Health Benefits Task Force Meeting

In order to cover cost increases in the health plan, the task force was asked to consider several options presented by the administration that would close the gap by charging the difference to employees or lowering the cost (and level of) benefits. The task force made no recommendations pending receipt of additional data.

BACKGROUND

Currently the administration gives approximately $414 [which includes a promised 3% annual increase for inflation] per employee per month under the defined contribution plan for health costs. Earlier estimates provided by the administration suggest that costs for 1999 will be around $448, and that the difference - anywhere from $15 to $40 per month [to be determined after July 1, 1998] - will have to be covered by employees.

These costs WILL be covered by employees, regardless of what happens in the future. The costs have already been incurred, and will be charged off to employees starting January 1. The plan changes under consideration for the future are an attempt to reduce future costs, which would be incurred during the calendar year starting January 1, 1999, and would be charged off to the employees starting January 1, 2000.

Administration officials, which included Patty Kastelic, Mike Humphrey, and Jim Johnsen from the SWOHR; proposed several possible options for reducing health care costs in addition to the costs employees have to bear over the defined contribution.

These included keeping the current basic and supplemental plan options or using these two options plus another, "preferred" option (see below). These options may include additional employee charges and/or a charge for dependents, depending on which plan the employee chooses. Also, options could include changes to the basic plan deductible and/or out-of-pocket maximum.

All of the options proposed and discussed assumed that the university's defined contribution would not increase. We have been told that the university's defined contribution will not increase, except for the built-in 3% annual increase which was supposed to cover additional increases in the cost of medical care.

The "Preferred" Plan

By implementing a "preferred" plan with lower per employee costs and giving employees the option to choose this plan over the basic or supplemental plans, cost savings would result that would [hopefully] meet or exceed the shortfall. The university's consultant from Mercer did not have any figures immediately available that would project savings from specific plan changes

We were not told that the cost savings would meet or exceed the shortfall. One of the problems with the whole meeting is that they did not discuss the revenue side of the picture at all. We do not know if those savings would be enough, just that they would lower expected and projected costs that the employees would have to bear in the event that costs for medical expenses exceed the 3% which we are currently allotted under the defined contribution model.

Some difficulties in implementing a "preferred" plan were that it would have to be a negotiated item with the unions before union members could choose it. Also, there could be an exodus of healthier employees to the "preferred" plan (because of the additional cost of the basic plan). This would result in a smaller pool of employees on the basic plan [thus increasing the cost of the basic plan]; the "preferred" plan would become the least expensive plan, with a corresponding reduction of benefits.

[Brian- the unions present a peculiar problem to the implementation of any new plan. Since the basic and the supplemental plan were in place when contracts were negotiated, legally the university is not supposed to do anything that has the potential to change anything about the contracts until the next round of contract negotiations. Since this new, optional plan could change the cost of the basic plan by changing the pool of people in it, the Anchorage rep from ACCFT indicated his union would fight this change. I assumed that means bringing an unfair labor practiced suit against the university before the State Labor Relations Board. Beth Frey thinks that Board has the power to stop any changes to a health plan affecting union members pending an investigation and determination by them about the legality of such a change. The Anchorage rep seemed insistent on just such a move. If that happened, it could be awhile before we would see anything changed.]

Major differences between the "preferred" and basic plans include a $250 rather than $100 deductible for individuals [and a $750/family deductible, replacing the current $300 maximum family deductible]; a new $400 "wellness" benefit for physicals, mammograms, and the like; and new pharmacy, dental and vision options. In an attempt to steer employees to network providers, the plan would keep the 80/20 split for network providers, but introduce a 60/40-payment split for non-network providers.

The out-of-pocket maximum [for an individual] would remain at $400, except for the pharmacy out-of-pocket maximum, which would be discontinued. The family out-of-pocket maximum would increase from the current $750 to $1200.

Patty Kastelic said at the meeting that she sensed that people, both within and without the task force, wanted the "preferred" plan, option 1, in some form.

