JOINT COMMITTEE ON INSURANCE AND BENEFITS
SENATE COMMITTEE ON FACULTY BENEFITS
2015-2016 Annual Report on the Status of Benefit Changes
This report is a summary of Penn State University benefit changes, changes under consideration, and issues discussed, for which the Joint Committee on Insurance and Benefits provided consultation with the administration between September 14, 2015 and September 6, 2016.
Changes to Penn State Benefits
Health Plan Benefit changes in 2016
The PPO Blue and PPO Savings remained the two health plan choices in 2016, and the premium contribution strategy and plan design remained the same, with one exception. Due to Internal Revenue Service Regulations, the Total Deductible and Out-of-Pocket Coinsurance Maximum for the PPO Savings plan was reduced from $4,300 Individual/$8,600 Family In-Network and $8,600 Individual/$17,200 Family Out-of-Network to $3,400 Individual/$6,800 In-Network and $6,800 Individual/ $13,600 Family Out-of-Network.
Long-Term Disability rates paid by employees increased 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, which will also include life insurance, accidental death and dismemberment, and the potential offering of short-term disability benefits.
Retiree health care plans for 2016 had an increase in premiums and out-of-network deductibles for retirees under age 65. The premium has remained the same since 2011. Premiums increased for the Freedom Blue Medicare Advantage Plan based on the fully-insured plan renewal. Members utilize in-network providers almost entirely because of the national reach of the Highmark Blue Cross Blue Shield network.
Teamsters’ health plan premium contributions follow the terms of the Collective Bargaining Agreement, which runs through June 30, 2017.
For 2016 health plan enrollment data indicated (as of January, 2016):
- 12,899 or 80.1% of employees enrolled in the PPO Blue plan
- 33,362 total members in PPO Blue plan
- 3,034 or 19.0% of employees enrolled in the PPO Savings plan
- 6,989 total members in PPO Savings 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 this year-to-year cost-sharing principle.
Table 1: Actual and Budgeted Costs with Premium Cost Share
|CALENDAR YEAR INFORMATION||Total Claims Paid|
|Employee Premium Contributions|
(% of Total Claims)
|Net PSU Cost
5% from 2012
4.5% from 2012
1.3% increase from 2013
3.7% increase from 2013
0.7% increase from 2013
7.1% increase from 2014
5.9% increase from 2014
7.4% increase from 2014
In 2014, the budgeted medical trend percentage for health care projected higher costs than the finalized actual year-end results. For 2015, the actual medical trend was higher than projected. Premiums were set for each year based on the projected budgeted costs with a target share by employees of 17.5%, but when actual year-end costs were determined, employee premiums fell in the 19% share range, and increased 3.7% from 2013 to 2014, then increased another 5.9% from 2014 to 2015. Because premiums are based on individual salary, even when the premium formulas applied to salaries were held steady from 2015 to 2016, salary increases generated higher premium contributions, as did changes in the number of employees participating in the medical plan. In addition to employee contributions through premiums, out-of-pocket contributions by employees detailed in Table 2 below are paid directly by employees to medical providers.
Table 2: Employee out-of-pocket contributions
|CALENDAR YEAR INFORMATION||Employee Medical|
|Employee Prescription Drug|
The change in employee out-of-pocket costs are in the 5% range over the previous year in both 2014 and 2015. When these contributions are combined with premium and university contributions, the full cost of medical plans 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|
|Employee Premium and|
|Net University Cost|
|University % Share of
Total Health Care Cost
Health care costs have increased each of the last two years as reported in Table 3. Both employee (5.7%) and university (7.4%) contributions experienced increases from 2014 to 2015. From 2013 to 2014, the university contribution remained relatively flat at 0.7%, while employee contributions had a 4.2% overall increase with 3.7% premium and 5.0% out-of-pocket increases.
