Appendix L

12/5/17

SENATE COMMITTEE ON FACULTY BENEFITS
JOINT COMMITTEE ON INSURANCE AND BENEFITS

2016-2017 Annual Report on the Status of Benefit Changes

(Informational)

This report is a summary of Penn State benefit changes, changes under consideration, and issues discussed, for which the Joint Committee on Insurance and Benefits provided consultation with the administration between September, 2016 and May, 2017.

Changes to Penn State Benefits

Health Plan Benefit changes in 2017

The PPO and PPO Savings remained the two health plan choices in 2017, with increases in employee contributions through deductibles, out-of-pocket maximums, and co-pays.  In the PPO plan, deductibles increased for individuals from $250 to $375, and for all other plan tiers from $500 to $750, coinsurance out-of-pocket maximums increased for individuals from $1,000 to $1,250 and for all other plan tiers from $2,000 to $2,500, and co-pays increased for office visits from $10 to $20, for specialist visits from $20 to $30, and for urgent care from $20 to $30.  The separate pharmacy deductible increased from $1,000 per member/$6,000 per family to $2,000 per member/$8,000 per family.

In the PPO Savings plan, premiums increased for each subscriber tier: Employee only from 0.52% to 0.63%; Employee plus spouse from 1.25% to 1.53%; Employee plus child(ren) from 1.16% to 1.42%; Family from 1.60% to 1.95%.  In addition to premium increases, deductibles increased for individual subscribers from $1,300 to $1,800, and for all other plan tiers from $2,600 to $3,200, coinsurance out-of-pocket maximums (excluding deductible) decreased for individual from $2,100 to $1,975, and for all other plan tiers from $4,200 to $3,950, based on federal minimums on out-of-pocket maximums for high-deductible plans at $3,775 for individual plans and $7,150 for family plans.  Co-insurance rates remained the same for medical and generic drugs, but increased for other pharmacy costs from 10% for all drugs to 20% for formulary and 40% for non-formulary, retail or mail order, and the additional minimum cost for specialty drugs at 20% or $65 for formulary and 40% or $100 for non-formulary.  The Health Savings Account Seed contributed by the University to the employee remains the same at $400 individual/$800 family for those earning over $60,000, but increases to $600 individual/$1,200 family for those earning less than $60,000.

The dental plan saw its first changes in many years.  While premiums and the annual maximum of $1,500 per member covered remained the same, a deductible of $50 individual/$150 family for both in and out of network non-preventive services was implemented.  Co-insurance also increased for out-of-network services from 80% covered to 60% covered for Class II basic services, and from 60% covered to 50% covered for Class III major services.

Long-Term Disability rates paid by employees stayed the same in 2017 after an increase in 2016.  The rates had remained the same for years until the provider, Prudential, increased them for the remaining two years of our contract, which ends December 31, 2017.  A request for proposal will be initiated in early 2017 to be effective January 1, 2018.

Retiree health care plans for 2017 had increases in employee contributions.  Retirees under Medicare age of 65 subscribe to the same PPO or PPO Savings plan as active employees, thus had the same 2017 increases to deductibles, co-pays, and out-of-pocket maximums.  Pre-Medicare retirees’ claim costs were 46% higher than active employees in 2016, prompting an overall increase in 2017 premium contributions from this group to generate 21% of the total cost of care for this group, not including out-of-pocket contributions.  Monthly premiums for non-Medicare retirees changed as rates for two tiers in 2016 were expanded to four tiers in 2017 for both the PPO and PPO Savings plans.  In the PPO, retiree-only rates increased from $135 to $176.16, retiree plus spouse decreased from $456.50 to $352.31, retiree plus children decreased from $456.50 to $264.23, and retiree family decreased from $456.50 to $440.39.  In the PPO Savings choice, retiree only rates increased from $99 to $127.18, retiree plus spouse decreased from $324 to $254.37, retiree plus children decreased from $324 to $190.77, and retiree family decreased from $324 to $317.96 The 2017 non-Medicare retiree premiums are roughly equal to an active employee salary of $90,000.

Retirees who are Medicare participants can select the Part B Freedom plan as a Medicare supplement plan that is fully insured by Highmark  Cross.  For 2017, premiums for this plan increased from $72 to $79, which is 20% of the full cost of this group plan with the University contributing the remaining 80%.

