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2002-03 Year-End Report of the Personnel Benefits Committee

The Committee got a late start due to difficulty in recruiting members and met only 4 times this year with a 5th meeting scheduled April 15, 2003. The primary focus was dealing with the skyrocketing healthcare costs as evidenced by required premium increases for FY04.  Also discussed were privacy, dental and vision benefits attached to the HMO plans, and pre-tax spending accounts.

Health Care Costs and Insurance Premiums

An increasingly larger component of healthcare costs is prescription drugs.  These have increased by 20% over 2 years while overall healthcare costs at Penn have increased by only 15%. Penn's benefits and subsidization are slightly richer than our peers, local area, and national comparators while our utilization is also somewhat higher. The Committee did not, though, want to recommend decreasing benefits. In particular Penn's mental health benefits are closer to parity than those of other employers including our peers.

In response to staff requests, it was decided to change from a 2-tier premium system to 3 tiers.  Instead of just Employee and Family rates the tiers will be Employee, Employee plus 1 Dependent, and Employee plus 2 or more Dependents. (An originally proposed 4th tier, Employee plus Spouse and one Child was eliminated for this year at least because it was thought to result in placing an unreasonably increased burden on the already burdened larger families while only slightly decreasing the expenses of the 4th tier families.

The opt-out credit of $300, which was developed when healthcare was subsidized at 100% or was at nominal cost to the employees, will be eliminated for FY04.

In order to provide for the financial needs of Penn, out-of-pocket maximums and copays will be rising for all options, but more so for out of network copays. Beginning July 1, 2003, the Pre-tax Medical Spending Account maximum will increase from $3,000 to $4,000. 

Contributions to the Pre-tax Dependent Care Account by the highly compensated participants (defined by the IRS as those making $90,000 and above) will be limited to $3,500; the non-highly compensated can continue to contribute $5,000.

We continued to monitor the quality of service and costs provided by the insurers.  As Penn is self-insured these costs are purely a reflection of our utilization of services which is higher than average, and the negotiated fees for administration.

An enhancement in the group life insurance program will be an increase in the multiple of pay that participants can elect from 4 times to 5 times.  In addition, the combined benefit maximum will be increased from $750,000 to $1,000,000.

Our major focus during the incoming years must be to slow down  the rate of increase in medical costs including prescription medicine. The Committee discussed and received presentations on two ways to do this. Caremark (our prescription manager) presented their Disease Management Program which includes written and web-based communications with both the patient and physician. As the program has been effective elsewhere and was deemed appropriate for Penn's personnel, the Committee recommended that such a program be pursued in the near future.  While moderately expensive, Penn is not at risk as the fees are taken from the first savings to accrue to the plan. Implementation could occur within 60 days of negotiating and signing a contract.

The second theoretical method to decrease costs is using preventive measures such as emphasizing healthy lifestyles. At the final meeting the Committee is scheduled to hear a presentation from Independence Blue Cross on their program for doing this.

Privacy Issues

The University as a whole continues to show progress on these issues.  In the healthcare arena, all but one of the health care providers has eliminated the use of Social Security numbers as the employee identifier. The one hold-out is Keystone. Keystone was waiting until after HIPAA was instituted April 14, 2003, but still will not commit to an actual date for compliance with this requirement.  Unfortunately Keystone insures a large portion of our employees, but, while Penn is one of Keystone's major purchasers, Keystone has numerous major other purchasers.

The Committee also suggested further promotion of the Penn privacy site at as a source for information including links to credit reporting agencies.

Other Issues

We discussed distribution of a total compensation statement to employees.  This will require further resources to implement because of the need to improve systems in order to arrive at accurate information.

Suggested Specific Initiatives for Next Year:

1) Revisit the status of Long-Term Care insurance.

2) Retiree medical benefits need to be further examined.  We could not get enough  information needed to put this one on the Committee's agenda but will aim to  have this by next academic year. Better communications regarding these benefits would be useful. In the mean time, continued one-on-one counseling will have to occur.

I would like to acknowledge the support provided to the Committee by Human Resources Staff, particularly Leny Bader, Executive Director of Benefits, Geri Zima, Manager of Benefits Administration, and Janice Gaspari, who provided staff support to the Committee.

--David B. Freiman, Chair


2002-2003 Council Committee on Personnel Benefits

Chair:  David B. Freiman (radiology); Faculty:  David Asch (medicine), Charles Dwyer (GSE), Laszlo Gyulai (psychiatry), Gerald Porter (mathematics), Therese Richmond (nursing), Margaret Stineman (rehab medicine); Graduate/Professional Students: Jeremy Korst (Wharton), PPSA:  Linda Kristekas (Fiscal Operations), Anna Loh (Wharton HR), Katrina Terrell (Housing & ConfSvcs.), Michael Wisniewski (Van Pelt Library Acquisitions); WPSA:  John Bell (Space Planning & Operations);  Ex-Officio: Elenita Bader (Exec Director, Benefits), Kenneth Campbell (Comptroller), John Heuer (VP, Human Resources).

Back to Council Reports

  Almanac, Vol. 49, No. 30, April 22, 2003