For 2013, 2014, and 2015, cost-sharing between the university and the employee fell short of the guiding 75% – 25% principle. The university share ranged between 72.9% to 73.5% and the employee share ranged between 27.1% to 26.5%. An employee 25% share in 2015 would equal a total contribution of $65,239,794, indicating that employees contributed $4,770,127 in excess of the cost-sharing goal expressed by principle 4. A contributor to the imbalance is the higher projected costs budgeted each year that are used to set premiums. To implement the cost-sharing Principle Four accepted by the President in 2016, the design of future plans should attempt to remedy the imbalance in cost-sharing between the university and employees evident over 2013-2015 plan years.
Health Plan Benefit Changes for 2017
The total allowed medical costs for calendar year 2017 are projected to increase to $262,030,000, continuing the Penn State self-insured group trend of 4.1% in yearly increases since 2011. The 2017 projection is 7.6% over the projected costs of $243,443,000 for 2016. The medical plan costs and cost-sharing projections used to develop the 2017 plan design and contribution levels are in Table 4 below.
Table 4: 2017 Medical Health Plan Cost Projections
|CALENDAR YEAR INFORMATION||2016 Projected Costs||2017 Projected Costs|
if Plans remained the same
|2017 Projected Costs
with Plan changes
|Total of Allowed Charges||$243,443,000||$262,919,000||$262,030,000|
|PPO Blue Plan Cost Share|
Penn State Cost Share
|PPO Savings Plan Cost Share|
Penn State Cost Share
Employee % share
|Increase in Overall Costs|
Given the projected increase in overall medical plan costs for 2017, the plan changes to the PPO Blue and PPO Savings plans were reviewed by the committee and evaluated using the 75% university – 25% employee cost-sharing principle. The committee noted an increase to the PPO Savings plan premiums and out-of-pocket contributions that bring the overall employee contribution to 24.8% for 2017, up from the 20.8% contribution in 2016, bringing this plan closer to the guiding principle. This change was in response to a question of disparity raised by the Faculty Senate to establish more parity between the PPO Blue and PPO Savings plan contribution strategies. The committee noted the effort to keep PPO Blue plan premiums at prior year levels, and recognized the need to increase out-of-pocket contributions that have remained the same for many years in order to keep the medical plans affordable and competitive. The changes do increase total projected employee contributions under the PPO Blue plan from 26.7% in 2016 to 28.0% in 2017.
The increased contributions for the projected 2017 plan design are very favorable in comparison to the 2015 actual costs and contributions. The 2017 plan design increases projected employee contributions in the PPO Savings plan closer to the desired 25% cost sharing for employees, but also increases the employee contributions to the PPO Blue plan 3% above the 25% contribution target. The overall employee contribution of 27.2% in the 2017 plan exceeds the guiding principle cost share of 75% university and 25% employee contribution. This 2017 projected employee cost share of 27.2% is similar to the range of 26.5% — 27.1% for contributions made by employees to the actual costs in 2013, 2014, and 2015 as reported in Table 3. The lower contribution of 25.6% projected for 2016 in Table 4 may be the result of an overall lower total medical cost projected for the 2016 calendar year. It will be important to continue monitoring the actual cost share contributed by employees and for the university to make an effort to migrate closer to the 75%/25% cost-sharing objective outlined in the guiding principles.
The committee also discussed various contribution strategies, different salary caps for indexing, and different ways to support employees at lower salary levels, including an indexed Health Savings Account and Flexible Spending Account contribution by the university. The committee examined pharmacy costs which are expected to increase to 25% of plan costs by 2018. In 2015, pharmacy costs increased 14.6% overall, with the specialty drug costs increasing by 38.5%.
Specific changes for health care plans effective January 1, 2017 include:
- PPO Blue Plan
- Premiums formulas (percent of salary) remain the same.
- Deductibles increase for individual from $250 to $375, and for all other plan tiers from $500 to $750.
- Out-of-pocket maximums (excluding deductible) increase for individual from $1,000 to $1,250, and for all other plan tiers from $2,000 to $2,500.
