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February 18, 1999

Pitt holds line on health insurance premiums by increasing co-pays

Faculty and staff covered by Pitt health insurance won't pay higher premiums next year, although they will be charged $2-$7 more for each drug prescription.

See table on this page.

Another change is that subscribers to the University's two HMO plans, Keystone and Tri-State, will be charged a $5 co-payment for each office visit. Currently, Keystone and Tri-State don't charge Pitt employees for office visits.

Also, the Comprehensive and SelectBlue plans will impose more limits on their subscribers' prescription drug choices, as the two HMOs currently do.

The changes will take effect July 1.

Pitt will continue to offer its four current plans: UPMC Health Plan's Tri-State HMO and three Highmark Blue Cross/Blue Shield options.

The three Highmark options include the Comprehensive deductible indemnity plan, the only non-managed care option at Pitt; the SelectBlue point-of-service plan, which maintains a network of primary care physicians but allows subscribers to opt for care outside the network at a higher deductible; and Keystone, which (like Pitt's other HMO option, Tri-State) limits subscribers to choosing among a network of physicians.

At a time when many employers are bracing for double-digit increases in health insurance premiums next year, Pitt avoided hiking its own premiums and those paid by its faculty and staff, Associate Vice Chancellor for Human Resources Ron Frisch pointed out.

"Going into the negotiations with Highmark and UPMC," Frisch said, "our goals had been to not raise premiums next year, to maintain all four of our current plans with their current services, and to guarantee that the plans use physicians from the UPMC Health System. We met all of those goals." The reason Pitt can hold the line on health insurance premiums is that the University will pass on next year's cost increases to employees who make the most use of Pitt health insurance.

Three employee groups have endorsed next year's contract: the University Senate's benefits and welfare committee; the Staff Association Council (SAC)'s benefits committee; and the medical advisory committee, a group of faculty, staff and administrators that advises the senior administration on health benefits.

Psychology professor James Holland, who co-chairs the Senate committee and serves on the medical advisory committee, said: "Overall, I'm real pleased with this new contract. In the current health insurance market, it's really unusual to be able to hold the line on rate increases." Economics professor Herbert Chesler, who co-chairs the benefits and welfare committee and likewise serves on the medical advisory committee, said the new contract meets principles set by faculty and staff groups several years ago: * Maintaining competition by awarding Pitt's health insurance business to more than one vendor.

* Continuing to offer at least one non-managed care plan.

* Charging faculty and staff in higher-cost plans proportionately more than employees in lower-cost plans.

Chesler called the new $5 co-pay for HMO subscribers' office visits "quite reasonable." "We were informed by the University's consultants [William M. Mercer, Inc., a human resources consulting firm] that a $15 co-pay for office visits is not unusual, and that $5 is really very low by comparison to what exists elsewhere in the community," Chesler said.

After finding that 20 percent of Pitt's approximately $25 million in health insurance expenses last year went toward prescriptions, Human Resources and the medical advisory committee agreed on the plan to absorb next year's increases by hiking co-pays for prescriptions and HMO office visits.

"It was based on the idea that employees who use their health insurance the most should pay a larger share of the costs," said Jim Edgerton, assistant vice chancellor, Compensation and Benefits.

Regarding limits on drug choices for Comprehensive and SelectBlue subscribers, physicians currently are largely free to prescribe drugs as they see fit under those plans.

Under the new arrangement — called a "closed formulary" system — physicians must choose from among a list of accepted drugs for a given health problem. Otherwise, the insurer won't pay anything toward the prescription.

The list of accepted drugs is set by the insurers on the advice of committees of physicians and pharmacists.

The Keystone and Tri-State plans already use closed formulary systems. About 70 percent of Pitt health insurance subscribers belong to Keystone and Tri-State, according to Human Resources.

Based on national averages, 6-10 percent of Pitt subscribers to the Comprehensive and SelectBlue plans will have to change prescriptions under the closed formulary system, said Associate Vice Chancellor Frisch.

Those employees and their physicians will be notified if a currently prescribed drug is not on a list of accepted drugs, Frisch said.

"In most cases like this, physicians and patients should be able to find a therapeutic equivalent" for a drug that's not on the list, he said.

But if a physician believes a patient needs a drug that isn't on the list, he or she may appeal to the insurer for permission to prescribe it, Frisch said.

Of the approximately 7,500 faculty and staff eligible for Pitt health insurance, about 1,000 waive coverage, many because they prefer to be covered by spouses' plans, according to Human Resources.

Frisch said that of the remaining 6,500 employees, 52 percent subscribe to the Keystone plan, 19 percent subscribe to SelectBlue (although only about 15 percent of SelectBlue members take advantage of their option to go outside the plan's physicians network, according to Human Resources), 18 percent subscribe to Tri-State and 11 percent subscribe to the Comprehensive plan.

Pitt had hoped to reach a two-year contract with its health insurers, but Highmark would not go beyond a one-year deal for fear of taking a financial loss, Edgerton said. "That means we'll be starting this whole process [of negotiating a new contract] again in September," he said, with a sigh.

Information on health insurance options for the 1999-2000 fiscal year will be mailed to faculty and staff prior to the open enrollment period, scheduled to begin in mid-March.

— Bruce Steele

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