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February 5, 1998

Health insurance options to grow, but so will costs

First, the good news about Pitt employee health insurance: Faculty and staff will gain a new option for the fiscal year that begins July 1 — the Tri-State health maintenance organization (HMO) offered by UPMC Health System.

Now, the bad news: Pitt's health insurance premiums will jump by 23.4 percent next year, from about $25 million to $31 million. And while rates for individual plans haven't been finalized yet, some faculty and staff will pick up 35 percent of the total hike, with Pitt paying 65 percent.

The University will continue to offer three plans through Highmark Blue Cross/Blue Shield next year. They include Keystone HMO, the SelectBlue point-of-service plan, and the Comprehensive deductible indemnity plan.

Pitt announced last year that the fourth Highmark plan currently available here, the University Health Network (UHN), will go out of business on June 30, 1998.

Unlike some other employers seeking to reduce health insurance costs, the University won't cut back next year on the coverages and deductibles currently offered to Pitt employees through Keystone, SelectBlue and Comprehensive. Tri-State HMO will offer the same coverage and fees as Keystone.

Plan rates and other information on Pitt health insurance options for the 1998-99 fiscal year will be mailed to faculty and staff prior to the open enrollment period, which is scheduled to begin in early March.

q In a Feb. 4 Campus Update, Chancellor Mark Nordenberg wrote of the 65/35 University-employee split on rate increases: "With anticipated migration between plans, that allocation will permit us to remain close to the current overall split in financial responsibility for health insurance costs." Currently, the University pays 83 percent of Pitt's total bill for employee health insurance.

Nordenberg added that the 65/35 split "also will actually position us to decrease the percentage contribution made by employees enrolled in the more cost-effective health maintenance organization plans. And, both in terms of choice and in terms of cost, it will leave us with a medical insurance plan that compares very favorably with other universities." The chancellor said he rejected advice to divide the rate increase evenly, with Pitt and employees paying $3 million apiece. "To some extent, I am sure, that view was grounded in a sense of our overall budgetary situation," Nordenberg wrote. "However, it also reflected the reality that monies committed to benefits today will not be available when salary decisions are made several months from now. Though sympathetic to those concerns, I have decided not to move in that direction until there is more of an opportunity to consider the alternatives and their consequences." Under a new "core University contribution" formula, employees will pay different rates next year depending on the plans and coverages they choose. "Simply put," Nordenberg wrote, "this approach will involve a departure from the existing practice of providing higher dollar subsidies to those who enroll in more expensive programs." Historically, Pitt has paid the full cost of health insurance for employees with individual coverage (although employees remain responsible for co-payments and other patient fees). Under the new system, the University will continue to pay the full cost of individual coverage only in the Keystone and Tri-State HMOs. Employees who choose individual coverage under the more expensive SelectBlue and Comprehensive plans will have the same dollar amount contributed by Pitt toward the higher premiums charged by those plans.

The same approach will be used for employees with other levels of coverage — employee/spouse, parent/child(ren) and family.

According to Pitt's administration, the "core contribution" scheme is fairer than Pitt's current system, in which the University pays differing portions of the total premiums for its health insurance plans. For example, Pitt employees currently pay 17 percent of the total cost of Keystone and 22 percent for UHN, but just 11 percent for the Comprehensive plan.

Ron Frisch, interim associate vice chancellor for Human Resources, told Faculty Assembly Feb. 3: "In effect, the University has been subsidizing the Comprehensive plan," which is the only Pitt health option that does not feature a gatekeeper, a limited network of primary care physicians or other managed care requirements.

"Under the new system, the University would say: If you want to belong to a higher-priced plan, you're going to have to pay more than faculty and staff who are enrolled in the lower-priced Keystone and Tri-State plans," Frisch said.

Faculty Assembly member Douglas Metzler complained, "It would seem very odd to raise rates for any individuals" considering that employees whose spouses and/or children are covered by Pitt health insurance "undoubtedly" take greater advantage of medical coverage than individuals.

When Frisch began to protest, Metzler cut him off, saying: "I guarantee you that people with family coverage are getting more benefits than individuals." Other Assembly members nodded and murmured in agreement.

q The one-year contract with Highmark Blue Cross/Blue Shield and Tri-State HMO for fiscal year 1998-99 will replace Pitt's current, three-year exclusive contract with Highmark.

In addition to Highmark and Tri-State, HealthAmerica submitted a bid for Pitt's health insurance business next year. But according to Frisch, Health-America dropped out of negotiations last month because it could not meet Pitt's demands for a range of plan options.

Three years ago, Health-America came out on the losing end of a battle with Highmark and its then-ally, UPMC Health System, when the Pitt administration granted Highmark a monopoly on the University's employee health insurance business. The move angered many faculty and staff members, including leaders of the University Senate and Staff Association Council.

James Holland, who was Senate president when that decision was made, accused Highmark of "low-balling" its rivals — absorbing financial losses by agreeing to lock in modest premium increases for three years — in order to gain an exclusive contract with Pitt.

At Faculty Assembly this week, Holland said it should come as no surprise that Pitt faces what he called a huge increase in health insurance costs next year, given Highmark's tactics three years ago.

Hard bargaining by the Pitt administration reduced the University's total premium hike from $8 million to $6 million for next year, he said, "but that's still a very big increase." Holland co-chairs the Senate's benefits and welfare committee and serves on the ad hoc committee that advises the administration on health insurance issues. Both groups endorsed the choice of Tri-State HMO as an additional vendor next year but were excluded from discussions of how to split rate hikes between employees and the University, Holland said.

He called the HMO-based "core contribution" system "a defensible idea" but complained that it was presented to faculty and staff groups essentially as a done deal. During the administration of Chancellor Wesley Posvar, University Senate groups were much more involved in negotiating details of Pitt health insurance offerings than they have been since then, Holland said.

Chancellor Nordenberg, in his Feb. 4 Campus Update, said he understood that some members of the medical advisory committee, the Senate benefits and welfare and the University Planning and Budgeting Committee's parameters subcommittee "wish there had been an opportunity for more extended discussion. However, I am assured that representatives of the administration did the best that they could to meet and consult with these groups under the pressure of very tight deadlines." University Senate President Gordon MacLeod told Faculty Assembly: "It appears that the representatives of Human Resources have done an excellent job of communicating with us with regard to the types of plans chosen, but we have had little or no real involvement in determining how to distribute the cost" of next year's rate hike.

MacLeod called this yet another example of faculty being excluded from their rightful role in the University decision-making process. "When I accepted this job [of Senate president], I was highly enthusiastic about the possibility of shared governance," he told Faculty Assembly. "But I must say that in the past several months I have seen a marked deterioration in shared governance, and despite the concerns that I have expressed individually to the chancellor and collectively to this group I'm not terribly optimistic about the future." Assembly member Mark Ginsburg said he was tired of hearing Senate committee chairpersons report that they were excluded from decision-making on policies that affect faculty. "That's not a report that I want to hear anymore here," he said.

MacLeod accepted Ginsburg's recommendation that the Senate president convene a meeting of faculty leaders and Pitt administrators in an effort to resolve the Assembly's concerns about shared governance.

–Bruce Steele

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