SENATE COMMITTEE ON FACULTY BENEFITS
Principles for the Design of Penn State Health Care Plans
Implementation: Upon Approval by the President
The purpose of this report is to recommend principles for the design of university health care plans. The recommendations were developed by a subcommittee of members from three university committees, with response from the full membership of these committees. These three committees are 1) The University Faculty Senate Faculty Benefits Committee, 2) the University Joint Committee on Insurance and Benefits, and 3) the President’s Health Care Advisory Committee. This report synthesizes ideas from the results of the October 2015 Healthcare Plan Survey and several prior reports presented to the University Faculty Senate as listed below. The university-wide Healthcare Plan Survey was released electronically to 15,885 benefits-enrolled employees on August 13, 2015. The intent of the survey was to determine why and how employees chose the health plan they did for 2015, as well as how employees believe the health plans should operate. The survey remained open until October 1. The completion rate was 31% (n=4784). Survey respondents included: 1171 faculty, 3344 staff, 167 technical service, and 82 postdocs; 1695 male, 3008 female; 3843 enrolled in the PPO Blue, 917 enrolled in the PPO Savings Plan, 88 unsure. Prior Senate reports related to Healthcare benefits include:
- Report of the Task Force on the Future of Benefits, July 1998
- Report of the Healthcare Task Force, April 18, 2014
- Report on Employee Contributions to Penn State’s Self-Insured Healthcare Costs, March 17, 2015
- Report on Health Insurance Plans: An Overview of Issues, October 27, 2015
- 2014-2015 Annual Report on the Status of Benefit Changes, October 27, 2015
- October 2015 Healthcare Plan Survey
- The principles of quality, transparency, accessibility, and cost effectiveness should guide the negotiation and management of contracts for healthcare services.
- 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.
- 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 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).
- A principle of informed utilization 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 health care utilization 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 health care services.
- 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.
Discussion of Recommendations
1) 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.
On the October 2015 Healthcare Plan Survey, employees expressed the importance of choice in plan selection depending on individual health care needs, preferences in how the plans work, beliefs about levels of cost sharing, and degree of financial risk. Many expressed a preference to purchase insurance and pay a predictable amount each month in order to have financial protection against unexpected health care events, and for this peace of mind were comfortable with the higher premiums and the lower out-of-pocket costs of the PPO Blue plan. Some even preferred paying their share in just premiums and having no more than copays for office visits. Others expressed a belief that those who use a health care plan should have to pay more of the cost for the plan, and those who use less health care services should be rewarded. Employees expressing a preference for the PPO Savings plan welcomed the lower premium, the opportunity to build a tax free health savings account for future healthcare needs, and were comfortable assuming more financial risk for an injury or unexpected health care need.
Employees anticipating healthcare needs such as elective surgery (e.g., orthopedic) or a pregnancy overwhelmingly reported selecting the PPO Blue plan even though premiums and other out-of-pocket expenses in this plan may still result in financial tension at lower incomes. Employees who self identified as single and/or young chose the PPO Savings plan for their current circumstances while those who self identified as older or dealing with chronic health conditions chose the PPO Blue plan. Some planned to switch to the PPO Blue plan because of impending healthcare needs in the upcoming year. Most all employees who self-identified as families with young and active children preferred the protection provided through the PPO Blue plan. These helpful observations point to the importance of a consumer transparency tool, which will inform and create understanding so that employees can make the best healthcare choices for themselves and their families.
Maintaining multiple plans that provide choice on these dimensions is of central importance to employees. Even with choice, shifting some costs to the user through out-of-pocket expenses can preserve affordability as well as support appropriate quality care. Both plans provide financial protection with maximum out-of-pocket costs after which the university pays 100% of all claims. The PPO Blue plan has higher premiums with lower out-of-pocket costs, and the PPO Savings plan has lower premiums with higher out-of-pocket costs. The PPO Savings plan seeks to have an overall lower cost for healthcare by using features that are meant to encourage more informed and appropriate utilization of healthcare services. In the Penn State situation, with employees enrolled in both plans, it is difficult to compare in a transparent way how the plan impacts overall total costs. To examine this question, Table 1.1 below illustrates the costs of each plan separately if all employees were enrolled in that plan.
