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March 19, 1998

Administration action on insurance rates explained by Cochran

Responding to faculty complaints that they were excluded from the process of setting next year's medical insurance rates for Pitt employees, Assistant Chancellor Jerome Cochran detailed and defended the administration's actions to Senate Council March 16.

"We reached a critical place in time [this winter] when we had to make decisions" on rate increases for July 1, Cochran said.

Faced with a $6 million hike in its health insurance premiums for the 1998-99 fiscal year, senior administrators needed to proceed with planning next year's University operating budget while leaving sufficient time for open enrollment, Cochran said.

During open enrollment, which began March 16 and continues through May 22, faculty and staff may change their benefits selections.

University Senate and Staff Association Council (SAC) representatives worked with the administration on bid requests and reviewed vendors' presentations, Cochran said. All parties agreed on awarding next year's contract to Highmark Blue Cross/Blue Shield and Tri-State HMO, he noted.

Also, he said, administrators followed faculty and staff advice to continue offering employees a non-managed care option next year: the Highmark Comprehensive plan.

Faculty and staff groups applauded the administration's success in persuading insurers to reduce their total rate increases for next year from an initial estimate of $8 million to $6 million. Even the original $8 million hike would have been a bargain, Cochran said, considering the University's own consultants estimated the insurers would need to raise premiums by $9 million here next year to break even on their business with Pitt.

At first, Cochran said, the administration proposed splitting the $6 million rate hike 50/50 with employees, but two Pitt governance groups balked at faculty and staff paying such a large share: the Medical Rates Committee and the budget parameters subcommittee of the University Planning and Budgeting Committee (UPBC).

The former includes Senate and SAC representatives and advises the administration on health insurance issues. UPBC is a University-wide advisory group comprised of faculty, staff, students and administrators.

Ultimately, Chancellor Mark Nordenberg decided that the administration would pay 65 percent of the $6 million hike, while employees who participate in Pitt health insurance plans would pick up 35 percent.

Cochran acknowledged that the administration did not consult with faculty or staff in adopting a new "core University contribution" formula for next year. Under the system, employees will pay different monthly rates next year depending on the plans and coverages they choose.

Historically, Pitt has paid the full cost of health insurance for employees with individual coverage.

But beginning July 1, the University will continue to pay the full cost of individual coverage only in the Highmark Keystone and Tri-State HMOs. Pitt will contribute the same dollar amount to faculty and staff who choose the more expensive Comprehensive and SelectBlue plans; employees will pay the difference in monthly rates.

"Everybody's in the same position," Cochran said. "If your choice is to drive a Cadillac instead of a Chevy, and we [the University] are only paying for Chevys, you can drive the Cadillac but you have to pay the difference yourself." Psychology professor James Holland, who serves on Senate Council and the Medical Rates Committee, said the administration made a mistake in excluding faculty and staff from later stages of this year's health insurance decision-making process.

In past years, Senate and SAC representatives have added legitimacy to sometimes-controversial health insurance decisions by endorsing them, Holland pointed out. "It's possible we could have gone through the [the later stages of this year's] process and come forth with exactly what you received," he told Senate Council members. "But I don't have any way of knowing that." Asked point-blank by Senate President Gordon MacLeod whether faculty and staff would participate in setting employee health insurance rate hikes for July 1, 1999, Chancellor Nordenberg and Assistant Chancellor Cochran did not reply. After the Senate Council meeting, Cochran told the University Times "it's too early at this point" to say whether faculty and staff will be consulted on those decisions.

— Bruce Steele

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