Health Care Discussed
The long-term sustainability of employer-funded health care benefit plans is in question because of rising costs that far outpace the rate of inflation, declining state support and political pressure to reduce public sector benefits and increase employees’ share of coverage. That was the closing point made by Gavin Leach (Finance and Administration) to the NMU Board of Trustees during a focus discussion on health care issues and trends.
“As an institution, we need to look at a structure that allows for greater flexibility to change the program on a regular basis,” said Leach. “We have to work with all employee groups on campus to maintain affordability, quality and achieve a reasonable sharing of costs. While Northern’s current employee contribution rate is similar to other public universities at about 11 percent, the trend is that most universities are heading toward 20 percent and some have achieved that level. We also need to adjust co-pays to create incentives to control costs, consider incentives for healthier lifestyles and adjust deductibles to match market trends.”
Northern’s total health care costs have grown from $5.9 to $11.9 million over the past decade. Employees’ annual required contributions are also up—from an average $750 to $1,360 over the past eight years.
Leach said the federal Patient Protection and Affordable Care Act (PPACA) approved in March imposes new mandates on self-insured and fully-insured group health plans sponsored by private and public universities. NMU’s self-insured plan is “grandfathered” from some mandates, but only if there is no change to existing coverage such as eliminating benefits, increasing cost-sharing percentage, co-pays/deductibles and decreasing employer contributions by more than 5 percent. Leach said the grandfathered status will be difficult to maintain.
Some of the near-term requirements effective Jan. 1 for all plans, whether grandfathered or not, are: extend dependent coverage up to age 26, regardless of financial dependency, marital status or enrollment in school; remove lifetime limits (plans may establish “restricted annual limits” on essential health benefits until January 2014 and annual limits on non-essential health benefits); prohibit retroactive cancellation of a policy with limited exceptions; disallow reimbursement from flexible spending accounts for non-prescribed, over-the-counter drugs.
The PPACA will require numerous phased-in changes from 2011-18. Leach said the legislation is fluid and being revised regularly, but it could impact NMU in the following ways:
▪The PPACA will likely increase employer and employee cost through mandated benefits, eligibility and taxes on medical devices and some services;
▪Regulatory requirements will add administrative burden and expense and increase the workload for human resources, IT, accounting and legal departments;
▪It requires distribution of a uniform plan summary with specific information—to be determined by Health and Human Services—and imposes fines for non-compliance;
▪The PPACA in 2018 would implement an excise tax of 40 percent to penalize employers whose annual health plan values exceed federal thresholds.
“The effects of the federal changes prior to 2018 will create more administrative burdens on the institution, but the most significant impact could come in 2018 if we are subject to the excise tax," Leach said. "I’ve seen a number of studies and the implications are that 20-30 percent of employer plans could be impacted by this. It’s eight years out and could change, but it’s something to keep an eye on as we go forward because that could have a major impact on the institution.”
NMU retirees who participated in the Michigan Public School Employees Retirement System receive health care coverage through a state plan. Non-MPSERS employees do not receive a retiree health benefit. They have the option to purchase coverage through Northern’s group plan at actual cost, but Leach said changes in accounting may not make that feasible in the future. He said non-MPSERS retirees might actually fare better under the federal health care law’s plan for state health insurance exchanges, which will provide more options to purchase coverage beginning in January 2014.
Leach outlined steps NMU has taken to control costs. These include membership in the Michigan Universities Coalition on Health (MUCH) Inc., which relies on group purchasing power to negotiate lower costs; the NMU Health Center, which serves students and employees, with 19,000 visits per year and 26,000 prescriptions filled; the NMU Injury and Evaluation Clinic, where athletic training students—with supervision from a faculty coordinator and MGHS medical director—gain clinical experience providing evaluation and primary treatment of physical activity/sports-related injuries at no cost to students and with no out-of-pocket cost for employees; and employee wellness education programs and activities.