Though the annual Open Enrollment period for UC-sponsored benefits is still months away, the university has begun its annual project to evaluate health and welfare benefits and find ways to reduce costs for the university, employees and retirees.
This year, systemwide Human Resources will consider proposals from new and current medical plan vendors in an effort to limit cost increases while continuing to provide high quality medical insurance plans to employees and retirees.
Only Kaiser, Western Health Advantage (WHA) and Optum, the mental health insurance provider, are not part of the bid process and are sure to be offered next year. All other current vendors and any interested new vendors can submit proposals to provide medical insurance for employees and retirees.
"Over the past three years, we've done a good job of reducing the percentage increase of premiums with our current carriers, but we have done all we can do under the current structures without simply shifting more of the costs to employees and retirees," said Dwaine Duckett, vice president of systemwide Human Resources.
"The university continues to face significant budget pressures and a comprehensive review of our medical plan offerings is an opportunity to help UC meet its fiscal challenges," he said.
Potential vendors have until mid-February to submit a proposal, and the highly confidential evaluation and negotiation process with prospective insurers is expected to continue through mid-summer.
UC currently has 13 vendors providing medical, dental and vision insurance at a cost of $1.86 billion for 2013. The university covers 86 percent of that cost, or about $1.5 billion.
UC periodically conducts a comprehensive review of its medical plans. The last such review was seven years ago, and the health care landscape has changed significantly in that time.
"As a result of health care reform and changes in the industry, there are a lot of new products and ways to provide health care," said Duckett. "It's time to go into the marketplace and see if these products can help meet our goals of providing high quality benefits while controlling costs."
Duckett points to examples such as a new accountable care arrangement offered through the Health Net Blue & Gold plan in San Francisco. The arrangement is a partnership among UCSF medical center, Hill Physicians medical group in San Francisco and other partners to provide greater coordination of care in order to give patients more support and a better quality of care while containing costs.
UC medical centers, medical insurance providers and others are developing similar types of products to make health care more efficient and affordable.
"We also want to look at ways we can access our own medical centers to be sure the world-class care they provide is available to and affordable for our employees and retirees," said Duckett.
For example, a self-funded medical plan that includes UC Medical Centers and doctors among its providers is an option that will be considered during the bidding process. Many large employers offer self-insured plans because because of the financial advantages they provide since the employer, rather than an insurance company, directly pays for plan costs.
The university is looking at a range of options to reduce costs. These options grew out of recommendations from a systemwide Health Care Benefits Task Force that met throughout 2012 to find ways to continue to deliver high-value health and welfare benefits to employees and retirees while controlling costs for the university. The Task Force, which Duckett chaired, included campus and office of the president leaders, members of the academic senate and subject matter experts from within and outside UC.
After a year of meetings and research, the Task Force ultimately developed and prioritized a set of levers for HR to use as needed to control the rising cost of health and welfare benefits. The top two levers — changes to the medical plans and discounts from UC medical centers — were used to keep costs down for 2013.
Other levers that could be employed in the future to meet any budget gaps include:
- Better control over time the UC contribution to employee medical premiums, similar to the step reduction currently being applied to retiree premiums.
- Offer a health plan exchange for retirees enrolled in Medicare supplement plans. Under this model, UC would provide retirees a set dollar figure to spend and the retiree would choose the best medical plan for him/her from the exchange. The model has particular advantages for retirees who live out of state since they would have more choices than UC can offer.
- Reduce UC contributions to premiums for part-time employees.
- Decrease UC contributions to premiums for dependents.
Decisions on using any of these cost-saving methods and the results of the medical plans bidding process are still months away.
"We remain firmly committed to providing quality benefits for our employees and retirees," said Duckett. "I think we can safely say that faculty, staff and retirees are likely to see changes next fall during Open Enrollment."
Watch for more information in the coming months.