Report on the April 24 Agenda
Year-end Report of the
Committee on Personnel Benefits
April 18, 2002
The committee met
six times this year. Health care costs and privacy were the two
dominant issues discussed. The committee also discussed retiree
benefits, parity of mental health benefits, dental benefits, pre-tax
expense accounts, benefits administration, and long-term care.
Issues involving health care providers were referred to appropriate
Care Costs: During
the past eighteen months there has been an extraordinary increase
in the cost of health care benefits. It is estimated that the
University's cost in the current fiscal year will exceed budget
by nearly 30%. This topic was discussed in detail in a recent
article in Almanac, Vol. 48, No. 25, March 5, 2002
That article also compared Penn employee benefits and costs with
those provided by other employers in the Philadelphia area. We
will not repeat that analysis here. Much of the committee's work
this year involved this issue. The committee advises the administration
on issues involving benefits and provides a venue for a candid
discussion of ways to contain this increase as well as the manner
in which the increased costs are shared between the University
and the employees. Benefits are an important component of total
compensation and are of concern to all employees of the University.
A large component
of the cost of health care is the cost of prescription medications.
The committee received a detailed report from Caremark on these
increased costs. A major factor in this increase was the use of
maintenance medications such as statins and anti-depressants.
The cost of these medications is much less if they are ordered
by mail. The committee discussed the advantages and disadvantages
of requiring mail order fulfillment. As a result of these discussions
the committee recommended that the administration use incentives
rather than penalties to increase the use of mail-order fulfillment.
Issues: Last year's report on the privacy of personal
information recommended that social security numbers not be used
as client identifiers by any of our health care providers. Major
steps were taken by most of our health care providers to implement
this recommendation; however, Keystone continued to use Social
Security numbers. The committee met with Keystone and restated
our concern about this matter. As a result there have been two
additional meetings between Keystone, Human Resource personnel,
the chair of the benefits committee and the University's Chief
Privacy Officer. Based on these meetings, we are optimistic that
Keystone will change its policy early next fall.
The committee received several complaints from retired faculty
concerning a precipitous increase in the cost of the Penn Faculty
Practice (PFP) Dental Plan for retirees. This is not an employee
benefit since it is not managed by the University's Human Resources
staff. Participants enter into individual contracts with the PFP
Plan and pay the full cost. The chair of the committee met with
representatives of the plan to discuss the issue and was told
that the increase was needed to cover the services provided by
the plan. As a result of this issue the committee became aware
that there was no good source of information available on retiree
benefits other than in one-to-one counseling. The Human Resources-Benefits
Department has agreed to undertake a review of retiree benefits
during the next academic year.
Over the past two years there has been a movement toward parity
for mental health benefits. In particular, the inpatient mental
health benefit for the in-network portion of the UPHS (University
of Pennsylvania Health Systems) Point of Service plan and for
the Keystone HMO has increased to unlimited days. The inpatient
mental health benefit for the Aetna HMO has increased from 60
to 90 days. The outpatient mental health benefit for the HMOs
and in-network portion UPHS Point of Service plan has increased
from 20 to 30 visits. This movement will continue during the next
fiscal year with an increase in outpatient mental health benefits
for the HMOs and in-network portion of the UPHS Point of Service
plan from 30 visits to 60 visits.
cost information for these benefits have been difficult to obtain.
We have no information from the HMOs, only inpatient data from
Plan 100, only outpatient data from the UPHS Point of Service
Plan. The only full data is from PENNCare. These benefits are
used by a very small number of participants. For example in FY
2001, only 0.2% (1 in 500) of the participants used the inpatient
benefits for Plan 100 and PENNCare while 9% of PENNCare participants
used the outpatient benefits (professional services). Total cost
for PENNCare use of this benefit for FY 2001 increased by 22%;
the cost increase in all other plans are unknown. Overall health
care costs increased by about the same percentage between FY 2000
and FY 2001.
Care: The committee reviewed the long-term care plan
offered to the University's employees. Currently about 200 employees
are enrolled in this plan. (An additional 200 individuals are
enrolled in an individual TIAA-CREF plan). In many ways the long-term
care plan resembles life insurance. If you sign up at a young
age, say 30, the cost is relatively low but you must pay for many
years. If you sign up when you are older, the cost is much greater.
Like life insurance there is a fixed benefit and a strong criterion
for payment of this benefit. To continue the analogy one step
further, the current long-term health plan offered by the University
has a non-forfeiture feature. The difference between non-forfeiture
and no non-forfeiture is similar to the difference between whole
life insurance and term life insurance. With the non-forfeiture
feature you will get some benefit if you stop paying premiums.
With no non-forfeiture feature, coverage stops if payments stop.
The University's current vendor has several tiers of non-forfeiture
plans available of which one is offered to University employees.
As one would expect: the richer the non-forfeiture feature, the
greater the cost of the benefit. The committee recommended that
the University consider the possibility of offering a lower tier
non-forfeiture benefit next year.
As one can see from
the previous discussion, decision making with regard to long-
term care insurance is not easy. It is even more difficult when
one considers the variety of plans offered by external vendors
(e.g., TIAA-CREF, AARP). There is no "standard" plan
with respect to benefits and, consequently costs vary widely.
The committee recommends that the University provide more information
(on the web, in printed form, and in Almanac) to help employees
make an informed decision on this issue.
Expense Accounts: Information about pre-tax expense
accounts for health care and dependent care was published in Almanac
of March 19 (www.upenn.edu/almanac/v48/n26/PreTax.html).
Reimbursements for such accounts may be limited by law under certain
circumstances. Employees earning in excess of $85,000 in 2002
may be affected by these limitations, and should be sure to read
the information cited above.
In response to an
inquiry from an employee, the University published the amounts
remaining in pre-tax accounts at the end of the 2000-2001 plan
year. The amount was $73,200 or an average of $29.49 per participant
in the health care spending account, and $15,900 or an average
of $25.57 per participant in the dependent care spending account.
As permitted in the relevant Treasury regulations, these funds
were used by the University to offset the costs incurred in administering
Administration: The University is moving the health
and welfare benefits administration services from Hewitt Associates
to ADP starting in July 2002. The main reason for this change
is that Hewitt is changing their administrative platform and a
change by the University would be very costly. In addition, ADP
will also be able to manage the tax-sheltered accounts and COBRA.
The transition should be transparent to the University community.
We are pleased to report that in response to the committee's recommendation,
maximum coverage for the MetLife Dental Plan will increase from
$1,000 to $1,500 next year.
It is a pleasure
to acknowledge the support provided to the committee by the Human
Resources staff, in particular by Leny Bader, Executive Director
of Benefits; Geri Zima, Manager of Benefits Administration; and
Janice Gaspari, who provided staff support to the committee.
J. Porter, Chair