UNIVERSITY PARK, Pa. -- Rapidly escalating health care costs over the past few years have colleges and universities across the country examining how best to manage the growing expense of providing high-quality medical benefits for its employees. A report recently accepted by Penn State’s Faculty Senate provides suggestions for how that process should happen.
A six-point plan of guiding principles for the design of Penn State’s health care plans was submitted by the Senate Committee on Faculty Benefits and approved last month by the University Faculty Senate.
The six principles outlined within the advisory and consultative report recommend making information accessible, keeping plans affordable, offering choice to employees, maintaining a fair cost-sharing approach, providing informed use when implementing data warehouse and cost transparency tools, and fostering a culture of health.
These recommendations were developed by a subcommittee of members from three University committees, with response from the full-membership of these committees: the University Senate Committee on Faculty Benefits, the University Joint Committee on Insurance and Benefits and the President’s Health Care Advisory Committee.
“The combined efforts of the three University committees charged with preparing this report demonstrate the inclusiveness and collaboration we have among faculty, staff and administration to better inform our decision-making process regarding an important component of our total compensation,” said David Gray, senior vice president for Finance and Business. Gray chairs the Health Care Advisory Committee, which includes faculty, staff and administrators with expertise in health care, health insurance and human resources.
The six guiding principles set forth by the advisory and consultative report include:
1) Choice
A principle of choice for employees in health care plans should guide the annual design of plans with consideration of the levels of premium contributions and out-of-pocket contributions shared with employees.
A current goal is to maintain the University’s two plans for 2017. Penn State is considering how choice can be effectively offered for 2018 and beyond. Employees have expressed preference around purchasing medical coverage either through higher premium contributions that reduce their out-of-pocket exposure should they have an unexpected health event, or being willing to take on more out-of-pocket risk for lower employee premiums.
Currently, employees have two options – PPO Blue and PPO Savings – for health care coverage. Both plans require employees to pay for a portion of the total cost through premium contributions, copays, deductibles and coinsurance. Finding the right balance of cost sharing will enable the University to offer plan options that are competitive and fiscally responsible. Under the PPO Blue plan, copays and deductibles have not increased since 2011. Similarly, with the PPO Savings plan, which was introduced in 2014, deductibles have remained at the statutory minimums and coinsurance has remained unchanged since that time.
University leaders recognize that maintaining multiple plans that provide choice is of central importance to employees. Even with choice, shifting some costs to the user through out-of-pocket expenses and providing access to helpful consumer tools can preserve affordability as well as support the use of appropriate quality care.
“Considering modest, more periodic increases in out-of-pocket expenses and providing employees the tools they need to make informed healthcare decisions enables Penn State to avoid significant plan-design changes that could create too much confusion and financial tension for employees and their families,” Gray said.
2) Cost Sharing
A principle for overall cost sharing of 75 percent University and 25 percent employee should guide the determination of contributions to meet the annual full-cost of healthcare. (University cost, plus employee premiums, plus employee out-of-pocket costs).
Historically, Penn State has been following this principle since 1992 when it was recommended by the University Faculty Senate Task Force on the Future of Health Care and Life Insurance, as well as in 1998 in the Report from the Task For Force on the Future of Benefits and the 2015 Report on Employee Contributions to Penn State’s Self-Insured Healthcare Costs. The University shares the cost of providing medical coverage with employees through premium contributions and other out-of-pocket costs. Generally, employees have been asked to cover 17 percent to 18 percent of the medical plan cost through employee premium contributions, with the remaining 82 percent to 83 percent of claims coming from Penn State’s general funds. When adding in the other out-of-pocket costs paid by employees, the total ratio is closer to 75 percent University, 25 percent employees.
3) Affordability and Equity
A principle of affordability and equity should guide the design of plans to incorporate features that make the plans affordable for employees below the median salary; however, the overall contribution of employees above the median salary should not exceed levels comparable to peer and industry trends.
Penn State leaders understand that employees below the median salary may not have the savings or liquidity necessary to cover the costs of increased out-of-pocket expenses from accidents, chronic conditions, surgeries and catastrophic health events. This principle suggests that various plan design features might provide financial support for employees below the median salary. Such features might include a more modest premium, decreasing deductibles as income decreases, lower coinsurance and out-of-pocket maximums, or incrementally higher seed money in the Health Savings Account or Flexible Spending Account as income decreases from the median.
4) Informed Use
A principle of informed use should guide the implementation of a data warehouse and cost transparency tools that provide the following: a. Analytic capabilities for conducting secure and anonymous studies of University employee healthcare use and provider costs. This will allow better design of future healthcare plans, contract terms and vendor management; and, b. Cost transparency and analysis tools to aid members in better understanding the costs and quality of care received, and so plan their utilization of healthcare services.
