ends on November 15th, and it was felt that for employees to make informed decisions it was necessary that they be aware of options, if any, as early as possible.

Data: In order to assess the impact of any recommendation of the Committee it was necessary to know the distribution of employees among the various healthcare options in 1997. It was also felt that, in spite of the exorbitant cost increases in some plans, that some employees could afford the changes (albeit some with sacrifice), but others could not without seriously disrupting their lives.

The distribution among civil service, academic and student members of Medica Premier are given in Appendix II (not distributed electronically, but available on the internet). In almost all cases dependents comprise approximately 50% of the total number of people enrolled in the program.

It was the feeling of the Committee that whatever the relief plan recommended it should not be across the board, but must be applied in a graduated way to aid those in most need. Based on figures supplied by Robert Fahnhorst of Employee Benefits, 67% of all employees at the University have an annual salary <<$45,000. It is these individuals who should be targeted for relief.

Options: Six relief options were discussed (it should be noted that each of the options is envisioned as only for one year, until a long term solution is accomplished):

• Hardship. There was unanimity of opinion that hardship cases should have high priority. Hardship is defined as those who have relationships with physicians that, if disrupted, would have deleterious health effects. Examples could include individuals who have strong relationships with physicians who will not be in any of the plans offered to University of Minnesota employees, or employees who have chronic diseases (e.g., diabetes) that have been treated by specific physicians who would be forced to change physicians because of the options available.

  The Committee unanimously recommended that Professor Hamilton meet with President Yudof to ask that he intervene with Governor Carlson for these individuals, asking for 9 months continuation with their current physicians to enable a smooth transition to new doctors. President Yudof expressed great sympathy for those affected and after meeting with Professor Hamilton on October 8th agreed to contact the Governor on our behalf.

• Subsidy. The earliest form of relief suggested was by representatives of the AHC FCC, for graduated benefit subsidies. This would have the advantage that the subsidies would be non-taxable (as part of the benefit package) and in a graduated form would benefit most those in most need. A possible package is suggested for those now on Medica Premier and the State Health Plan and can be viewed on the internet. As can be seen, the total cost to the University would be somewhat in excess of $2,000,000.

  A concern of the Committee was whether a subsidy based on income was equitable, particularly since users of other plans with similar incomes would not be subsidized. However, in most of the instances of non-subsidy in other plans, individuals would benefit directly from decreased costs. This is not universally true, but accommodations could be made to make it more equitable.

• Loan. The University made available no-interest loans to entice employees to go onto the biweekly payroll. Why could not a similar approach be made to healthcare?

• Onetime Grant. A onetime grant is essentially a subsidy, and since any relief is envisioned as only for one year this is essentially a subsidy.

• Benefits Swap. Many of those covered in the <<$45,000 range are civil servants and students. Civil servants might consider taking advantage of their vacation and sick leave benefits to swap for health benefits during the coming year.

• No Action. This action is the least palatable for the Committee members. It is felt that among the options noted above, some solution (or a cafeteria selection of solutions) could be made to those most deserving in the institution.

  Except for the clearly defined hardship cases, there was not unanimity on the Committee as to the other mechanisms to offer relief. Offering a subsidy to help some means that others will have less, or that other university programs will have resources taken away. A loan program, or a trade of sick/vacation leave for insurance, would seem to have the smallest fairness penalty in that regard; the latter would require acceptance by unions and other groups.

Table 1

• Table 1
• Table 2
• Distribution of University of Minnesota Employees Among Health Benefits Providers

Table 1

Table 2

Distribution of University of Minnesota Employees Among Health Benefits Providers

[2] If Medica Premier users select the State Health Plan.