The current state reflects the projected costs for 2016 for our current employee enrollment of 82% in the PPO Blue plan and 18% in the PPO Savings plan. The 2016 current state of mixed enrollment carries an average yearly cost to the employee of $3,600 in premiums and out-of-pocket costs combined. If all employees were enrolled in just one plan, the PPO Savings plan illustration has a lower average yearly cost to employees of $2,700. With the PPO Savings, the university cost is highest at $178.2 million in part from the contribution of an additional $10.6 million directly to all employees in their Health Savings Account. However, because employee costs would be lowest in the illustrated PPO Savings plan, the total costs for health care would be $222.4 million in that plan, lower than the current 2016 mixed enrollment total of $227.6 million, and lower than the illustrated PPO Blue total of $235.7 million.
Table 1.1: Illustration of Projected 2016 Total Healthcare Costs if All Employees were in a Single Plan (in millions)
|Costs and Contributions||Current State||Full Replacement |
|Aggregate Cost ($M)||-||-||-|
|Claims + Expenses||$202.1||$214||$180.6|
|Employee Out of Pocket||$23.5||$21.7||$31.2|
|Total Allowed Amount||$227.6||$235.7||$222.4|
|Employee Cost ($M)||-||-||-|
|Employee Out of Pocket||$23.5||$21.7||$31.2|
|Total Employee Cost||$59.6||$66.1||$44.2|
|Penn State Cost||$168.1||$169.6||$178.2|
|Per Employee Cost||-||-||-|
|Average Out of Pocket||$1400||$1300||$1900|
|Total Employee Cost||$3600||$4000||$2700|
In maintaining a choice in plans, it is important to seek transparency in the costs of the plans in combination with the effectiveness of each plan design to encourage and maintain appropriate and high quality healthcare.
2) 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).
Historically, the university has used the guide of approximately 17%-18% of the medical plan cost to set employee premiums when budgeting for medical plan costs each year. Penn State budgets to pay from general funds the remaining 82%-83% of the claims charged to the plans. Outside of premium contributions, employees may incur additional out of pocket costs (copays, deductibles, coinsurance). When the additional out-of-pocket costs are combined with the medical plan costs, the total allowable charges are shared between the university and employee at a ratio closer to 75% university and 25% employee. The principle recommended here would use previous years costs to consistently seek a cost sharing balance of 75% university and 25% employee. This cost sharing principle has been recommended by the University Faculty Senate in the 1992 Task Force on the Future of Health Care and Life Insurance, the 1998 Report from the Task Force on the Future of Benefits, and the 2015 Report on Employee Contributions to Penn State’s Self-Insured Healthcare Costs.
Table 2.1 below details the actual and budgeted healthcare expenditures and contributions for the medical plan cost for all active and retired employees since 2011.
Table 2.1: University and Employee Contributions to Total Healthcare Costs (includes retirees)
|Total Claims Paid|
|Employee Premium |
(%of Total Claims)
|Net PSU Cost|
|(2011 actual percentage)||4%||22.79%||_|
|(2012 actual percentage)||4%||18.30%||_|
|(2013 actual percentage)||5%||18.91%||_|
|(2014 budgeted percentage)||10%||17.31%||_|
|(2014 actual percentage)||1%||19.39%||_|
|(2015 budgeted percentage)||5%||17.71%||_|
|(2015 actual percentage)||7%||19.17%||_|
The 2014-16 years combine the medical plan costs for both the PPO Blue and PPO Savings plans to arrive at the total costs. The figures illustrated in Table 2.1 above may differ from previous reports submitted to the Faculty Senate by the Senate Committee on Faculty Benefits. The figures in this report have been updated by Penn State’s Finance Office to accurately reflect the costs of budgeting and medical expenditures.
