Why are medical plan premiums increasing so dramatically for 2024?

Premiums for 2024 have increased, significantly so in some instances, because UC’s costs for medical and prescription drug claims have increased significantly. These increases are due to a combination of:

  • Nationwide cost increases for health insurance, prescription drugs, and patient care
  • Increased costs specific to the UC population, including the fact that over the past two years UC members have received more care, and more expensive care. For example:
    • Costs for COVID care, testing and immunization have increased overall benefits costs
    • Some members who delayed elective procedures during the pandemic are now getting them done; others who needed to delay care developed more severe conditions, requiring higher-cost treatment
    • Members have sought higher than usual levels of care for mental health and substance use
    • New specialty drugs have been released (and more are coming) which are both life-saving and extremely expensive (such as cancer drugs that cost over $100,000), driving up the costs for pharmacy benefits.

How much are total medical plan premium costs for UC employees and retirees increasing for 2024, and how much of the increase is UC paying for?

The total cost of UC medical plan premiums is increasing by $460 million – from $2.90 billion in 2023 to $3.36 billion in 2024. UC is paying $310 million of the increase.

UC’s contribution to medical plan premiums is increasing from $2.41 billion in 2023 to $2.72 billion in 2024. That includes $93 million in additional spending for 2024 above UC’s projected budget. This additional spending went directly toward reducing premium costs for employees and retirees. Because of the size of the overall premium increases, this additional spending will not fully protect UC employees, retirees and their families from rising premium costs.

How much does UC contribute to monthly premiums compared to other employers?

On average, UC continues to pay over 80% of the cost of medical plan premiums compared to 71% by other higher education and hospital employers.[1] UC contributes 100% of the cost of dental and vision plan premiums for eligible employees.

 

[1] According to a nationwide survey by a major benefits consulting firm.

Are all UC employees experiencing significant premium increases?

Not necessarily. Monthly premiums and increases vary by salary level, location, union representation, plan choice, and coverage level. Premium increases will be moderate for some members and high for others, depending on these factors. For the lowest cost Kaiser plan option (coverage for self only), the monthly employee premium will increase by less than $8/month. For Health Savings Plan members, premium increases will range from $51.10 in the lowest pay band (coverage for self only) to $725.22/month in the highest pay band (coverage for family).

How much of my monthly medical plan premium does UC pay for?

In 2024, the average medical premium cost per employee is $20,000 per year. UC’s average contribution toward that cost is $16,600, or 83%. UC contributes 100% of the cost of dental and vision plan premiums for eligible employees.

Why does UC’s contribution to monthly premium costs vary by salary level?

For many years, UC has based its contributions to monthly premiums on salary level to help ensure access to quality health care for all UC employees by having lower-paid employees pay a smaller percentage of their monthly premiums. 

In 2024, UC will cover an average of:

  • 91% of medical plan premiums for employees earning the full-time equivalent of $68,000 or less
  • 84% of medical plan premiums for those earning $68,001 to $136,000
  • 77% of medical plan premiums for those earning $136,001 to $204,000
  • 71% of medical plan premiums for those earning $204,000 or more.

Why can’t UC contribute more to monthly premiums to lower 2024 premium increases for employees?

Employee health insurance costs for an organization of UC’s size are significant. UC’s contribution to medical plan premiums is increasing from $2.41 billion in 2023 to $2.72 billion in 2024. This includes an additional $93 million for 2024 — significantly more than UC’s projected budget. This additional spending is going directly toward reducing premium costs for employees and retirees. Still, because of the magnitude of the overall premium increases, UC’s contribution, including this additional spending, will not fully protect UC members from rising premium costs.

Why are premium increases higher for some plans than others?

Medical plan premiums are based on estimates of how much care members will need during the year (using data about past utilization), and how much care will cost (using past costs plus expected medical inflation). In general, plans that deliver more expensive medical services in higher amounts to their members have higher premium costs.

Why are premium increases for the UC Health Savings Plan so much higher than other plans?

Over the last few years, members in the UC Health Savings Plan have utilized more medical care on average than estimates predicted, making the plan more expensive for UC. This has made it necessary to raise employee contributions. Premiums have also been adjusted to capture the costs of covering an additional adult more accurately.

I understand that UC continues to offer its CORE plan without any employee contributions, which presumably reduces available funds to subsidize other plans. Why is that, and why can't UC add an employee premium for CORE to make more UC funds available for other plans?

CORE has the highest deductible of all UC’s medical plans (and unlike Health Savings Plan, is not compatible with the Health Savings Account). CORE is designed for employees who prefer to trade paying no monthly premium for a high deductible, and to ensure that all benefits-eligible employees have access to medical insurance that meets ACA standards for minimum essential coverage.

Did UC leadership consider changing features of UC’s medical plans to lower premiums?

Systemwide Human Resources analysts investigated the impact of benefits and/or cost-sharing changes on premiums. Unfortunately, they determined that the minor changes under consideration would not reduce premiums significantly enough to outweigh the negative ramifications of plan changes.

UC continues to offer CORE, a high-deductible medical plan, as a $0 premium option for budget-conscious employees who don’t anticipate significant medical needs. For other employees, it is critical that UC continue to offer plans with a range of features, including low out-of-pocket costs for care and access to UC Health’s world-class providers (access that is protected regardless of issues that may arise between UC Health providers and insurance carriers).

Is UC upholding its bargaining agreements regarding premium costs for represented employees?

Yes, UC is honoring the commitments made in union contracts pertaining to employee contributions to health benefits.