Good morning. I appreciate all of you attending the meeting yesterday, especially Norma for driving from West Plains; hopefully she arrived back before the bad weather hit.
Members Attending Members Absent
Howard Berriman Earle Doman
Neosha Mackey Melanie Earl
John McAlear Nila Hayes
June McHaney Shirley Huffman
Dave Meinert Tamera Jahnke
Laree Moore Robert Lunn
Norma Ogletree Dave Muegge
Kant Patel
Mary Routh
Burnie Snodgrass
The first item the Committee discussed was the recommendation being sent to the Board of Governors regarding termination of health insurance for all Medicare-eligible retirees. The recommendation from the Administration is that the University no longer allow retirees the option of continuing their Missouri State insurance once they are on Medicare. This change will take effect on January 1, 2008. The University will develop a list of other health insurance plans that offer comparable coverage, including prescription drug coverage, at reasonable premium rates. And, HR staff will meet with our retirees to answer their questions about other coverage. An informal check of other insurance has already found that there are a number of other plans available to Medicare-eligible retirees at considerably lower premiums than what is charged for MSU insurance. We found plans that charge as little as $55/month for coverage. We also learned that our retirees will be guaranteed enrollment in another plan without the imposition of any pre-existing limitations.
Several members of the Committee expressed consternation over the decision of the Administration to end retiree insurance for Medicare-eligible persons. While some comments were made about not “going through” the Committee first, the strongest opinion voiced was that ending coverage for Medicare retirees was just the start of a plan to end all retiree insurance. I responded by stating that I had briefed the Committee on the fact that we no longer qualify for the Medicare 28% tax-free subsidy and that we needed a decision from the Administration regarding what coverage we would offer our Medicare-eligible retirees in 2007. We got the Administration to agree to allow our retirees to continue their coverage in 2007, when they could have decided to end the coverage in 2007. I appreciate the concern that this decision represents a first step towards ending all retiree insurance, but I don’t agree. As has been stated in past meetings, if the University were to end retiree insurance, doing so would “force” employees not to retire until they reach age 65, when they can go on Medicare. If employees stay to age 65 rather than retiring, the University wouldn’t save any money because it would still has the medical expenses on those “active employees” who should have (or wanted to) retire, and wouldn’t be getting any real insurance premium from the folks. For that reason, I can’t imagine the University ending coverage for retirees.
The next subject we discussed was increasing the University’s contribution for employee insurance next July 1, 2007 (FY’08). I informed the Committee that our consultants (Mercer Health & Benefits) had sent a recommendation that we increase the University’s contribution for medical insurance next July by 1.89% (from $389.26 to $396.63). Much discussion ensued about how the consultants arrived at this percentage and what factors they took into account in their calculations. We also discussed the Board of Governors’ Guiding Principles about how much the University should spend on health insurance and how much reserve it should maintain. I’ve attached the Board’s guidance here just FYI.
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1) Present a medical and dental program to the Board that does not exceed 4.9% of the projected FY07 Operating Budget. 2) In that budget, provide for a reserve fund that does not fall below 60 days payout, nor exceed 90 days payout. |
A concern from some members was whether the Administration would even consider an increase since the reserve account is so robust. (The last figures I have show the reserve at $4.9 mil well above the $2.8 needed to meet Board guidelines.) Other members expressed a concern that the Administration might view the reserve as available funds for other programs or special projects and the members wanted our recommendation conditioned on the Administration not using the reserve for other programs or projects.
After much discussion, the Committee agreed that we should recommend an increase for three reasons:
- Although we are having a good year this year and the reserve is robust, that can change and we need to ensure that the insurance plan is fully funded; several Committee members reminded us that we have seen bad years before.
- We know that we will re-bid the PPO contract in 2007. Our experience has been that when we have a new contract, we always see increase costs due to new and lower discounting percentages.
- We expect to lose the net revenue we receive from Medicare-eligible retirees who will no longer contribute to the insurance fund after December 31, 2007 because they won’t be eligible for our insurance starting January 1, 2008.
After the meeting, a Committee member offered to fact that when we lose our Medicare-eligible retirees in 2008, we will reduce the amount we pay Med-Pay and stop-loss since those fees are based on head count. I did a quick calculation and it looks like we will save about $38,300/year in Med-Pay fees and stop-loss premiums when the Medicare-eligible retirees aren’t on our plan.
I will bring this issue back to the Committee because there may be other relevant matters we need to consider before I send a recommendation to the Administration.
The Committee then discussed the issue about coverage for Correcting Intraocular Lenses (IOL) for cataract patients. I advised the Committee that we currently have 3 claims pending a decision from the University regarding whether our insurance will provide coverage for refractive lenses following cataract surgery if the patient elects the have the correcting IOL implanted. The members offered a variety of opinions on the question, and there was uncertainty whether the insurance plan should cover refractive lenses (i.e., eye glasses) if the patient’s cataract surgery was on only one eye and not both. I advised the Committee that it seemed to me that we should not complicate the matter for Med-Pay, but we should tell them to allow a benefit for refractive lenses following cataract surgery for patients, even if the patient has the correcting IOL implanted. The Committee agreed.
The final topic the Committee discussed was the matter of costs for specialty drugs. I explained that specialty drugs are classification of drugs that are injectibles, require that a physician administer them, and are used to treat such illnesses as Multiple Sclerosis, Rheumatoid Arthritis, HIV, Chron’s disease, and Hepatitis C. We know from actual paid claims data that the cost for such drugs when purchased from the doctor can be 3 or 4 times higher than if purchased from the pharmacy. I advised the Committee that we will begin an educational program directed at physicians and patients to inform them that the insurance plan will not cover the cost for specialty drugs when they are purchased from the doctor rather than the pharmacy. I told the Committee that we could require patients the pay the difference between what they were charged by the physician and what the pharmacy would have charged. That seemed to be acceptable to the Committee.
The meeting ended.
I will advise the Committee of our next meeting.
Howard Berriman
Assistant Director of Human Resources
Missouri State University
(417) 836-6616