The percentage of employee actual premium contributions between 2005 and 2014 ranges between 17.31% to 22.79%, with an average of 19.71% of the total costs of medical plans for healthcare for all active and retired employees. The 2014 and 2015 budgeted costs anticipated higher total medical plan costs that would have resulted in a lower percentage share through employee premiums of 17.31% and 17.71%; however, lower actual total medical plan costs increased the percentage shared through the fixed contributions of employee premiums to 19.39% and 19.17% respectively. These medical plan costs, budgeted and actual claims paid, do not include out-of-pocket contributions paid directly by plan members to providers.
Since 2011, employees have contributed an additional average of 5% to 10% of allowable medical charges through out-of-pocket contributions each year. Table 2.2 below, Employee Out-Of-Pocket Contributions, details the out-of-pocket contributions. It wasn’t until the introduction of deductibles and coinsurance in 2011 that employees’ combined contributions (premiums and out-of-pocket contributions) approximated the 25% contribution to the total healthcare costs for the university. Thus, a frequent perception shared by employees who completed the October 2015 Healthcare Plan Survey, that their health care benefit has been declining in value, is likely attributable to the increase in out-of-pocket costs since 2011 resulting from medical inflation and the introduction of deductibles and coinsurance.
Table 2.2: Current State of Total Cost Sharing for Penn State Healthcare Plans
For total out-of-pocket contributions from 2013 to 2014, employee out-of-pocket contributions increased 5.0% from $12,350,608 to $23,457,002, and from 2014 to 2015, increased 5.4% from $23,457,002 to $24,722,979.
Table 2.3 below, Total Health Care Costs and Employee-University Share, details the total health care cost for 2013, 2014, and 2015, the combined employee contributions, through premiums, surcharges, and out-of-pocket costs, and the remaining net university cost.
Table 2.3: Total Health Care Costs and Employee-University Share
|Net University Cost|
of Total Health
The total employee contribution increased 4.2% from $63,518,244 in 2013 to $66,204,906 in 2014. When all administrative and claims costs required to provide health care are included, the university contribution increased 0.7%, from $176,509,649 in 2013 to $177,731,285 in 2014. When all employee and university contributions are combined, the total costs of medical care increased 1.6%, from $240,027,893 in 2013 to $243,936,191 in 2014. The overall cost sharing for employees increased by 0.9% from 2013 to 2014, from 73.5% university and 26.5% employee in 2013, to 72.9% university and 27.1% employee in 2014. The employee cost sharing ratio declined from 2014 to 2015 to a 26.8% share of the total health care cost. Over the three years, the employee cost share has been 1.5% to 2.1% higher than the 75% university – 25% employee principle being recommended.
Overall cost sharing for 2015 is illustrated below in Table 2.4, with percentages provided for university payments, employee premiums, and employee out-of-pocket costs separately for the PPO Blue plan and the PPO Savings plan, the combined overall for both plans, and a comparison to the market trend benchmark.
Table 2.4: Current State of Total Cost Sharing for Penn State Healthcare Plans
The bar graphs in Table 2.4 show that in 2015 the university paid 74.7% of total healthcare costs across both plans, with employees and dependents covering the remaining costs through premiums at 15.7% and out-of-pocket contributions at 9.6%. This cost sharing ratio is more favorable than market trend of 72% employer and 28% employee. However, the first two bar graphs illustrate inequity between the overall employee contributions of 26.5% to the PPO Blue and 20.9% to the PPO Savings plans. The university contributed 79.1% to the PPO Savings plan costs, but only 73.5% to the PPO Blue plan costs. The principle of cost sharing at 75% university and 25% employee (premiums and out-of-pocket costs combined) should apply within each plan design, thus ensuring equity in cost sharing between multiple plans. Given the principle recommended above, an inequity in university and employee cost sharing between different plans should provide direction for the design of contributions in future years to better achieve the cost sharing goal overall as well as within each plan. It is critical to note as well that the university might budget for a cost share of 75% in an upcoming year, but if the plan utilization is lower than predicted, the fixed contribution of the employees in premiums would result in a lower university cost share when actual costs are calculated in a later year.
