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March 30, 1995

Faculty debate administrators over axing of HealthAmerica

During an unusually rancorous and well- attended University Senate meeting yesterday, faculty and staff members attacked — and Pitt administrators defended — Chancellor J. Dennis O'Connor's decision to give Blue Cross of Western Pennsylvania exclusive rights to Pitt's employee health insurance business.

(O'Connor announced the $66 million, three-year contract in a March 27 letter to the University community. The letter is reprinted on page 2.) The two sides agreed on virtually nothing throughout the two-hour, us-versus-them Senate discussion. Catcalls and hissing frequently followed (and occasionally interrupted) administrators' statements, while the standing-room-only audience in the Graduate School of Public Health auditorium applauded and cheered comments critical of the Blue Cross contract, under which Pitt will eliminate HealthAmerica here effective July 1.

Discussion focused on the following issues, among others: Quality of care About a dozen faculty and staff members gave testimonials praising HealthAmerica as a low-cost, family-friendly operation and damning Blue Cross as a bloated bureaucracy characterized by numbing paperwork and high consumer costs.

A junior faculty member said: "This isn't [merely] a disruption. What this [eliminating HealthAmerica] will mean for my family is that my husband and I will not get health care, and I will have to pick and choose what my child gets." Administrators pointed out that 70 percent of Pitt employees have willingly chosen Blue Cross over HealthAmerica. "For all its failings, and I think its failings are significant, this (Blue Cross) is not a fly-by-night operation," said Jeffrey Romoff, president of the University of Pittsburgh Medical Center (UPMC).

Darlene Lewis, associate vice chancellor for Human Resources, said the University is negotiating to make Blue Cross's Keystone West option here nearly identical to Health-America. Keystone has agreed to drop all co-payments, she said. The only significant difference will be that Keystone cannot follow the HealthAmerica model of centers employing full-time staff physicians.

Savings to Pitt Administrators estimate that the Blue Cross agreement will save Pitt $5 million over three years, compared with just $1.5 million if the University had kept HealthAmerica but frozen future enrollments in it. O'Connor said he regretted the hardships his decision will impose on employees currently enrolled in HealthAmerica but maintained that the savings will go a long way toward helping the University cope with its current budget squeeze.

O'Connor said that some, but not all, of the savings resulting from the Blue Cross agreement will be plowed back into employee benefits. To earmark all of the savings for that purpose would violate the University Planning and Budgeting System, in which allocations are based on institutional priorities rather than the source of those funds, the chancellor said.

Several professors, including University President James Holland, noted that the $5 million estimate is based on the assumption that health care costs will rise during the next three years. Yet Blue Cross's rates at Pitt haven't risen in three years and HealthAmerica's rates declined in two of the last three years, Holland said. The Blue Cross contract doesn't guarantee savings, he said; it guarantees that Blue Cross will limit its rate increases to 11-25 percent depending on the plan. The 25 percent increase would be for the Comprehensive plan, which Holland predicted will cease to be offered within a few years.

Nathan Hershey of public health outlined a formula indicating that Pitt would be justified in demanding $12 million to $15 million upfront from Blue Cross based on the increased market share the company will receive by acquiring Pitt HealthAmerica subscribers.

Ben Tuchi, senior vice chancellor for Business and Finance, said that if Hershey were a student in his corporate finance class he would have given him an A for presentation and an F for arithmetic. "It strikes me that we don't know and never will know the maximum we could have obtained" under the three-year Blue Cross contract. But the University will monitor the arrangement closely and make additional demands if Blue Cross gains more from the deal than currently is expected.

