University Park, Pa. -- As part of its ongoing efforts to control rising costs, Penn State is making some modifications to employee health benefits, starting in January 2011.
"Penn State remains committed to maintaining excellent benefits in a time of limited resources," said Al Horvath, senior vice president for finance and business. "The changes we're going to be making in no way lessen our commitment to the health and well-being of our employees. The University's expansion of adult dependents to remain on their parents' health care to age 26 -- almost a year before the federal government required it -- is an example of our dedication to provide access and coverage to our employees and their families."
At the same time, Penn State must take action to control costs, and health care costs are a major expense for the University. In discussing the University's strategic plan with faculty this spring, Executive Vice President and Provost Rod Erickson spoke about the efforts to control health care costs, as outlined in Goal 7 of the plan. "We simply cannot continue on our present trajectory with health care costs without bankrupting the University," he said.
The University took the first step in making changes in January, when it changed retirement health benefits for new employees. All new employees as of Jan. 1 now have health savings accounts, rather than having the defined benefit plan into which all existing employees were grandfathered. "That change alone, over the next 30 years, will save us an estimated $3 billion," Erickson said.
The upcoming changes will include additional cost-sharing at the time an employee or one's family member receives medical care through the introduction of deductibles and co-insurance. "To maintain an affordable health care plan for all faculty and staff, the University will be introducing some new cost-sharing elements to the Penn State plan that are very common in other employer health plans," Horvath said.
Complete details of the new health plan design and wellness programs will be released in mid-August. The Office of Human Resources will mail information about the changes to employees. In addition, the Employee Benefit Division staff will be visiting all campus locations to help educate faculty and staff on the new plan, and additional educational tools will be available online.
Penn State invests a significant amount of its financial resources to provide comprehensive health care benefits for its employees. The annual budget for health care benefits at the University is more than $180 million. The projection for 2011 indicates that health care expense will increase to approximately $206 million if the current approach is continued. The increasing cost of these benefits has caused the University to shift more and more of its financial resources to support faculty and staff health care while State funding to the University has tightened, putting a greater tuition burden on students and their families.
"Every effort has been made to lessen the adverse impact of the economic downturn on our faculty and staff. Last year the University froze the monthly employee contribution to health care even though the cost increased by 12 percent," Horvath said. "We established a long-term relationship with Highmark Blue Shield to provide a single health plan for all Penn State employees. It's important to note that while Highmark administers all aspects of our plans, the University is self-insured and funds all expenses related to providing coverage for you and your family members. Therefore, the ability to slow the growth in this significant expense element will directly alleviate some pressure on what has become a challenging environment for balancing our budget."
For information about the portion of the strategic plan related to these changes, visit http://strategicplan.psu.edu/healthcare online.