Technical Service’ PPO plan percentage of salary contributions from 2016 to 2017 increased in each tier to the following:

Tier20162017
Individual2.37%2.56%
Two persons5.12%5.53%
Parent & child(ren)4.78%5.16%
Family6.42%6.93%

Technical Service’ PPO Savings Plan percentage of salary contributions from 2016 to 2017 stayed the same in each tier:

Tier20162017
Individual1.25%1/25%
Two persons2.20%2.20%
Parent & child(ren)2.05%2.05%
Family2.6%2.6%

For 2017 health plan enrollment data indicated:

  • 12,460 or 77% of employees enrolled in the Highmark PPO plan
  • 3,769 or 23% of employees enrolled in the Highmark PPO Savings plan
  • 640 moved from PPO in 2016 to PPO Savings plan in 2017
  • 163 moved from PPO Savings in 2016 to PPO plan in 2017
  • 127 Technical Service members chose the PPO Savings option
  • 96% who were enrolled in the PPO Savings plan last year remained in the plan

In March, 2016 the senate passed and the President accepted the report on “Principles for the design of Penn State health care plans.”  The committee participated in the development of this report.  In the report, principle four stated: “A principle for overall cost sharing of 75% University and 25% 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).”  The annual report of JCIB includes the following tables of health care contribution data to monitor the year-to-year implementation of this cost-sharing principle.

Table 1:  Actual and Budgeted Costs with Premium Cost Share

CALENDAR
YEAR
INFORMATION
Total Claims Paid
(% change)
Employee Premium
Contributions (% of
Total Claims)
Net PSU Cost
(% change)
2013217,677,285
5% from 2012
41,167,636
18.91%
176,509,649
4.5% from 2012
2014 budgeted239,138,418
10% projected
41,383,917
17.31%
197,754,501
2014 actual220,479,189
1% actual
42,747,904
19.39%
3.7% actual
177,731,285
 0.7% actual
2015 budgeted250,868,027
5% projected
44,441,055
17.71%
206,426,972
2015 actual236,236,199
7% actual
45,286,942
19.17%
5.7% actual
190,949,257
 7.4% actual
2016 actual270,407,414
14% actual
46,807,111
17%
3.4% actual
223,600,303
17% actual

The 2016 total claims paid by the University increased by a significant 14% over the prior 2015 calendar year.  Employee premium contributions to the University cost declined approximately 2% from the 2015 calendar year, thus the University’s overall contribution to medical costs increased 17% in 2016 over 2015.  The University total cost does not include out-of-pocket payments made by employees directly to providers and these are detailed in the table 2 below.

Table 2:  Employee out-of-pocket contributions

CALENDAR
YEAR
INFORMATION
Employee Medical
Out-Of-Pocket
(% change)
Employee
Prescription Drug
Out-Of-Pocket
(% change)
Total Employee
Out-Of-Pocket Cost
(% change)
201315,890,0826,460,52622,350,608
201417,179,997
8.1%
6,277,005
-2.8%
23,457,002
5.0%
201518,073,639
5.2%
6,649,340
5.9%
24,722,979
5.4%
201619,707,691
9.04%
6,618,254
-0.47%
26,325,945
6.48%

Employee out-of-pocket costs increased 9% for medical claims and decreased slightly .47% for prescription drug claims.  However, overall employee out-of-pocket costs increased 6.48% in 2016 over the 5.4% increase in 2015.  When these contributions are combined with premium and University contributions the full cost of medical care and cost-sharing between the University and employees can be examined below in Table 3.

Table 3:  Cost-sharing of total health care contributions between the University and employees

CALENDAR
YEAR
INFORMATION
Total Health
Care Cost
(% change)
Employee
Premium and Out-
Of-Pocket
Contributions
(% change)
Net University
Cost
(% change)
University %
Share of Total
Health Care
Cost (% change)
2013240,027,89363,518,244176,509,64973.5%
2014243,936,191
1.6%
66,204,906
4.2%
177,731,285
0.7%
72.9%
-0.9%
2015260,959,178
7.0%
70,009,921
5.7%
190,949,257
7.4%
73.2%
0.4%
2016296,733,359
14%
73,133,056
4.46%
233,600,303
17%
75.35%
2.98%

The yearly increase in health care claims paid by the University doubled from 7% in 2015 to 14% in 2016.  The full employee contribution of premiums and out-of-pocket costs increased 4.46% in 2016 over 2015, but the increase declined over the prior year increase of 5.7%.  The 2016 overall University cost for the total allowable charges increased 17% over the cost in 2015.  However, the cost sharing between University and employee better achieved the goal of 75% University and 25% employee in 2016 as the final actual cost sharing resulted in the University contribution of 75.35% to total allowable medical charges.  This is an important improvement over the prior three years when the University contribution fell short of the goal at 73.5%, 72.9% and 73.2%.  The design of future plans should attempt to maintain the goal achieved in 2016.

