University faculty, administrators discuss health care coverage options

January 26, 2016

UNIVERSITY PARK, Pa. -- Penn State administrators spoke with the Faculty Senate Tuesday (Jan. 26) about ways to actively involve employees in managing their health care and the shared responsibility of keeping University health care plans affordable in the future. The discussion comes as the administration is working with advisory committees, which include faculty representatives, to study options for health care coverage that promote the well-being of employees and their families and are financially sustainable.

David Gray, senior vice president for Finance and Business, and Susan Basso, vice president for Human Resources, reviewed the costs and benefits of the health care options currently available to Penn State employees, as well as key considerations for the University moving forward.

“There is shared accountability between employees and the University to ensure that our medical plans remain competitive and affordable,” Gray said. “Availing ourselves of health management resources, following the direction of our physicians and using the most cost-effective types and sites of care are all ways in which we can keep costs manageable.”

Gray is chair of the Health Care Advisory Committee (HCAC), which includes faculty, staff and administrators with expertise in health care, health insurance and human resources. Penn State President Eric Barron created HCAC in 2014 to study issues related to health care coverage and its growing costs and to advise the administration. While Penn State’s health care coverage plan is administered by Highmark Blue Shield, the University is self-insured, which means the University and employees pay for all medical claims. Total medical costs for active employees and their families are close to $200 million per year, not including the additional cost of providing medical coverage to eligible retirees. Active employees are asked to share in the cost through $35 million to $40 million in annual premium contributions. Medical costs are predicted to continue to grow in excess of consumer inflation rates.

Gray explained that HCAC has identified guiding principles to help steer discussion and evaluation of the options: 1) offering competitive, affordable coverage for employees; 2) helping employees and their families avoid or manage chronic conditions; 3) directing employees and their families to the appropriate places for their care; 4) increasing physical activity; 5) embracing healthy behaviors such as a tobacco-free community across all University campuses; and 6) continuing to help employees and their families thrive in their communities through access to tools and resources designed to help them make the best health care decisions.

HCAC also has been seeking input from the University community as part of the process. That includes conducting a survey sent to faculty and staff in 2015. Among its findings:

  • Employees stressed the importance of robust, clear and abundant communications;
  • Employees want specific examples of claims scenarios to illustrate out-of-pocket exposure;
  • Employees’ risk aversion has an influence on decision-making.
  • Employees are hungry for more information — they lack a general understanding of how medical insurance works;
  • Employees are concerned about their total medical costs through premiums and out-of-pocket expenses.

Penn State’s health care expenses for employees increased by more than $30 million from 2011 to 2015, or an average of 4.1 percent a year, which is below market trend — but still higher than the Consumer Price Index (CPI), the most common measure of inflation. The University’s current contract with Highmark continues until December 2017, and next year the University will begin the process of requesting proposals for an administrator of its health benefits. Gray emphasized the University’s commitment to having a strong network of health care providers.

“Penn State is committed to keeping the provider network strong for all employees and families across the Commonwealth and will not compromise that for lower cost services,” Gray said.

Currently, employees have two options for health care coverage: PPO Blue or PPO Savings. With the traditional PPO Blue plan, increasing copays, deductibles and coinsurance levels is one approach for allowing the University to continue offering that option in a way that is fiscally responsible. Copays and deductibles on the PPO Blue plan have not increased since 2012.

“As we think about ways in which Penn State can manage the cost of providing medical benefits, there are many levers that can be pulled to share the cost between employees and the University,” Gray said. “Considering modest, more periodic increases in out-of-pocket expenses enables Penn State to avoid significant plan design changes that could create too much financial tension for employees and their families.”

Similarly, with the PPO Savings plan, modest changes in out-of-pocket expenses would keep plan costs manageable. Other factors HCAC is evaluating include the costs of pharmaceuticals, lab work and other services that will be addressed during contract negotiations with third-party administrators.

Gray, noting that there are two approaches that could be used for sharing costs — increasing health care premiums overall or increasing out-of-pocket costs for those who use health care services — received feedback from the University Faculty Senate on those and other questions including deductibles, benchmarking fees with other universities and having access to information about the costs providers charge for services.

Gray said the feedback faculty senators provided offered valuable insight into the issues HCAC will study moving forward. More details about plan design and cost-sharing decisions for 2017 will be presented to Faculty Senate this spring.

He noted that the University will be piloting a new program later this spring through Penn State Health Care Partners that will allow patients to benefit from health management support from clinical experts. Patients with physicians at Mount Nittany Medical Center and Penn State Hershey Medical Group will be able to participate.

“This is a great example of how you and your doctor can become more engaged in your care and the management of your health conditions,” Gray said.

For information on Penn State benefits, go to: Check Penn State Today for updates on these efforts.

Last Updated January 26, 2016