Healthcare
Healthcare has been a topic of concern and discussion across our nation for several years. The cost of health care coverage continues to outpace most measures all across the United States, and as discussed in previous issues of HR News, healthcare consumes a healthy portion of Drew’s benefits budget. Grappling with this burgeoning cost has been a priority for HR and a focus of attention for the Compensation Monitoring Committee for the last three years. To summarize:
In 2007 HR was mandated to find ways to slow down health care costs. Working with our consultant — Aon Consulting, HR focused on developing a better understanding of our plans, the marketplace and other factors that have affected the utilization and cost of our program and collaborated with United Health Care to identify ways to enhance service, hold down cost increases and streamline administrative procedures.
In 2008, with a 22% increase in medical cost projected for 2009, we implemented a number of changes to the Active plan (the plan that covers faculty and staff who are working). We added the ability to select a doctor without a referral and free preventative care, and increased the cost of a doctor’s visit and prescription co-pays. These changes maintained the same level of benefit, incorporated benchmark data specific to colleges and universities; and held the premium increase for the base plan to 3.4% for faculty and staff. We also made the conscious decision to postpone any changes to the Retiree plan until we had sufficient time to review their plans and consider all options.
In 2009 we faced a 8.7% increase for 2010. We contemplated joining a consortium as well as changing to an insured program. Again, we reviewed plan design changes and factors that were driving our costs, but determined that given all the changes implemented in 2009, we could not make any additional changes to the plan. Instead, HR concentrated on reducing costs for other benefit programs and using those savings to offset medical costs. By changing vendors and negotiating lower rates for life, short and long-term disability insurances, we were able to keep premium increases to under 4%. In addition, we announced that a review of retiree health was underway and changes would be announced later for implementation on January 1, 2011.
It is now 2010 and we face a projected increase of 11.3% for 2011, due largely to the continued escalation in health care costs. Working with our consultant, we were able to contain costs somewhat, but despite our effort, the increase for this year is still the highest it has been in some time. For 2011, the BASE plan will increase 9.9%. The University will continue to cover 70% of the cost of the premium for this plan. Faculty and staff who elect the Core plan will experience a smaller premium increase, while those who elect the Enhanced plan will experience a higher premium increase.
Full information regarding rates for all benefit plans will be distributed with Open Enrollment materials next week.
2011 Healthcare Changes
Other than premium increases, no changes will be made to the Active plan for 2011. However, after two years of review, we are ready to make changes to the Retiree plan that will align it more closely with the Active plan. Changes will be communicated to all current retirees in a separate communication, but the highlights include an increase in the prescription co-pay, the elimination of a separate plan for retirees under age 65, and changes in the coordination of Medicare benefits for retirees over age 65.
Health Care Coverage for Future Retirees
Over the course of this last year, HR, working with Aon Consulting and a small group of Cabinet members, reviewed retiree health plans and identified a number of options for managing retiree health care in the future. Several meetings were held with the Compensation Monitoring Committee and a retiree representative to explore other options. We will present the recommendations to the community later this year.
In the meantime, effective January 1, 2011 we will temporarily suspend retiree health benefits for any faculty or staff member retiring after December 31, 2010 (not including those in the VRP program). Recommendations for managing retiree health moving forward will be made to the Board of Trustees at their February meeting and assuming their approval, the new plan will go into effect on March 1, 2011. Anyone who chooses to retire in January or February will be covered by the new plan, provided they meet the eligibility requirements; however, they should contact Deborah Raikes-Colbert to discuss COBRA coverage during these two transitional months.
Current retirees and VRP retirees are not affected by the temporary suspension.
We recognize that there is much to be absorbed from this memo. Please know that there will be open meetings when everyone will have the opportunity to learn more about the future of retiree health benefits.
Healthcare Reform
The immediate impact of the health care reform legislation is that Drew will provide medical coverage to the children of our employees who are under age 26, provided they meet the eligibility requirements, and will update our materials to reflect changes to the Flexible Spending Account (FSA). The other measures that apply to plans as of January 1, 2011 – free preventative care and no lifetime limits — were already in place at Drew, hence, no other plan design changes are necessary at this time to comply with the law.