Health Plan Benefit Changes for 2018

The total allowed medical costs for calendar year 2018 are projected at $191,338,000. The medical plan costs and cost-sharing projections used to develop the 2018 plan design and contribution levels are in Table 4 below.

Table 4:  2018 Medical Health Plan Cost Projections

CALENDAR YEAR INFORMATION2018 Projected Costs
Total of Allowed Charges$191,338,000
PPO Plan Cost Share
Participant OOP
Premium Contributions
HSA seed
Penn State Cost Share

10.6%
14.4%
0.0%
75.0%
PPO Savings Plan Cost Share
Participant OOP
Premium Contributions
HSA seed
Penn State Cost Share

14.4%
10.6%
4.4%
70.6%
Contribution by
University
Employee

$143,504,000
$47,834,000
Cost Sharing
Employee % share

25%

The 2018 health care structure for employee premiums, employee out-of-pocket contributions, and University contributions will achieve the cost sharing goal of an overall 75% University and 25% employee contribution.  The ratio of employee premium and out-of-pocket contributions between the PPO Plan and PPO Savings plans are balanced to emphasize the choice between a lower premium and higher potential out-of-pocket costs in the PPO Savings and the higher premium and lower potential out-of-pocket costs in the PPO Plan, both choices contributing 25% to the overall costs of allowable charges.

To achieve this cost-sharing principle, the following changes will be made to the 2018 PPO Plan and PPO Savings plans.

Specific changes for health care plans effective January 1, 2018 include:

  • PPO PLAN
    • Premiums decrease for monthly contributions for each tier:
      • Employee only from 1.81% to 1.51%
      • Employee plus spouse from 4.40% to 3.68%
      • Employee plus child(ren) from 4.08% to 3.41%
      • Family from 5.61% to 4.69%.
    • Deductibles change to be based on four salary bands and only two plan tiers, individual and family:
      • Salary less than or equal to $45,000 – individual at $250 and family at $500
      • Salary $45,001 – $60,000 – individual at $375 and family at $750
      • Salary $60,001 – $90,000 – individual at $500 and family at $1,000
      • Salary greater than $90,000 – individual at $625 and family at $1,250
  • PPO SAVINGS PLAN
    • Premiums increase for monthly contributions for each tier:
      • Employee only from 0.63% to 0.78%
      • Employee plus spouse from 1.53% to 1.89%
      • Employee plus child(ren) from 1.42% to 1.75%
      • Family from 1.95% to 2.41%
    • The Health Savings Account Seed contributed by the University to the employee changes based on four salary bands and only two plan tiers, individual and family:
      • Salary less than or equal to $45,000 – individual at $800 and family at $1,600
      • Salary $45,001 – $60,000 – individual at $600 and family at $1,200
      • Salary $60,001 – $90,000 – individual at $400 and family at $800
      • Salary greater than $90,000 – individual at $200 and family at $400

An additional change to the 2018 health care plans includes the elimination of the tobacco surcharge.  A minimal additional contribution is currently collected based on the employee self-attestation, and the President’s task force on smoke/tobacco free campus will recommend a future direction.  The PPO Savings plan will adopt the same “soft” generic substitution rule as the PPO  plan for prescription drugs.  No financial penalty will be incurred if the prescribing doctor indicates “dispense as written” on the script.

The committee also discussed various contribution strategies, different salary caps for indexing, and different ways to support employees at lower salary levels.  The committee examined pharmacy costs that account for approximately 20% of all costs in 2016; with the increasing prices of specialty drugs, pharmacy costs are expected to increase to 25% of plan costs by 2018.

2018 Benefits Open Enrollment is November 1, 2017-November 17, 2017 with all changes made effective January 1, 2018.

The selection of a new Third Party Administrator for the University self-insured health care plans

A steering committee was established to review the proposals for the Third Party Administrator contracts to administer medical and prescription drug benefits beginning January 1, 2018.  The steering committee reviewed proposals from six vendors for the separate administration of medical and pharmacy benefits.  Willis Towers Watson provided consultation to the special committee in the analysis of proposals.  A preliminary round was followed by a finalist round with the review beginning in February 2017 and ending in May 2017. The steering committee evaluated proposals based on the availability of providers to reduce disruption in the change to a new administrator, the in-network pricing negotiated by the new administrator, and the administrator fees for plan administration.  Aetna was recommended to senior University leadership as the best proposal for the administration of the University medical benefits and CVS Caremark was recommended as the best proposal for the administration of the University pharmacy benefits.