A data warehouse would allow Penn State to develop more precise strategies through data-driven decision making. For example, a data warehouse can be used to extract information on participants who have been diagnosed with chronic conditions like diabetes. Specific questions could be asked, such as: “To what degree is the group seeing a physician and filling necessary prescriptions? Are they having regular tests?” Once this information is known, outreach to these individuals through Penn State Health Care Partners (http://news.psu.edu/story/397109/2016/03/11/administration/penn-state-health-care-partners-seeks-help-optimal-health) is one strategy to help employees better manage their conditions and receive free, private consultation and guidance.
Depending on how robust the data warehouse is, other data such as vision claims, dental claims and unscheduled absences from work can be included, to provide further specificity around where the opportunities exist to better manage care and to determine correlations between health and other components of Penn State’s total compensation program. Programs, services, plan design and cost-sharing can all be positively influenced by using the information from a data warehouse. Because data is presented on an aggregate basis, with no specific member data provided to the employer — employee privacy is maintained.
A cost transparency tool for employees also could help them understand the costs for all services, whether they be preventive, diagnostic, in-patient, out-patient or other professional services. As an example, knowing which services are covered as preventive at 100 percent versus those that may require out-of-pocket expenses for diagnostic tests can be found through the tool, allowing employees to make better informed economic and quality decisions on where they want to receive their care. The current preventive schedule is available here: http://ohr.psu.edu/assets/benefits/insurance/health/documents/PreventiveSchedule.pdf
5) Quality, Accessibility, Transparency and Cost Effectiveness
The principles of quality, accessibility, transparency and cost effectiveness should guide the negotiation and management of contracts for healthcare services.
With a greater understanding of use and cost patterns, the University could negotiate contracts for specific services to support quality and achieve greater affordability for employees. For example, when laboratory tests are performed at a physician’s office or hospital, the costs can be inflated by 50 percent up to 700 percent, as compared to fees at stand-alone facilities. The costs can add-up for the member’s out-of-pocket expenses, as well as for the University. The opportunity to steer healthcare services to high quality, lower costs sites of care should be considered.
The effective management of prescription drug costs is of equal importance to a cost effective, affordable benefits program. A strong Pharmacy Benefits Manager (PBM) partnership, whether through a claims administrator like Highmark, or a separate contract, can provide savings to both the employee and the University.
6) A Culture of Health
A principle of fostering and promoting a culture of health, which is included as a thematic priority in the University’s 2016-2020 strategic plan, should guide the design of plan features and programs that promote healthy choices and activities, shared efforts to establish tobacco-free campuses and support the consistent and effective management of health risks.
University leaders believe Penn State should play a role in in achieving a healthy community by infusing health and well-being into everyday operations, business practices and institutional initiatives. Some examples include exploring policies to create tobacco-free campuses across the Commonwealth, developing a supportive campus environment that includes healthy food choices, providing areas to promote physical activity and promoting opportunities to support personal development.
The importance of health and well-being is supported through medical survey data. Studies indicate that additional medical claims that a tobacco user incurs each year are between $1,000 and $3,000. To help defray the cost of additional claims that tobacco users incur, Penn State may want to explore the continued use of a tobacco surcharge, promotion of the tobacco-cessation products available through both the PPO Blue and PPO Savings plans (note that some tobacco-cessation medications and services are available at no cost), and the establishment of tobacco-free campuses with expanded cessation support for employees.
As another example, Value Based Benefits Design (VBBD) is a program focused on supporting the consistent management of health conditions and available to those enrolled in the PPO Blue plan who have been diagnosed with diabetes, high blood pressure and/or high cholesterol. VBBD programs promote individual health and management of chronic conditions by removing cost barriers to appropriate, high-value care. In the PPO Blue plan design, the costs of treatments and services related to the condition are covered at 100 percent.
A focused chronic care management pilot program is currently underway through Penn State Health Care Partners’ clinically integrated network, which will coordinate the efforts of local physicians and healthcare facilities in the University Park area to provide comprehensive care and support.
“We are committed to engaging providers, employees and their families in effectively managing their care, keeping them healthy and thriving in the communities in which they live and work. Maintaining and growing a strong, high-quality provider network for all employees and families across the Commonwealth is Penn State’s promise and we will not compromise that for lower cost services,” Gray said.
To review the complete Principles for the Design of Penn State Health Care Plans report, visit the Faculty Senate website: http://senate.psu.edu/senators/agendas-records/march-15-2016-agenda/appendix-m/