David E. Lechner, vice president for business & finance for the University of Nebraska, has sent the following information regarding 2004 health insurance benefit changes.
Dear Friends and Colleagues:
As promised, attached is a question and answer document with Web links to details of the 2004 health benefits plan. These materials are designed to provide you with additional information as you weigh your benefit elections.
In mid-November, you will receive the usual enrollment materials for your 2004 NUFlex benefits plan. These changes will take effect Jan. 1, 2004.
After you review the materials, please contact the UNMC campus benefits office at 559-4340or via e-mail atbenefits@unmc.edu.
Questions and Answers Concerning Health Care
What are the new premiums I will pay?
The employee portion of the premium is as follows:
http://www.nebraska.edu/hr/2004BenefitChanges.pdf#EmpPortion
Note: When the 2004 table is compared to the 2003 table, it appears that rates have gone down. Please be advised that the 2004 table is your monthly net cost (monthly price tags or gross cost minus NUCredits [$63]) versus the 2003 table which show price tags or gross cost.
What are the benefits changes?
http://www.nebraska.edu/hr/2004BenefitChanges.pdf#Changes
Note: When the 2004 table is compared to the 2003 table, it appears that rates have gone down. Please be advised that the 2004 table is your monthly net cost (monthly price tags or gross cost minus NUCredits [$63]) versus the 2003 table which show price tags or gross cost.
What is the cause of increases in premiums?
Our premiums are increasing because the cost of claims the health plan is paying has increased substantially.
Two years ago, in a similar question and answer document, it was stated that in the future rates for employees would go up to the extent of growth of claims. Accordingly, in 2002, when medical expenses went up 5-6 percent, premiums for employees rose approximately 5-6 percent with no changes in medical deductibles or stop losses.
This year, medical expenses are up 30 percent and pharmacy costs have increased by 6 percent over the past year, with some groups’ expenses increasing even more. These costs must be passed through and recovered by a combination of increased university contributions, employee price increases and benefit changes.
It should be remembered that since we are self-insured, virtually all increases go to paying plan expenses, other than a fee paid to Blue Cross Blue Shield to process claims.
Did the university increase its contributions?
Yes, the University continues to pay in four dollars for every dollar contributed by active employees. The University’s contribution to the plan increased $2.5 million on July 1 of this year. This follows last year’s increase in contribution of $6.8 million. Barring further budget cuts, an additional $7 million will be contributed for the year starting July 1, 2004.
How do these rate increases and costs compare to other employers?
Three examples are offered, two national, one local.
The Wall Street Journal recently reported the overall growth in health care premiums in the United States was 13.9 percent for the past year. In comparing costs, the Kaiser Family Foundation’s 2003 Annual Benefits Survey found that nationally, in PPO plans similar to ours, the average cost for family coverage on an annual basis (using 2002 data) was $2,515 for only the employee’s portion of the premium. On a nationwide basis, the average employee paid 27 percent of total cost. The University’s family coverage cost for 2004 (the employee’s portion only) will be $2,028. University employees pay approximately 21 percent of the total premium.
According to the 2002 Comprehensive Survey of Colleges and University Benefits Programs published by the College and University Personnel Association, health benefits have sharply increased in the past year. Some 65.8 percent of the survey participants reported their traditional plan premiums have increased more than 10 percent, including 14.5 percent who reported increases of more than 20 percent.
The Federal Employees’ Health Benefits program and the State of Nebraska (for its BluePreferred PPO plan) have posted the following rates for 2004, which is compared to our plan’s basic coverage (in all cases – employee cost only):
| Federal | State | University | |
| Employee Only | $106 | $64 | $57 |
| Employee and Spouse | Not offered | $160 | $121 |
| Employee and Child(ren) | Not offered | $160 | $103 |
| Family | $245 | $228 | $169 |
What are the national trends in benefits?
The health care challenge is a national phenomenon that is not confined to colleges and universities. Per the Wall Street Journal and Watson Wyatt Consulting, the following are examples of measures that others are taking to keep health care premiums down:
- Verizon now charges an extra $40 per month for employees whose working spouse declines comparable coverage at their own company.
- Boeing charges $100 extra a month if the working spouse chooses Boeing’s plan rather than its own.
