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April 17, 2003

Higher-cost health plan shifts much of burden to those who use it most

Pitt’s new health insurance benefits package will maintain existing medical services, and participating staff and faculty won’t have to change their doctors or prescription drugs.

But, when the new package takes effect July 1, most employees will be paying higher monthly premiums as well as higher co-pays (and more of them).

Under the new package, which continues Pitt’s exclusive relationship with UPMC Health Plan through a one-year contract, the highest premium hike charged to employees will be a 74 percent increase — from $110 to $192 per month — for family coverage under the “Panther Gold” plan, one of four new medical insurance options that Pitt will offer and the closest in design to the University’s current HMO plan.

The three other options will be point-of-service plans which (unlike Panther Gold) will cover services provided at non-UPMC as well as UPMC facilities: “Panther Premier,” featuring lower deductibles; “Panther Basic,” an economy plan that basically will cover catastrophic health costs, and “Panther Plus,” the middle-priced plan. Employees will continue to have access to UPMC’s network of 6,000 physicians through all four of the new plans.

Premiums for Pitt’s employee-paid group dental, vision and life insurance plans will not increase next year.

Package details will be spelled out in open enrollment packets that employees should begin receiving in the mail late today, April 17. Open enrollment ends May 23.

Enrollment is mandatory for all Pitt employees except those who attest that they have alternative coverage.

Staff and faculty can enroll online at:

Whichever plan Pitt employees choose, their co-pays for prescription drugs will go up from the current rates of $8 for generics and $15 for “preferred” non-generic drugs — i.e., those that UPMC Health Plan has approved as drugs of choice for specific medical conditions. To get reimbursement from the health plan for a non-preferred drug, employees currently must prove that the plan-approved one does not meet their medical needs.

Pitt’s new package will have three rates for prescription drug co-pays: $10 for generics, $20 for preferred drugs and $40 for non-preferred drugs. “If you want that high-cost drug instead of the preferred drug, you will now be able to get it without jumping through hoops,” said Ronald W. Frisch, Pitt associate vice chancellor for Human Resources. “But you’ll pay more for it.”

Pitt currently offers the option of so-called “mail-order” prescriptions, through which employees can buy a 90-day supply of a prescription drug (through the mail or walk-in services at Falk Clinic and the Student Health Service) and pay just a single co-pay. Under Pitt’s new package, employees will have to make two co-pays for a 90-day supply of a drug — still one co-pay less than they would make if they bought three one-month supplies, but nonetheless a cost increase over Pitt’s current plan.

Under the new package, those who access the health care system more will pay more and those who use it less will pay less, said Associate Vice Chancellor Frisch. “That’s in contrast to the University assigning a cost to employees regardless of how often they use the system,” he said.

Provost James V. Maher warned that staff and faculty may suffer “sticker shock” when they see their new premium rates. But he pointed out that Pitt’s health insurance costs, including employees’ share of costs, have not increased in the last five years. While other employers in the region have been slammed by double-digit rate hikes, Pitt rates have been locked in under the University’s three-year deal with UPMC Health Plan.

Staff and faculty “are not going to be overjoyed” by Pitt’s new medical insurance rates, Maher acknowledged at last week’s Senate Council meeting. “But I can also assure you that if you look at it very soberly and then look at what’s going on in town, this is about as good a deal as anybody’s getting,” he said.

Leaders of Pitt’s University Senate and Staff Association Council (SAC) agreed. They said the University’s Office of Human Resources did everything possible to ease the burden of health insurance premiums for faculty, staff and covered dependents.

“Our Human Resources people are tough negotiators,” said Senate President James Cassing. “It’s nice to have them on our side.”

“I think this package is as good as we could reasonably have expected — maybe better,” said Herbert Chesler, who co-chairs the Senate’s benefits and welfare committee. Chesler also serves on the faculty-staff Medical Advisory Committee, with which Human Resources and Pitt’s health insurance consultants, Mercer Human Resources Consulting, Inc., met regularly during contract negotiations.

Chesler noted that, under the new deal with UPMC Health Plan, the University will pay a larger share (85 percent) than it currently does (80 percent) of the overall cost of Pitt’s premiums.

SAC President Barbara Mowery said: “As our SAC members attended the Medical Advisory Committee meetings, we saw how senior administration brought the costs down from the original estimates.”

Pitt’s benefits consultants, Mercer, analyzed initial proposals from the two health care insurers that submitted bids for Pitt’s medical insurance business — UPMC Health Plan and Highmark Blue Cross Blue Shield — and concluded that the former still offered Pitt the best value. However, continuing to offer the identical health package currently available would have meant a premium hike of 66 percent for Pitt above current rates, according to Mercer.

Pitt negotiated that increase down to 28 percent by shifting some costs for services to employees and sharing other costs with them, and by self-insuring, meaning that the University will now bear any costs that exceed the projected coverage levels under its health care plans.

According to Pitt’s administration, Mercer studied insurance packages of 88 other colleges and universities and found that Pitt’s new package “is highly competitive … in many cases offering more coverage at a lower cost.”

Rich Colwell, SAC vice president for steering, said he compared Pitt’s new medical insurance package with other employers’ plans in the Pittsburgh area and likewise found that the University’s is better.

“You now must manage and control the cost of your health care,” Colwell said. “If you use doctor visits and prescription drugs minimally, you will see a slight increase in your health care cost. If you use preferred prescription drugs, etc., you will notice a considerable increase.”

One group displeased with the University’s new health insurance package is Local 585 of the Service Employees International Union (SEIU), which represents Pitt service workers and has been offered the same package that faculty and non-unionized staff will get in July. To protest the package’s increased co-pays and 74 percent hike in family coverage, SEIU planned to march at 7 a.m. today (April 17) to UPMC’s offices at 200 Lothrop and deliver an open letter demanding affordable family health insurance for Pitt workers.

Frisch and James W. Edgerton, assistant vice chancellor for Compensation and Benefits, offered the following advice to minimize health care costs:

• If you take prescription drugs and don’t already use generics, consider doing so. “In the past, some people have rejected generics out of hand and the cost difference may not have been substantial,” Edgerton said. “Now, it will be.”

• Take your time in perusing open enrollment information. “There is no textbook formula anymore to which plan is the best for you if you’re of a certain age, with a certain number of dependents and so forth,” said Frisch. “It’s going to vary from individual to individual. Thoroughly studying each plan, its provisions and what impact it would have on you will probably take a good two or three hours.” He and Edgerton also encouraged staff and faculty to attend Human Resources’ health benefits fairs and education sessions.

• Seriously consider setting aside money for health care expenses through flexible spending accounts. Employees save at least 25 percent of what they put into these accounts because they pay no Medicare, Social Security, state and federal taxes on these funds. (A warning: Money in a flexible spending account must be spent by the end of the fiscal year or it will be lost to the employee.)

For the first time, those with flexible spending accounts will receive “Benny Cards,” which will act like debit cards, allowing employees to pay for prescription or medical care directly from their accounts.

— Bruce Steele

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