SWOHR presented this plan to the Board of Regents and subsequently will present it to the union bargaining tables in the near future (by August or September 1998). This item was on the BOR agenda for the June 18 meeting of the Human Resources Committee. The SWOHR is providing information on the proposed additional health plan for informational purposes. Action is not expected at this meeting. Changes could be proposed at the August BOR meeting.

Apparently, a mailing will go to all employee homes before open enrollment to explain the changes in health plan options. It is not clear if or when this proposal would formally go to governance for review.

This has been an ongoing issue. For more background information, visit this site http://info.alaska.edu/UA/benefits/hbtfreport/execsum.html or contact Rita Bowen (907-465-6439), jnrmg@acad1.alaska.edu and/or Bev Frey (907-474-5954), beverly@gi.alaska.edu.

APPENDIX

Agenda
Board of Regents
Human Resources Committee
Thursday, June 18, 1998 *11:00 a.m.- 1:00 p.m. Regents' Conference Room, Butrovich Bldg., UAF
Fairbanks, Alaska

EXCERPT

IV. Ongoing Business

C. Employee Relations Report: Compensation Adjustment for Classified and APT Staff

In light of upcoming salary adjustments for faculty and union represented staff and the recent vote by classified staff not to be represented by a union, it is timely for the university to consider salary adjustments for classified and administrative/ professional/technical (APT) staff.

Effective July 1, 1998, classified maintenance and service staff represented by UACEA will receive a 1.5 percent across the board grid adjustment, faculty represented by ACCFT will receive a 2 percent across the board adjustment, and faculty represented by United Academics will receive performance-based adjustments from a 2.4 percent salary pool. In addition, faculty represented by ACCFT and United Academics will receive annual lump sum payments, in part, for the purpose of mitigating the impact on employees of potential future health care cost increases.

For classified and APT staff, the university administration will make a recommendation to the Board of Regents concerning future pay adjustments, after consultation with the appropriate staff governance groups and review of the results of an upcoming survey of staff attitudes toward workplace issues including salaries and health benefits. Alternatives for consideration include:

• An across the board grid adjustment;
• A non-recurring lump sum payment;
• A payment timed to cushion employees from potential health benefits charges in January 1999; and/or
• A modification of the salary range structure for classifications with severe recruitment and retention problems.

University policy and regulation require a consolidated approach to compensation adjustments and Board of Regents approval is required before implementation of any adjustments.

At the April 1997 Board of Regents' meeting in Juneau, Patty Kastelic, executive director for Statewide Human Resources, provided an update on the work of the Staff Alliance Benefits Task Force and the administration's effort to identify ways to control health care cost increases to the university while continuing to provide comprehensive coverage to university employees and their dependents. The Staff Alliance Benefits Task Force report recognized that in order to slow down the increase in the cost of the health plan, some changes would be required in the future.

As a result of contract bargaining with the UACEA, ACCFT, and AAUP/AFT, the university's Health Care Plan became a defined contribution plan. Staffs who are not members of a bargaining unit continue to receive the same health care coverage and are also on a defined contribution plan. The contribution rate is $402.29 per month per employee, with a university-paid inflation rate of up to 3 percent, to a maximum of $414.36 for fiscal year 1998. This cost was based on actuarial projections by the university's consulting firm, William Mercer, Inc. If the university's Plan costs exceed the defined contribution rate for fiscal year 1998, employees will pay the difference beginning January 1999.

The Benefits Task Force was expanded this spring to include representation from all employee groups. The Task Force held three day long meetings on May 6th, 27th and June 16th to review recent health care claims and administrative cost information and to explore potential plan design changes to address projected increases in health benefit costs. Based on preliminary discussion, the university suggested several plan design options. Executive Director Kastelic will give a report on the work of the Task Force and outline possible options. One of the likely outcomes will be to continue the current basic plan and basic plus supplemental while offering employees the additional choice of a more cost effective plan beginning in January 1999.

The university administration will hold campus-wide meetings in the fall before open enrollment to communicate any changes to the health care plan. No action is required on this issue.