- General Electric will start charging more for large families than for small ones.
- The trend away from employer-provided retiree health benefits continues as a result of rising health care costs, growing retiree populations, and uncertain business conditions.
How are health insurance rates determined and why are there different size increases in the employee paid portion of the premium?
Different prices reflect different levels of usage by the various employee groups. For each of the last three years, the university has employed actuaries, professionals who have expertise in insurance matters, to study our plan and the prices charged for the different plan options and coverage categories. The actuaries look at our plan from a number of angles including the usage of the plan by persons in all coverage categories and for all options. The actuaries supply us with their opinion as to what the premiums should be, which we use in setting premiums.
Didn’t last year’s benefit changes have any impact on this year’s claims?
Yes, the changes of last year did have an impact. While there were few changes last year, most revolved around pharmacy. As a result, this year our pharmacy costs are up 6 percent, much less than national trends where retail prices have increased approximately 18 percent every year since 1997.
Why are there now separate categories for Employee and spouse and Employee and child(ren)?
The President’s Health Care Advisory Committee, a group comprised of faculty and staff appointed by the President and Chancellors, recommended this category, that previously included employee and spouse and employee and child(ren), be divided into two separate rates because the usage of health care by these groups tends to be different. An employee and spouse use substantially more health care resources than does an employee and child.
There are new rules on health care reimbursement (flex) accounts. Will we see changes there?
There are new federal rules that expand what can be reimbursed through flex accounts. We do plan on amending our plan to allow these changes, which should provide additional savings to those who use flex accounts. Details will appear in your NUFlex packet in mid-November.
What is the long-range forecast for health care trends?
Unfortunately, health care trends will probably continue to grow at the same or higher rates nationally and locally. Key factors pushing this increase are the aging of our workforce, larger claims, Medicare/Medicaid losses of hospitals being shifted into other payors (including our plan), higher cost of medical technology, and large increases in medical malpractice insurance to doctors who then must recover this cost through increased charges.
Is there anything I can do as a health care consumer to reduce expenses?
Yes. The greatest impact you can have long-term is dictated by your lifestyle and wellness. It is well-proven that lack of exercise, obesity, smoking and the lack of proper management of chronic diseases such as high blood pressure, diabetes and asthma significantly increase your health care risks.
Choosing to use generic drugs can also reduce expenses. The difference in co-pays between generics and brand name drugs on the primary drug list is substantial — $17 dollars per prescription. (Drugs on the primary drug list are sometimes called “formulary” drugs. These are drugs for which our plan gets a negotiated discount.) If you, in consultation with your health care provider, switch one monthly prescription from formulary to generic, the savings to you will be $200 dollars per year. If you were able to make the same switch from a brand not on the formulary to a generic, the savings would double to $400 per year.
Third, plan properly and set aside money in your health care reimbursement (flex) account to cover medical, pharmaceutical and other covered expenses. This allows you to pay for claims with pre-tax dollars.
Be a conscientious consumer. To demonstrate the point of how your choices can impact expenses, let’s look at an example of our purchases of Prilosec© and Claratin©, two drugs that recently came off of patent and went to “over-the-counter” status. In 2001 (the last year we have the costs and dosages purchased of both of these drugs) the university’s plan spent over $600,000 on these two drugs alone at a cost of $4.26 and $2.26 per day’s supply, respectively. This week, at a local pharmacy, over the counter, the same drugs were 66¢ and 83¢ per day. The direct-to-consumer ads are pushing you to a “new, improved” model of these drugs, which carry a price similar to the old, higher price. If everyone taking these drugs bought the less expensive over-the-counter versions, versus the new, improved model, the savings to the plan would be $435,000. Being an active participant in your health care choices can make a big difference.
What is management doing to try to keep our plan viable and competitive?
The President and Chancellors are deeply committed to keeping our plan as competitive and comprehensive as possible. They recently charged the Vice President for Business and Finance to conduct a survey to benchmark our plan in certain key areas and to canvas for innovations or changes others have made to keep their plan competitive.
Following this survey, the information will be weighed to determine what actions must be taken to make our plan even more sound and responsive to the needs of its members. Consultants from nationally recognized benefits consulting firms could be engaged as a part of this process.