Addition legal wards as benefits eligible dependents

Children over whom employees have legal guardianship have been added as benefit eligible dependents beginning January 1, 2017.  A comparison with peer institutions found Penn State to be an exception to the vast majority, supporting the change.

Retiree Healthcare Billing

Retiree insurance billing is now administered by Lifetime Benefit Solutions, who also handles COBRA payments.  Retirees can now have quarterly billing or monthly automatic withdrawals for their health care premiums.

Spending Account Services

The University has contracted with HealthEquity to administer Health Care and Dependent Care Flexible Spending Accounts and Health Savings Accounts.  The administration of Health Savings Accounts are being transferred to HealthEquity in September, 2017, and Flexible Spending Accounts will transfer as of January 1, 2018.

Laboratory Services

The University contracted with Quest Diagnostics to provide laboratory services for employees and the University.  Quest Diagnostics provides collection sites at locations convenient to Commonwealth Campuses and at Penn State Hershey Medical Group in State College.  Currently there is a migration of 7,500 tests to Quest over the first 5 months with a savings for both University and employees of $250,000.  After a year with Quest, September 2016 to September 2017, the Benefits office may look to further incentivize the use of Quest Diagnostics.  Benefits will bring a trend by location analysis to JCIB in the fall, with inpatient hospital tests separated out of the analysis. The committee reviewed this development with specific attention to access and affordability for employees.

Acute Care Center on the University Park Campus

An acute care clinic run by the College of Nursing in collaboration with Penn State Health opened in the spring semester 2017. The center offers walk-in acute care for active employees only and not dependents or retirees.  Plans are in process to add health and well-being programs in the future.  The center will be a model for the development of other centers at other Commonwealth Campus locations.

Data Warehouse and integration with other services 

Truven Health Analytics (now known as IBM Watson Health) was selected to provide a data warehouse for health care analyses.  Vendors will send claims and other relevant data to Truven.  The data warehouse will enable the production of reports on trends that might help to better understand conditions, underlying costs, and utilization.    The University will be able to run reports and complete predictive modeling on utilization to improve health care outcomes and focused outreach.

Security measures are in place to ensure that any analyses are based on aggregated, de-identified data.

Benefit Changes under Consideration at this Time

Adding a Short-Term Disability Program

The University does not currently offer a short-term disability program.  New hires without leave accumulation may experience a lack of time off for non-work related illness and injuries.  An RFP for a vendor to offer a plan is being developed effective in 2018.

Topics Discussed with No Change at this Time, or for Informational Purposes

Retirement health savings plan

Employees hired on or after January 1, 2010 are eligible to receive $144 a month which accumulates to cover the cost of health care in retirement.  The accounts are vested at age 60 with 25 years of service, or age 65 with 15 years of service.  The University is reviewing the vesting eligibility for competiveness.

Support for employees to participate in health-related wellness activities during the workday

The committee discussed a potential policy change to HR 34 that would specify the ability of employees in all units to participate in wellness activities 3 hours each week.  If all employees could not have a benefit of work time allocated to health-related activity, perhaps it could be extended to those with specific health needs, such as those who were newly diagnosed with a condition or had experienced a health event for which exercise is essential.   Reinforcing policies allowing flextime and more flexibility for exempt and non-exempt employees was discussed as a way to enable employees to engage in health and well-being activities.

SENATE COMMITTEE ON FACULTY BENEFITS

  • Mary Beahm
  • Renee Borromeo
  • Lonnie Golden
  • Galen A. Grimes, Chair
  • Mark Horn
  • Peter Jurs
  • Cassandra Kitko
  • John Liechty
  • Kathleen Noce
  • David Post
  • Ira Saltz
  • Geoff Scott
  • Erica Smithwick, Vice Chair
  • Gregory Stoner
  • William Wenner

JOINT COMMITTEE ON INSURANCE AND BENEFITS

  • Mary Beahm
  • Renee Borromeo
  • Gina Burge
  • Joseph J. Doncsecz
  • Peter C. Jurs
  • Cassandra Kitko
  • Jonathan M. Light
  • Jill M. Musser
  • Willie Ofosu
  • Ira J. Ropson
  • Kimberly Smith
  • Erica Smithwick
  • Gregory Stoner