- Co-pay increases for office visits from $10 to $20, for specialist visits from $20 to $30, and for urgent care from $20 to $30. Emergency room copays remain at $100.
- Co-insurance rates remain the same.
- The separate pharmacy deductible increases from $1,000 for individual/$6,000 per family subscriber to $2,000 per member/$8,000 per employee subscriber.
- PPO Savings Plan
- Premium formulas (percent of salary) increase for monthly contributions for each 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%
- Deductibles increase for individual from $1,300 to $1,600, and for all other plan tiers from $2,600 to $3,200.
- Out-of-pocket maximums (excluding deductible) decrease for individual from $2,100 to $1,975, and for all other plan tiers from $4,200 to $3,950. Federal limits on out-of-pocket maximums establish a minimum amount for high-deductible plans at $3,575 for individual plans and $7,150 for family plans.
- Co-insurance rates remain the same for retail and mail order generic drugs, but increase for other pharmacy costs from 10% to 20% for formulary and 40% for non-formulary, retail or mail order, and the additional cost for specialty drugs at 20% with a $65 minimum for formulary and 40% with a $100 minimum 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 $60,000 or less.
- Premium formulas (percent of salary) increase for monthly contributions for each tier:
- Dental Plan
- Premiums remain the same and the annual maximum remains at $1,500 per member covered.
- Annual deductibles increase from $0 for in-network and $25 individual/$50 family for out-of-network to $50 individual/$150 family for both in and out of network services, excluding Class I diagnostic and preventive services.
- Co-insurance remains the same for in-network services, but decreases 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.
- Orthodontics remains the same for all subscribers.
- All other coverages remain the same.
2017 Benefits Open Enrollment is November 1, 2016-November 18, 2016 with all changes effective January 1, 2017.
Retiree Healthcare Billing
Retiree medical insurance billing is now administered by Lifetime Benefits Services, who also administers COBRA payments. Retirees can now have quarterly billing or monthly automatic withdrawals for their health care premiums.
Penn State is conducting an awareness campaign, communicating a lower cost lab services option beginning in September, 2016. Quest Services will establish offices within 5 miles of every university campus location, and offer online appointment scheduling to expedite visits for routine laboratory services. 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 will be run by the College of Nursing in collaboration with Hershey Medical Group and the Office of Human Resources and plans to be open in January 2017. The center will offer walk-in acute care initially, and provide additional services in 2017. The center will be a model for the development of other centers at other University campuses.
Carry-over for Flexible Spending Accounts
The committee examined data on the utilization of Flexible Spending Accounts for 2013, 2014, and 2015 through November 3, 2015, and the amounts forfeited back to the university at the end of each calendar year. The university decided to begin providing carry-over to the maximum amount of $500 permitted by the IRS.
Changes to TIAA retirement funds and the refund of service fees to participating employees
TIAA is paid recordkeeping fees to administer the Alternate Retirement Plan and tax-deferred annuities. Some funds share revenue from which the administration costs are paid to TIAA. Excess revenues are reallocated to participants. Prior to 2015, the reallocation was done on the basis of account balances for all participants, regardless of what funds in which they were invested. Beginning with the last reallocation in 2015, reallocation was directed to just those participants who participated in revenue generating investments. It is the case that the TIAA fees are paid by just those participants who invest in revenue generating funds. The committee felt it was a good decision that just those participants in revenue generating funds shared in the reallocation based on their account balances in those funds. Because of the existing individual contracts for TIAA and CREF investments, it is not possible to separate out revenue sharing provisions for certain funds in order to equitably distribute the cost of TIAA’s administration fee across all TIAA participants, rather than just those who choose to invest in those particular revenue sharing funds. Not all fund choices share revenue. The Retirement Oversight Committee, as required by federal regulations, guides these decisions, adhering to its Investment Policy Statement and Committee Charter. The industry is heading towards no revenue sharing and a fee distributed across all participants. The Retirement Oversight Committee has recently negotiated lower administrative fees with TIAA.