Sole providers Several faculty and staff members said they opposed giving Blue Cross what they called a health insurance "monopoly" at Pitt and what the administration called a "single source agreement." One audience member accused Blue Cross of "low-balling" its bid to Pitt to eliminate competition and set the scene for dramatic premium increases three years from now. Chancellor O'Connor, asked whether Pitt has any guarantee that Blue Cross won't jack up its premiums here at the end of the contract, replied: "At the end of three years, the health insurance carrier would again be out for bid, and I don't think that in a competitive marketplace Blue Cross will exorbitantly increase rates. Do we have a guarantee on that? No, we don't." Romoff said, "You're always going to save money with a sole source" because such arrangements enable insurers to eliminate distortions in their risk pools — distortions such as the current one at Pitt, Romoff said, where HealthAmerica has tended to attract younger, healthier employees while Blue Cross has been the choice of older, sicker employees who need expensive specialized care. A growing number of employers (including, recently, the Pittsburgh Board of Education) are going to sole provider health care contracts, Romoff noted.

UPMC Administrators denied charges that the Blue Cross contract was largely an effort to ensure more referrals of Pitt employees to UPMC.

Romoff noted that Blue Cross subscribers have access to every local hospital and nearly every local physician except the 100 or so employed exclusively by HealthAmerica. "Under Blue Cross, you have the choice not to use any of the UPMC doctors or hospitals," he said.

Provost James Maher said the Blue Cross deal "is not an attempt to throw business to our medical center" — rather, Maher said, it was a matter of deciding to go with a sole provider arrangement, and then choosing between HealthAmerica (which avoids referring patients to UPMC hospitals because of their comparative expense) and Blue Cross (which uses UPMC facilities and personnel, and which already enrolls 70 percent of University employees).

Holland pointed out that UPMC recently rejected an offer from HealthAmerica to allow its Pitt subscribers to use medical center facilities and personnel.

Implications for University governance A number of audience members accused the administration of ignoring what they called the "overwhelming" opinion of faculty and staff members that Pitt should maintain the status quo in its medical insurance.

Faculty Assembly and Senate Council approved resolutions this month recommending that Pitt make no changes in its medical options. Of the 4,724 employees who responded to a recent survey of faculty and staff opinions of Pitt benefits, 76 percent said they believed Pitt should have more than one health insurer; only 11 percent approved of having a sole medical insurance provider.

Barbara Shore of the School of Social Work said she understands that administrators have the right to reject faculty and staff recommendations, "but we ought not to have a process in which it appears that people are going to have significant or meaningful input and then it doesn't happen," she said. "We should not have gone that far down the line without some sense that there was already in the hopper a decision [by the administration]. It can't be that that decision was made one week after the Senate Council meeting" of March 20. The chancellor announced his decision on HealthAmerica March 27.

O'Connor replied: "The decision was made after all of the concerned parties had put their opinions on the table. It was reached within those [following] 10 days in order to give people the longest period of time to respond. But to say the decision was already in the hopper is absolutely incorrect." As for employees' recommendation to maintain the status quo, the chancellor said, "That recommendation was heard. It simply was not followed." Provost Maher said O'Connor "did just what the [governance] process asks — namely, he got every relevant constituency to give its advice. You may be disappointed that after considering all of that, the chancellor did not agree with you. But I don't think that should leave you with the feeling that he didn't listen. I think he listened very hard." Regarding the benefits survey, Romoff said, "If you ask a person on a survey, 'Would you like more health care and more choice?' they will always say yes," just as a survey of students would find that most oppose tuition hikes, and a faculty survey would find that most professors prefer salary increases.

Senate President Holland said the Blue Cross decision will cause many employees to give up on shared governance. The stress on HealthAmerica subscribers from breaking off long-standing relationships with their primary care doctors will literally cause some employees to get sick, he said.

Holland also predicted that demoralized employees will work less efficiently, "take more pencils and paper clips home" and resist contributing to Pitt's internal fundraising campaign. "This could cost the University more than $5 million over the next three years," he said. According to Holland, Pitt's current budget crisis "could have been foreseen a decade ago. And what did our managers do? Increase, build, buy property, [create a] $10 million parking lot over where the Syria Mosque used to be. And now it's, 'Come on, help us.'" English professor Phil Wion, who led the United Faculty's last faculty unionization drive (which failed in 1991 to attract sufficient votes) called on faculty to support collective bargaining as the only viable alternative to Pitt's current governance process.

— Bruce Steele

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