The premiums and out-of-pocket levels for each plan are lower than benchmarking data on levels for typical Preferred Provider Organization plans (PSU’s PPO Blue plan) and High Deductible Health Plans (PSU’s PPO Savings plan). A 2015 CUPA-HR (College and University Professional Association for Human Resources) survey of 363 public and private universities, which included five Big Ten universities and another large state-affiliated university in PA determined the median monthly medical premiums for PPO and HDHP plans as follows with comparable Penn State premiums provided:
- Median monthly medical premiums
- PPO single: $114 (Penn State is $45-$211 depending on salary, $85 at PSU median salary)
- PPO family: $476 (Penn State is $140-$655 depending on salary, $263 at PSU median salary)
- HDHP single: $62 (Penn State is $13-$60 depending on salary, $24 at PSU median salary)
- HDHP family: $319 (Penn State is $40-$187 depending on salary, $75 at PSU median salary)
Penn State plan premiums, at the median Penn State salary of $56,232 fall well below the market median, and are comparably even lower for the PPO Savings plan. In another recent survey, conducted by the university consulting firm of Willis Towers Watson, involving 23 universities, a comparison of employee health plan contribution levels indicates:
- Penn State employees’ premium contributions are, on average, $1,000 less per year than premiums in the benchmark plans.
- In the PPO Savings Plan,
- Premiums are over 50% less than those in comparable high deductible health plans
- Deductible is at statutory minimum ($1,300/$2,600)—lower than 91% of industry
- Coinsurance (90%/10%) is in line with industry
- Total out-of-pocket max (excluding deductible) is in line with industry ($2,100/$4,200)
- HSA seed is in line with industry ($400/$800) for those that provide one. 54% do not seed accounts.
- In the PPO Blue Plan,
- 18% of employers have an individual deductible of under $400 for a “traditional” PPO plan, like PPO Blue (Penn State’s is $250)
- PPO Blue coinsurance is in line with industry (90%/10%)
- PPO Blue out-of-pocket maximum ($1,000/$2,000-medical only, excluding deductible) is lower than 93% of employers in industry
- PPO Blue prescription Rx out-of-pocket maximum is the lowest ($1,000/$6,000)
- PPO Blue copays:
- Emergency room: only 28% of employers are below $150 (Penn State is $100)
- Office visit: Penn State is lower than 94% of industry (Penn State is $10)
The comparison above indicates that Penn State plans are in line with industry standards for the level of coinsurance for both plans, and for the level of the out-of-pocket maximum and HSA seed for the PPO Savings plan. Penn State plans are lower for all other types of out-of-pocket costs to the employee, including being in the bottom 10% for the PPO Savings plan deductible and PPO Blue plan out-of-pocket maximum and office visit copay. In addition to these out-of-pocket comparisons, the PPO Savings plan premium levels are more than 50% lower than comparable high deductible healthcare plans.
Unequivocally, Penn State’s medical plans are of very high value. However, any increases to employee contributions through premium or out-of-pocket costs should have proportionate increases to the university contribution, adjusted from year to year to seek the 75% university and 25% employee cost sharing ratio each year.
3) 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.
On the October 2015 Healthcare Plan Survey, lower paid employees express support for premium indexing, and feel that the health plan has become too complicated with the addition of deductibles and coinsurance in 2011. Most importantly, many instances of financial burden were reported as a consequence of large and unexpected bills for accidents, chronic conditions, surgeries, and catastrophic health events. Employees who perceived the PPO Savings plan as unaffordable for lower income employees also reported avoiding care and deferring needed care because of the additional out-of-pocket costs, even when enrolled in the PPO Blue plan. Lower paid employees may not have the savings or liquidity necessary to cover the costs of the increased out-of-pocket expenses.
