As health care costs continue to rise, Penn State remains proactive

November 09, 2018

UNIVERSITY PARK, Pa. – Penn State’s continuing commitment to offering employees an affordable and high-quality benefits package relies heavily on the University’s ability to control costs and mitigate risks — something David Gray, senior vice president for Finance and Business, said it is being consistently monitored. 

Gray, who provided an update Thursday (Nov. 8) to the Board of Trustees Committee on Finance, Business and Capital Planning, explained that the variability found in multiple factors — including those beyond the University’s control, such as federal legislative changes; the amount of appropriation the University receives from the Commonwealth; and normal inflationary rises — in the area of health care make controlling costs an ongoing challenge for any organization, particularly one as complex and large as Penn State.  

Currently, Penn State offers health care plans to active employees and retirees, including those eligible for Medicare, for a total of more than 50,000 members (subscribers plus eligible dependents), Gray said. Actions taken by the University to help mitigate the rise in health care costs, yet maintain high-quality offerings include:

  • Changes in third-party administrators to Aetna and CVS Caremark
  • Changes to benefit plan designs
  • Purchase of IBM Watson Health Data Warehouse
  • Collaboration with Penn State Health Care partners

“With the continuous rise in health care costs, trending on an annual basis at more than 6 percent nationwide, the University has made great strides in reducing our self-funded medical and prescription drug plan claims cost for fiscal year 2018 by almost 8 percent, or $18.5 million,” Gray said. “In particular, the change in our third-party administrators to Aetna for medical benefits and CVS Caremark for prescription drugs has helped us to slow the increasing cost trend for the University.”

Gray said the switch to Aetna and CVS Caremark have done the following:  

  • Lowered allowed charges for services, reduced overall costs to employees and to the University;
  • Lowered administrative costs paid by the University. 

“With ever-evolving policies, processes and complexities at the state and federal level that impact the health care industry, as well as rapidly changing standards and expectations in the industry itself, maintaining affordable health care for the University’s employees is not an easy task, but certainly remains a priority,” Gray said. “While our work to date has yielded good results and we are seeing a positive impact, these are early markers in our ongoing process and we will have to measure our efforts over a longer period of time. In dealing with the unpredictability in this area of our operations we need to remain vigilant and committed, as well as far-sighted.”

Moving forward, the University will continue to further identify opportunities with Penn State Health, and work with internal governance and advisory committees, including the Health Care Advisory Committee, Gray said. 

Last Updated November 12, 2018