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November 10, 1994

Blue Cross proposes monopoly on Pitt medical insurance in exchange for reductions in rates

Pitt's administration is considering a proposal from Blue Cross of Western Pennsylvania that would make Blue Cross the sole provider of employee health care benefits at the University.

In exchange, Blue Cross would cut Pitt's health care premiums by more than 20 percent between Jan. 1 and July 1, 1995, according to the proposal. For three years after that, Blue Cross would agree to cap Pitt's annual rate increases.

Pitt administrators estimate that the deal could save the University $5 million annually during the 42-month agreement period. A portion of the savings would be passed on to staff and faculty in the form of reduced employee premium payments, said Darlene Lewis, associate vice chancellor for Human Resources.

But the savings would carry a price: the University would have to drop the HealthAmerica health maintenance organization, in which some 1,800 non-medical center faculty and staff now participate. HealthAmerica is the only one of Pitt's five current health benefits options that is not part of Blue Cross.

A letter from Associate Vice Chancellor Lewis, describing the Blue Cross proposal and its potential impact on Pitt's upcoming health care open enrollment period, is being mailed to faculty and staff this week. The letter is reprinted on page 2 of this issue of the University Times.

Complicating the Blue Cross proposal is the fact that, beginning this summer, Pitt's health care enrollment year will be linked to the University's fiscal year (which begins July 1) instead of the calendar year, as it is currently.

Thus, Pitt's next health care open enrollment period (during which employees can enroll in health care plans or transfer from one plan to another) begins in late November, and choices take effect Jan. 1, 1995. But the subsequent open enrollment period will begin in May, with choices taking effect July 1, 1995. In future years, open enrollment will continue to follow the fiscal year schedule.

What this means for 1995 is that Pitt employees who enroll in HealthAmerica this month could be out of luck by the summer should the University accept the proposal for a Blue Cross monopoly.

Associate Vice Chancellor Lewis emphasized that Pitt's administration did not solicit the Blue Cross proposal and has only begun studying it since receiving the plan in late October.

"On the surface of it, the Blue Cross proposal is potentially such a good deal for the University that we would be irresponsible not to look at," Lewis said. "But nothing has been decided yet." Staff and faculty organizations, including the Staff Association Council (SAC) and the University Senate, will have opportunities to discuss the Blue Cross proposal and recommend accepting, amending or rejecting it, Lewis said. However, Pitt senior administrators will make the final decision on whether the proposal is accepted.

One group that already has been discussing the proposal is the Medical Rates Review Committee, a group of faculty, staff and administrators who advise the senior administration on health care benefits issues.

The committee discussed the proposal at its Nov. 1 and Nov. 7 meetings and plans to present its recommendation on the proposal to senior administrators by the end of February.

Faculty and staff members of the committee greeted the Blue Cross proposal with skepticism and anger, according to several committee members interviewed by the University Times. "Practically everybody on the committee was outraged," said committee member Darlene Harris, president of SAC. "My position is that if they (Pitt's administration) want to take away HealthAmerica, employees should at least receive an equally good product to replace it." Harris pointed out that the Blue Cross-affiliated Keystone West health maintenance organization charges co-payment fees for a number of services that are free to HealthAmerica participants.

Harris said she will oppose the Blue Cross proposal unless it results in substantial health care savings for employees. "A lot of people who are currently enrolled in HealthAmerica will be forced to drop their primary care physicians under this (Blue Cross) proposal and find new physicians. Those people should be compensated" through lower health care premiums, Harris said.

University Senate President James Holland called the Blue Cross proposal "a bad idea. I don't think the University community will go for it." Blue Cross's promise of major cuts in Pitt premiums is based largely on the assumption that members of health maintenance organizations such as HealthAmerica tend to be younger and healthier than the average Blue Cross subscriber, Holland noted. Adding younger, healthier employees to the overall "risk pool" of Blue Cross subscribers should lower the rates for the whole pool, the reasoning goes.

But Blue Cross has not provided any data yet to back up that theory, Holland said. And Blue Cross is "notorious" for giving the review committee incomplete and misleading data, according to Holland, who also dealt with Blue Cross officials during the 15 years he served on the Senate benefits and welfare committee.

The four Blue Cross plans that will be offered at Pitt in 1995 — SelectBlue (which replaces the Traditional plan), Comprehensive, Keystone West and the University Health Network — require higher deductibles and more co-payments than HealthAmerica, Holland said.

"My suspicion is that, under this proposal, the University would be saving money only because the people currently enrolled in HealthAmerica would be forced to take on a greater share of their health care costs," said Holland. "More of the burden would be shifted from the University to the faculty and staff." Herb Chesler, a member of the review committee who chairs the Senate's benefits and welfare committee, said the Blue Cross proposal "would certainly impose a terrific burden" on current HealthAmerica members.

"They would have to change primary care physicians, and the way they access medical care would be altered," Chesler said. "That may be a very high price, to ask 30 percent of our faculty and staff to bear this burden in order for the University to realize these cost savings." Chesler said Pitt can't guarantee that Blue Cross won't jack up Pitt's premiums immediately following the 42-month agreement period covered under the proposal.

Like Harris, Chesler and Holland, review committee member Gordon MacLeod said he was suspicious of giving any provider a monopoly on Pitt health care benefits. "I've long thought that competition is very important in the health care field, both in terms of insuring high-quality services and holding down costs," said MacLeod, a public health professor who served as state secretary of health (1979) and founding director (1971-73) of the federal program that created health maintenance organizations such as HealthAmerica and Keystone West.

At its Nov. 9 meeting, Senate Council approved a motion, proposed by theatre arts professor Attilio Favorini, to require Human Resources to conduct a survey of employee satisfaction with the Blue Cross and HealthAmerica plans. Results of the survey will be shared with the Pitt community.

Associate Vice Chancellor Lewis and Chancellor O'Connor agreed to the request, adding that Human Resources had been planning to conduct such a survey before Pitt decides on the Blue Cross proposal.

Lewis said she will meet today, Nov. 10, with HealthAmerica representatives to discuss the Blue Cross deal. The HealthAmerica representative assigned to Pitt's account did not return a phone call from the University Times.

Lewis noted that a growing number of local employers have signed exclusive contracts with Blue Cross, including PNC Bank, H.J. Heinz Corp., Equitable Gas Co. and the Pittsburgh Board of Education.

— Bruce Steele

Filed under: Feature,Volume 27 Issue 6

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