Various plan design features might provide financial support for employees below the median salary. Such features might include a decreasing deductible as income decreases, lower coinsurance and out-of-pocket maximums, or incrementally higher seeds to the Health Savings Account or Flexible Spending Account as income decreases from the median. Both the Flexible Spending Account and the Health Savings Account allow employees to save tax free money for health care expenditures, thus reducing the impact of out-of-pocket costs for utilizing health care. On the October 2015 Healthcare Plan Survey, employees shared a frustration with provider billings for care that fell under the deductible or coinsurance. Many felt that these additional costs equated to a loss of value in their plan, or a level of complication in trying to determine if the billings were accurate, or keeping up with paying and verifying payments from spending accounts. Many indicated that they did not seek care because of the potential out-of-pocket deductible costs. University contributions to the FSA or HSA accounts on a yearly basis would reduce the exposure of lower salaried employees to deductible costs. At the lower salary levels, higher seed contributions to the FSA or HSA would especially support employees who lack the ready access to savings to pay for necessary care.
The introduction of the PPO Savings plan in 2014 also introduced a complexity in setting premium ratios to implement equitable indexing separately across two plans and the four enrollment tiers in each plan: individual, two party, parent-child(ren), and family. The ratios used in 2014, 2015, and 2016 created an imbalance in premium contributions for employees in the PPO Blue plan above the median salary and below the cap of $140,000 in salary. The ratios also created an imbalance between the two plans in the cost sharing for overall health care costs with a 20.9% contribution from employees toward the costs in the PPO Savings plan and a 26.5% contribution from employees toward the costs in the PPO Blue plan. The methodology for indexing needs to be articulated that will provide a basis to set premiums for both plans that create equity in the proportion of cost sharing between the two plans, and progressively support employees below the median with lower premiums with respect to salary. One methodology might be based on a relationship between the additional risk taken on with the higher out-of-pocket costs in the PPO Savings plan versus the higher premium required in the PPO Blue plan. Another strategy might be based on the costs that would be required from all employees if everyone were in the same plan, as those contributions should be the expected costs required to support each plan independently even when enrollment is divided between them in any proportion.
When indexing, a cap should also be used to limit the premium amounts on higher salaries for both plans, and still achieve the overall goal of budgeting approximately 17.5% of the plan’s total cost from employee premiums. A cap is used to prevent an employee from paying more than a reasonable amount of the full real cost of a plan. The 2016 cap of $140,000 resulted in a premium that equaled 38.9% of the full cost of the PPO Blue plan without the additional out-of-pocket costs. A cap of $120,000 would produce a premium at that salary level and above that equals 33.3% of the full cost of the PPO Blue plan without the additional out-of-pocket costs. When adding the average PPO Blue out-of-pocket costs of 8.6% to the lower $120,000 salary cap, the employee would contribute more than 40% to their total healthcare cost when compared to the actual cost of the plan. This amount may exceed peer and industry trends which should be used to set a cap on indexed premiums to limit the maximum contributions by employees in each plan offered.
Another strategy of indexing was offered in the 2015 Faculty Benefits Report on Employee Contributions to Penn State’s Self-Insured Healthcare Costs, presented to the University Faculty Senate on March 17, 2015. This report recommended that instead of using a ratio to calculate employee premiums based on individual salary, the university could contribute an equal dollar amount at established income tiers to employees regardless of the plan they select. Employees in the lower tier would have a larger university contribution that eliminated premiums and also had an additional amount left over that could be contributed to an FSA or HSA account. Employees in the PPO Blue plan, after the university contribution, would have a larger balance due to meet the cost of the plan that would be their premiums because the full cost of their plan is 12% to 14% higher than the PPO Savings plan at each coverage tier level. This strategy of cost sharing could be based on an equal dollar contribution to all employees to reach the 75% share of the university based on total healthcare costs, regardless of the plans offered. Then, the employee would chose between plans to pay a combination of premiums and out-of-pocket levels that fits their desired level of assumed risk.
Regardless of the strategy the university identifies to provide premium relief for lowered salaried employees, the principles for establishing indexed premiums should be clearly articulated and presented to the University Faculty Senate for consultation. The inclusion of incentives to further reduce out-of-pocket costs through the demonstration of engagement in positive lifestyle behaviors should also be considered.
