Answering Questions: More on Health Insurance Benefits

by Barbara J. Lowery and H. Clint Davidson

In response to a number of questions and comments about health insurance that we have received since the Benefits Advisory Committee published its report February 11 in Almanac, this article gives more information and background on the options the Committee proposed.

Offer a New University of Pennsylvania/Keystone Point of Service (POS) Option. The recommended POS option offers a great deal of flexibility and choice within a plan that is more cost effective than the current PENNCare PPO while providing numerous features that make it a substitute for the PPO. Care can be accessed in one of three ways:

--In-Network Benefits, generally 100% after specified copays, are available through the very broad range of physicians and hospitals within the Keystone HMO network. Each enrollee needs to select a primary care physician from within the Keystone network who will be responsible for providing care and for coordinating referrals to specialists. Enrollees have the right to change primary care physicians during the plan year.

--UPHS Benefits. With the in-network option, benefit incentives (through lower copays for office visits and hospital admissions) are provided for employees who select a primary care physician from within the UPHS network. Note that UPHS doctors and hospitals are already part of the broader Keystone network, so this benefit actually represents an additional level of preferred care within the in-network coverage as described above.

--Out-of Network Benefits are indemnity benefits comparable (but not identical) to the current Comprehensive plan. These benefits are available within the POS plan at any time a covered member needs medical service with no requirement to use a primary care physician to coordinate care or to obtain referrals. The plan generally pays 80% after a $200 deductible.

The POS option gives added flexibility compared to the PENNCare PPO, in that the in-network (i.e., 100% after copays) benefits will now be available from the much broader Keystone network, rather than only from the more limited UPHS network (in-network benefits are still available on a preferred basis for use of UPHS doctors). Taken together, the three ways of accessing care provide features that are similar to PENNCare and the Comprehensive plan. However, the payroll contributions for the POS option are set lower than the PENNCare PPO to reflect the greater cost effectiveness and managed care efficiencies avilable through Keystone. Contributions are higher under the POS than for the HMO to reflect the greater degree of choice and flexibility available under the POS option.

Eliminate the BC/BS Comprehensive Option. To streamline plan administration and eliminate options that are redundant, the Committee recommended the elimination of the BC/BS Comprehensive indemnity option--but only after it became clear that benefits similar to those in the Comprehensive plan could be made available under two other options:

Current Comprehensive plan enrollees who wish to continue in an indemnity plan should consider enrolling in the POS option as the most economical way to maintain these benefits.

Retain the Current BC/BS Plan 100 Indemnity Option. This plan provides high benefit levels and unrestricted access to doctors and hospitals for all medically necessary care. No changes in benefit levels are proposed. Its higher contribution cost reflects the generous benefit levels and lack of restriction on access to providers.

Retain Current PENNCare PPPO. When the PENNCare PPO option was first offered in 1995, neither the University nor the Health System knew the ultimate plan cost since the plan was new and enrollment could not be predicted. It was decided as a first approximation that the new plan should be priced at the same level as the comprehensive indemnity plan. This approach resulted in no contributions for the PENNCare option for the past two years, and 25% of the University population elected this plan.

In evaluating the claim experience under the plan, it has become apparent that the payroll contributions were set too low. The factors that made this plan attractive to employees--generous benefits, no contributions, and no restrictions on access to care--also worked to make the plan economically unsustainable, absent change.

Serious consideration was given to the elimination of PENNCare. This approach was rejected, however, since many employees had enrolled in the plan and would be disadvantaged by its discontinuance. The Benefits Redesign Committee recomended retention of the PENNCare option, but agreed that payroll contributions should be increased to a level that better reflects the plan's true value and cost relative to other Penn options.

A review of the PENNCare PPO's features may be useful:

Retain the Current Keystone and USHC Options. A key goal guiding benefits redesign was that Penn should offer health insurance options which are affordable for all employees. The Committee learned that the high level of coverage and low payroll contributions for HMOs have made them the option of choice for a majority of Penn's A-3 population.

In evaluating these plans, the lack of prescription drug coverage stood out as a significant gap from perspectives of employee cost, quality of clinical care and competitive standing. Although it would mean additional costs to the University, the Committee felt strongly that the addition of prescription drug coverage was critical to employee security and to the overall effectiveness of the Penn benefit program. The recommendation, therefore, is to add a new prescription drug benefit to the HMOs.

The reinstituted contributions for HMO coverage to a level lower than that required for the 1993/94 plan year should be viewed in light of the new prescription plan's value. In fact, for normal users of prescription drugs, the the HMO coverage will cost less.

Another goal in considering possible changes for the HMOs was to explore ways to promote the use of UPHS doctors and hospitals. The recommended program achieves this by adding incentives for selection of primary care physicians from within the UPHS network. Enrollees can still elect a primary care physician from within the broader HMO network.

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The authors are co-chairs of the Benefits Advisory Committee.


Almanac

Volume 43 Number 25
March 11, 1997


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