Central funding for health and well-being programs at all campus locations
Central funding for health and well-being programs at all campus locations ended in the Spring 2016 semester. Wellness Ambassadors continue to be advocates at each location and activities are locally directed and funded.
Benefit Changes under Consideration at this Time
Adding a Short-Term Disability Program
The university does not currently offer a short-term disability insurance program because of the relative generous sick leave policy and prohibitive costs which were recently evaluated. However, new hires without leave accumulation may have a gap between a disability and the Long Term Disability benefits that being after a 180 day elimination period. A request for proposal will be initiated in early 2017 to be effective January 1, 2018, which will also include life insurance, accidental death and dismemberment, and the potential offering of short-term disability benefits. A relevant change to the policy on donating vacation days is being piloted, when employees within the same budget line only can donate sick leave as well as vacation time to fellow employees who are experiencing an emergent medical need have expended all of their sick leave and vacation time.
Addition of eligible dependents over whom employees and/or spouses are legal guardians
A child for whom you and/or your spouse is legal guardian has been added as benefit eligible dependents beginning January 1, 2017. The estimated costs for this change is between $500,000 and $1,000,000. A comparison with peer institutions found Penn State to be an exception to the vast majority.
Topics Discussed with No Change at this Time, or for Informational Purposes
Healthcare Provider Contract Negotiations
The Joint Committee on Insurance and Benefits also discussed the Highmark contract that will expire at the end of 2017. Beginning fall 2106, the University will embark on a bidding process with other healthcare vendors to provide third party claims processing services. The RFP process will be supported by an external consultant and include University Faculty Senate consultation. The possibility of multiple providers for specific health care services, geographic areas, and pharmacy services will be explored through the RFP process.
Retirement health care plan for post 2010 hires
Employees hired after January 1, 2010 are enrolled in a TIAA managed retirement account and accumulate savings for retiree healthcare. Currently these employees receive $144 per month and are vested at age 60 with 25 years of service, or age 65 with 15 years of service. The university is considering changes in the vesting that would make the benefit more competitive for hiring new employees.
Health Care Advisory Committee University Wide Survey Results
At the beginning of the Fall 2015 semester, the Employee Benefits Division surveyed all employees enrolled in medical benefits with the university, with nearly a 30% response rate. The survey requested responses on their decision-making process when it came to selecting their medical coverage, risk tolerance and preferred approach to saving for future healthcare costs. The committee discussed the results of quantitative and qualitative analyses of the responses by survey participants, their relevance for future health care plan design, and how to report survey results to the University Faculty Senate and the university community.
Support for employees to participate in health and well-being 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 health and well-being activities 3 hours each week. If all employees could not have a benefit of work time allocated to health and well-being activities, 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 and healthy behaviors are essential. Reinforcing policies allowing flextime and more flexibility for exempt and non-exempt staff was discussed as a way to enable staff to engage in health and well-being activities.
JOINT COMMITTEE ON INSURANCE AND BENEFITS, 2015/2016
- Larry C. Backer
- Sheila Cartwright
- Susan McGarry Basso
- Joseph J. Doncsecz
- Nyriis D. Hinton
- Krishna Jayakar
- Peter C. Jurs
- Cassandra Kitko
- Jonathan M. Light
- Jamie Myers, Chair
- James A. Miles
- Jill M. Musser
- Willie Ofosu
- Ira J. Ropson
- Gregory Stoner
- Jeremy Warner
SENATE COMMITTEE ON FACULTY BENEFITS
- Susan McGarry Basso
- Renee Borromeo, Chair
- Victor Brunsden
- Amy Dietz
- Mark Horn
- Peter Jurs
- Cassandra Kitko
- James Miles
- Jamie Myers
- Willie Ofosu
- Erica Smithwick, Vice-Chair
- Greg Stoner