Other considerations for affordability, equity, and fairness should include the utilization of surcharges, being mindful of cost impact to employees as well as effectiveness. On the October 2015 Healthcare Plan Survey, some respondents expressed the excellent value of the PPO Blue plan in comparison to plans from former employers and spousal employers. This value supported their acceptance of the spousal surcharge. But other respondents perceived the spousal surcharge as a violation of the value for family within the university community. Also, employees at the lower incomes expressed a belief that the spousal surcharge added an additional financial burden and should also be indexed. Given the overall health insurance market conditions, employers are required to provide healthcare to full time employees. In many circumstances these plans are of low value, prohibit the addition of spouses who are eligible for benefits from another employer, and even pay employees not to insure their spouses. Over 30% of employers have spousal surcharges today and it’s expected to increase to 60% in three years. In many cases, paying a surcharge is less costly than paying for the insurance plan offered through the spouse’s employer. The effectiveness of the surcharge for Penn State employees, and the impact of a spousal surcharge on premiums for employees who earn less than the median salary should be evaluated for future plan design.
4) A principle of informed utilization 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 health care utilization 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 health care services.
A data warehouse provides the opportunity for an employer to inform strategy through data-driven decision making. Because data is presented on an aggregate basis, no specific member data is provided to the employer, preserving employee privacy. An example of how the data warehouse can be used is to extract utilization of medical services for the group of participants who have been diagnosed with diabetes. To what degree is the group seeing a physician and filling necessary prescriptions? Are they having regular A1C tests? Depending on how robust the data warehouse is, other claims data such as vision, dental and unscheduled absence from work data 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 the total compensation program. Programs, services, plan design and cost-sharing can all be positively influenced by the utilization analyses that are enabled through a data warehouse. The long-term health consequences of a plan design can be analyzed to ensure a continued high quality of health.
It is expected that a vendor will also provide members with a cost transparency tool to evaluate provider charges for anticipated health care services, with some measure of the relative quality of providers in services to be provided. On the October 2015 Healthcare Plan Survey, employees expressed some resistance to what they felt was pressure to become educated healthcare consumers, preferring that the university just provide the best plan for their healthcare needs. Other employees expressed a desire to have more information to guide their decision making in selecting health care services. Regardless of the plan design offered, it is important for employees to understand that there is shared accountability regarding choice and the most educated and effective use of healthcare services.
A cost transparency tool for employees could also integrate the costs for services that are covered as preventive at 100%, as well as provide the amounts of covered and out-of-pocket costs prior to a visit to their provider. On the October 2015 Healthcare Plan Survey, several employees reported a surprise cost for lab work ordered at, or for their well-visit that they believed was covered as preventive at 100%. It is unclear to employees how providers code these yearly “preventive” lab tests, or additional follow-up diagnostic tests as a result of preventive visits and tests. Not being able to anticipate potential out-of-pocket costs contributes to the perception expressed on the survey of complexity in the plans and the erosion of healthcare provided by the plans. While the current preventive schedule can be found at the following website, http://ohr.psu.edu/assets/benefits/insurance/health/documents/PreventiveSchedule.pdf, this information should be integrated into a cost transparency tool.
Employees in the PPO Savings plan reported on the October 2015 Healthcare Plan Survey being charged the full cost of services initially, then having to advocate for themselves to get the negotiated in-network rates for their bills. Information on the costs of services from in-network providers available through a cost transparency tool could reduce the avoidance of care by members not knowing what costs to expect from a provider, and give reliable information to select quality healthcare services. Having this information empowers employees to ask questions of their providers prior to receiving services to ensure that they are getting the right care at the right time at the best price.
5) 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 utilization and cost patterns, the university can negotiate contracts for specific services to support quality and achieve greater affordability. As one example, when labs are drawn at a physician’s office or hospital, the costs can be inflated by 50%-700% as compared to fees at stand-alone facilities. The savings add up for the members in lower out-of-pocket costs, as well as the university in their share of costs. The negotiation of contracts to provide university health plan members specific services should insure that members retain equal access to the services, and that employees should not be required to use services that are unacceptable to their chosen in-network provider or create undue hardship in using. The opportunity to steer healthcare services to Penn State Health partners on a negotiated basis should be considered. Regardless of the type of service, convenience, accessibility and efficiency are all critical to the success of any efforts to steer members to the most cost-effective quality services.
