Benefits changes focus on employee wellness, long-term cost savings

July 25, 2013

UNIVERSITY PARK, Pa. – Penn State officials have announced a new, comprehensive strategy designed to improve employee health and to curb the rapidly growing cost of health care for both employees and the University.

The changes, all of which are outlined below, will be implemented by Jan. 1, 2014, and seek to reduce, over the long term, the University’s significant and growing health care costs through wellness-focused programs and strong relationships with partner providers. These changes only apply to Penn State employees who are enrolled in the University-sponsored health plan. Additional details about individual initiatives will be released by the Office of Human Resources over the coming weeks through face-to-face meetings, electronic and mail-based communications.

“We are implementing a significant set of changes that will help us turn the tide on unmanageable increases in health care costs for our faculty and staff,” said Penn State President Rodney Erickson. “Higher education is at the crossroads with respect to our responsibilities for greater cost control, and now is the time for decisive action. I have challenged our leadership in human resources to hold annual health care cost increases to the Consumer Price Index plus 2 percent, a goal that will help us to sustain the existing quality of employee health care options while easing pressures on tuition increases that face our students and their families.”

Penn State’s health care insurance is self-funded, so the costs for faculty, staff and their dependents are paid directly by the University and by employees through their health care contributions. In 2013-14, the University’s health care costs are expected to top $217 million, continuing a steady trend of increased expenses, projected to balloon further without significant intervention. Nationwide, employers are seeking ways to stem the ever-increasing cost of health care, which includes initiatives to empower employees and their families to make healthy choices and minimize their medical risks through preventive care. The strategy is being implemented as part of the University's 2009-10 to 2013-14 strategic plan and seeks to reduce cost through similar methods.

“We have heard the concerns raised by some members of the University community since the announcement of the Take Care of Your Health initiative earlier this month, and we want to be clear about all of the changes that are being made to employee health care at Penn State for the foreseeable future,” said Susan Basso, vice president for Human Resources. “We know that many members of our faculty and staff will have questions about the steps we are announcing today, and that some of the changes may affect their health-related choices. In the coming weeks, we will answer their questions and provide them with comprehensive, detailed information to fully support them in their decision-making.”

In spring 2013, OHR benefits staff attended meetings with various constituent groups, including the Faculty Senate Joint Committee on Insurance and Benefits, the Faculty Senate Benefits Committee and the University Staff Advisory Council, to discuss proposed changes and solicit feedback. The discussions were productive, Basso said, and helped to shape the strategic direction of the University’s plan. Officials at Penn State Hershey Medical Center implemented similar objectives eight years ago that incorporated employee wellness into their health benefits strategy. The changes that were implemented proved successful in significantly reducing the trajectory of health care costs. Though the two are not identical, the University-wide program announced today is modeled after the Medical Center's program.

The changes outlined below will go into effect on Jan. 1, 2014, for all benefits-covered Penn State employees and their spouses/same-sex domestic partners (SSDPs). Additional information about each component of the initiative can be found at the individual links below.

Like all employers, Penn State always has had access to aggregate reports from its health care insurer. The reports have and will continue to be used only for benefit planning purposes. Because Penn State and all third-party providers must comply with the federal Health Insurance Portability and Accountability Act (HIPAA), it is important to emphasize that Penn State will never have access to an individual’s health records, will never ask for those records and will not charge an employee additional fees based on their individual health status.

The changes are aimed directly at encouraging all employees and their families to improve their health, thereby reducing costs for both employees and for Penn State.

-- The annual Take Care of Your Health initiative encourages benefits-enrolled employees to participate in a free, confidential biometric screening, and encourages those employees and spouses/same-sex domestic partners (SSDPs) to complete an online wellness profile and to certify that they have had or will have a preventive physical exam. Those employees and spouses/SSDPs who do not complete the steps will be assessed a monthly $100 surcharge.

For more information about this initiative, visit:

-- New health plan options to provide employees with a greater range of coverage choices are being finalized. The cost will be dictated by the choices that an individual makes. Some options will actually eliminate cost sharing on preventive care and other medical services for employees who have been diagnosed with the most prevalent chronic conditions, if the employee chooses to opt in.

For more information about this initiative, visit:

-- A monthly insurance surcharge of approximately $100 will be assessed to benefits-enrolled spouses/SSDPs who have the option to elect health care coverage through their own employer. At this time, this surcharge will not apply to employees whose spouses/SSDPs also are employed at Penn State.

For more information about this initiative, visit:

-- Free tobacco cessation programs will continue to be offered to employees and their covered spouses/SSDPs who wish to quit; a new monthly surcharge of $75 per tobacco user per month will be assessed to those who choose to continue to use tobacco.

For more information about this initiative, visit:

“We want all Penn State employees and their families to be knowledgeable about their health, and our strategic goal is to help encourage individuals to make personal choices that are well-informed and health-focused, which ultimately benefits all of us,” said Susan Basso, vice president for Human Resources.

Penn State has had robust, voluntary wellness programming for more than a decade. Voluntary participation, however, has not positively impacted the health care cost curve at all. As a result, Penn State is implementing a more aggressive strategy, which employs a financial disincentive but keeps premiums stable for all with no hidden costs. In order to have offered incentives rather than surcharges, the University would have had to inflate health care premiums artificially for all employees and then discount for those who participate. Those involved in drafting and implementing the plan felt it was important to be straightforward about how the costs will be assessed. This strategy is not a result of the Affordable Care Act, but is supported by its mandates.

“Maintaining affordable, competitive health care options for our employees is critically important to ongoing recruitment and retention of top-quality talent, even as the University faces mounting health care costs. Continuing to ask all employees to contribute an increasing percentage of their income is not a sustainable, long-term solution,” said Basso. “This strategy allows our employees to control their own financial outcomes, while helping us to manage costs and reduce the need to pass expenses on to employees through increased premiums. Stable health care costs also will mean greater availability of funds for other pressing needs, including pay increases for employees. I realize that these changes are a lot for individuals to absorb, but I am confident that in the long term we will benefit as individuals and as a community.”

Employees who have questions about any of the initiatives outlined above are encouraged to contact their human resources representatives, or to contact the Penn State Office of Human Resources at or 814-865-1473. More information will be available in late August.

Employees who are a part of the University’s Teamsters’ collective bargaining agreement will not see any health care benefit changes during the current contract term, which expires June 30, 2014.

(Media Contacts)

Last Updated August 22, 2013