Summary

June 16, 1998

In order to cover cost increases in the health plan, th= e task force was asked to consider several options presented by the admin= istration that would close the gap by charging the difference to employee= s or lowering the cost (and level of) benefits. The task force made no re= commendations pending receipt of additional data.

BACKGROUND

 Currently the administration gives approximately = $414 [which includes a promised 3% annual increase for inflation] per emp= loyee per month under the defined contribution plan for health costs.&nbs= p;

Earlier estimates provided by the administration sugges= t that costs for 1999 will be around $448, and that the difference - anyw= here from $15 to $40 per month [to be determined after July 1, 1998] - wi= ll 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 wi= ll be charged off to employees starting January 1. The plan changes under= consideration for the future are an attempt to reduce future costs, whic= h would be incurred during the calendar year starting January 1, 1999, an= d would be charged off to the employees starting January 1, 2000.<= /TD>

OPTIONS

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

These included keeping the current basic and supplement= al plan options or using these two options plus another, "preferred" opti= on (see below). These options may include additional employee charges and= /or a charge for dependents, depending on which plan the employee chooses= =2E 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 to= ld that the university's defined contribution will not increase, except f= or 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 emplo= yee costs and giving employees the option to choose this plan over the ba= sic or supplemental plans, cost savings would result that would [hopefull= y] 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 ex= ceed the shortfall. One of the problems with the whole meeting is that th= ey 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 an= d 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 we= re that it would have to be a negotiated item with the unions before unio= n members could choose it. Also, there could be an exodus of healthier em= ployees to the "preferred" plan (because of the additional cost of the ba= sic 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 w= ould become the least expensive plan, with a corresponding reduction of b= enefits.

[Brian- the unions present a peculiar problem to the im= plementation of any new plan. Since the basic and the supplemental plan w= ere in place when contracts were negotiated, legally the university is no= t 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 th= e 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 pr= acticed suit against the university before the State Labor Relations Boar= d. Beth Frey thinks that Board has the power to stop any changes to a hea= lth plan affecting union members pending an investigation and determinati= on 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 befor= e we would see anything changed.]

Major differences between the "preferred" and basic pla= ns 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 emplo= yees to network providers, the plan would keep the 80/20 split for networ= k providers, but introduce a 60/40-payment split for non-network provider= s.

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

 PROCESS

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

SWOHR presented this plan to the Board of Regents and s= ubsequently will present it to the union bargaining tables in the near fu= ture (by August or September 1998). This item was on the BOR agenda for t= he June 18 meeting of the Human Resources Committee. The SWOHR is providi= ng information on the proposed additional health plan for informational p= urposes. Action is not expected at this meeting. Changes could be propose= d at the August BOR meeting.

Apparently, a mailing will go to all employee homes bef= ore 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 re= view.

This has been an ongoing issue. For more background inf= ormation, visit this site http://info.alaska.edu/UA/benefits/hbtfreport/e= xecsum.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

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 b= e represented by a union, it is timely for the university to consider sal= ary adjustments for classified and administrative/ professional/technical= (APT) staff.

For classified and APT staff, the university administra= tion will make a recommendation to the Board of Regents concerning future= pay adjustments, after consultation with the appropriate staff governanc= e groups and review of the results of an upcoming survey of staff attitud= es toward workplace issues including salaries and health benefits. Altern= atives for consideration include:

-- A modification of the salary range structure for classifications wi= th severe recruitment and retention problems.

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

D.

Benefits Update

At the April 1997 Board of Regents' meeting in Juneau, = Patty Kastelic, executive director for Statewide Human Resources, provide= d 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 inc= reases to the university while continuing to provide comprehensive covera= ge to university employees and their dependents. The Staff Alliance Benef= its 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 fut= ure.

As a result of contract bargaining with the UACEA, ACCF= T, and AAUP/AFT, the university's Health Care Plan became a defined contr= ibution plan. Staffs who are not members of a bargaining unit continue to= receive the same health care coverage and are also on a defined contribu= tion 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= =2E36 for fiscal year 1998. This cost was based on actuarial projections = by the university's consulting firm, William Mercer, Inc. If the universi= ty'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 inc= lude representation from all employee groups. The Task Force held three d= ay long meetings on May 6th, 27th and June 16th to review recent health c= are claims and administrative cost information and to explore potential p= lan design changes to address projected increases in health benefit costs= =2E Based on preliminary discussion, the university suggested several pla= n design options. Executive Director Kastelic will give a report on the w= ork of the Task Force and outline possible options. One of the likely out= comes will be to continue the current basic plan and basic plus supplemen= tal while offering employees the additional choice of a more cost effecti= ve plan beginning in January 1999.

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