The effective management of prescription drug costs is tantamount to the sustainability of a cost effective, affordable benefits program. A strong Pharmacy Benefits Manager partnership, whether through the claims administrator, or a separate contract carve out, is imperative. In addition to aggressively negotiating the Pharmacy Benefits Manager relationship, the university may want to consider potential changes to the pharmacy benefits design to adjust the share of costs according to market comparisons, and to incentivize lower costs to the employee and the university.
For the PPO Blue Plan:
- Increase separate out-of-pocket maximum (currently at $1,000 per subscriber) OR integrate the pharmacy deductible into total coinsurance out-of-pocket maximum,
- Increase specialty drug maximums paid by member per prescription (currently at $50/fill),
- Incorporate a more stringent mandatory generic policy,
- Implement mandatory mail order for maintenance drugs after 2 retail refills.
For the PPO Savings Plan
- Establish minimums paid per prescription fill by member across all drugs (generic, mail order and specialty),
- Implement a more stringent mandatory generic policy,
- Implement mandatory mail order for maintenance drugs after 2 retail fills
Increased pharmacy costs within both plans should fall within the goal of principle two to maintain an overall 75% university and 25% employee cost share.
6) 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.
The University can play a role in in achieving a healthy academic community by infusing health into everyday operations, business practices, and academic mandates. Examples include embedding health in all campus policies such as creating a tobacco-free institution, a supportive campus environment that includes healthy food choices as the default, areas to promote physical activity, and opportunities to support personal development. The following are examples of strategies already in place that support a culture of health:
Tobacco Surcharges. Tobacco surcharges are one tactic employers are using promote a culture of health as well as to defray the cost of additional claims that tobacco users incur. Depending on the study, the additional claims a tobacco user incurs to a health plan each year is between $1,000 and $3,000 annually. For Penn State employees, tobacco-cessation products are available with no cost-sharing through both the PPO Blue and PPO Savings plans. However, the effectiveness of the tobacco surcharge on health plan premiums for Penn State has been limited. Instead of debating the effectiveness of this surcharge to promote a culture of health, the Faculty Senate together with the administration, should work in a collaborative way with local communities, employees, and students to begin the process of establishing tobacco-free campuses with expanded cessation support for employees.
Value Based Benefits Design (VBBD). This program is specifically focused on supporting the consistent management of health conditions. It is available to those enrolled in the PPO Blue Plan who have or who may be 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 all treatment and services related to the condition are covered at 100% as detailed below:
- 100% coverage and waived copayment for primary care provider and specialist office visits
- 100% coverage for tests such as lipid panels (with no deductible)
- 100% coverage for important supplies including glucometer, test strips, needles and syringes (with no deductible)
- 100% coverage and waived copayment for primary care provider and specialist office visits
- 100% coverage for tests such as basic metabolic panels (with no deductible)
- 100% coverage and waived copayment for primary care provider and specialist office visits
- 100% coverage for tests such as liver function and lipid panels (with no deductible)
To be eligible for this coverage, one must opt in with Highmark following diagnosis and re-enroll January 1 of each subsequent year. Members must also remain in the PPO Blue Plan and follow the in-network doctor’s plan of care.
The VBBD is an example of how plan design assists members in acquiring appropriate care to mitigate against greater health care expenses if a condition is not managed with the best ongoing medical care. The university should research other conditions that might also benefit from supportive ongoing care through plan design features, adding them to the current VBBD program, or expanding such care to the PPO Savings plan through VBBD or some similar plan design feature.
SENATE COMMITTEE ON FACULTY BENEFITS
- Kimberly Baron
- Paul Barney
- Susan McGarry Basso
- Renee L. Borromeo, Chair
- Victor W. Brunsden, Vice Chair
- Amy R. Dietz
- Lonnie M. Golden
- Mark W. Horn
- Peter C. Jurs
- Cassandra Kitko
- Chris Muscarella
- Jamie Myers
- Willie K. Ofosu
- Erica Smithwick
- Gregory Stoner