October 2005 Friday Focus
Healthcare Issues Facing Missouri State
Like most other organizations, Missouri State University has experienced significant increases in its healthcare costs in recent years. In fact, over the past 10 years, the University's healthcare costs have increased by more than $8 million from $3,991,762 in 1995 to $12,184,769 in 2004, an average increase of 12 percent annually. Nationally, the trend is the same: healthcare costs have risen by 10-15 percent annually over the past five years.
I am very concerned about these increasing costs and their impact on you and the University. Obviously, every dollar you spend on personal healthcare is a dollar you cannot spend elsewhere. Similarly, every dollar the University spends on healthcare costs is a dollar we cannot invest in other areas. Addressing this problem will require tough decisions about new approaches.
I am encouraging the institution to set priorities so we can focus on what we decide are our most important initiatives and our best opportunities. In order to help fund these priorities, we must address the problem of relentlessly rising healthcare costs, a challenge that the Board of Governors has also repeatedly emphasized.
The University will need to consider a number of steps to gain control of its healthcare costs. We are not alone. According to the most recent (October 21, 2005) Chronicle of Higher Education, colleges and universities across the nation are taking similar action to curb costs. None of these decisions will be uniformly popular, but the alternative of continuing to pay dramatically greater healthcare costs is simply not acceptable or sustainable. To cope with this problem, I believe we must consider a number of strategies, including the following:
- A comprehensive wellness program;
- A healthcare plan that includes multiple options, some requiring an employee contribution toward the premium;
- Elimination of retiree health benefits for faculty and staff hired after January 1, 2006.
I will outline each of these initiatives below.
Comprehensive Wellness Program
An excellent strategy to reduce rising healthcare costs is to promote healthy behavior and encourage disease prevention among consumers. The health and welfare of our campus community must be a basic priority, in support of which a new wellness program should be introduced.
Various University groups (which includes faculty and staff representatives) are working to develop a wellness program that will establish Missouri State University as a model health and wellness community. I hope this program sparks positive, measurable differences in the health of our students, faculty, and staff at the same time that it minimizes cost increases to the University's self-funded healthcare plan.
A wellness program could provide educational opportunities for our students and research opportunities for our faculty and graduate students. We could assess the effectiveness of these initiatives via faculty-conducted research and contribute to knowledge in health education and wellness disciplines. We could also promote health improvement and wellness to our students and model these principles in the larger communities where we live.
Participation in this new wellness program should be incentive-based. Those individuals who participate should be advantaged in our healthcare plans. For those individuals unwilling to participate in the program, their out-of-pocket healthcare costs may need to increase.
Employee Contribution to Healthcare Premium
When our current health insurance plan was implemented in 1988, the University could cover the cost of medical and dental claims without asking employees to pay a monthly insurance premium for individual coverage. Only employees who elected to enroll in the family plans paid a monthly premium.
Over the years, we have attempted to control rising healthcare costs by implementing a number of standard cost containment measures. In 1998, we switched to a managed care contract (PPO) with St. John's Health System to reduce costs at the "point of use" through discounts on healthcare services. Increasingly, employees who used the insurance plan were required to pay a greater portion of their healthcare costs at the "point of use" through higher deductibles and out-of-pocket amounts. Similarly, the University's contribution for employee health insurance increased; in one year alone by 29 percent. All of these strategies were intended to provide employees, retirees, and their families with an affordable, high-quality health insurance plan, without requiring employees to pay a portion of the cost of the insurance plan.
From every indication, it is obvious that healthcare costs will continue to surge. Many employers now require their employees to pay a portion of the cost of their health insurance plan. For years, higher education institutions resisted doing so. But within the past five years, an increasing number of colleges and universities have begun to require employees to pay a portion of their premiums as they struggle to fund quality healthcare while facing decreasing revenues from state legislatures and other sources. A recent benefits survey conducted by the College and University Professional Association (CUPA) revealed that only 29 percent of the surveyed institutions reported that they pay all health insurance costs for their employees. Missouri State University is part of this dwindling minority. Indeed, some institutions are now discussing getting out of the healthcare benefit business altogether, opting instead to roll the amount the institution spends on the benefit into employees' salaries and letting employees purchase health insurance on their own.
While the University has been committed to providing a high-quality, affordable health insurance plan and to funding the plan within its fiscal capability, I am skeptical that we can continue to do so without seeking a financial partnership with employees to fund the plan. Therefore, I believe we must consider requiring employees to pay a portion of their monthly premium. We could entertain at least three options for doing so:
- A relatively high deductible plan requiring no employee contribution;
- A lower deductible plan requiring an employee contribution;
- A lower deductible plan requiring an employee contribution toward the premium, but with some adjustment to the employee's contribution earned by participating in the wellness program.
In other words, these options in combination would obligate an additional contribution toward rising healthcare costs by those employees electing not to participate in the Wellness Program, while also providing an incentive for faculty and staff to make healthy lifestyle choices by participating in the new program.
Retiree Healthcare Coverage
Missouri State University has a long history of valuing its retirees and their service to the institution. In fact, I am investigating the introduction of a "phased retirement" system as well as a method to make it easier for retired faculty to return to campus to teach, if they desire.
Some University employees elect to remain on the University's healthcare plan after their retirement. Over the past 17 years that the University has been self-insured, paid claims data show that the collective retiree constituency's premium contributions have not come close to covering their actual healthcare costs. In fact, since 1988, retiree premiums have lagged behind their medical expenses to the point that their cumulative shortfall through the current year amounts to more than $5.6 million. In essence, the University's contribution to the healthcare plan has heavily subsidized retiree coverage during this time, and it will continue to be required to do so, probably at an accelerated rate.
Because of this situation, I believe we should act now to constrain our future healthcare deficit. To address this problem, I believe we should change our healthcare plan such that the University would no longer offer retiree healthcare coverage to new faculty and staff hired after January 1, 2006. Current faculty and staff would be "grandfathered in" to continue to be eligible for optional retiree healthcare coverage for as long as the University is able to offer this plan.
I did ask the Healthcare Plans Review Committee for its input on this topic, and it recommended that retiree coverage not be eliminated for any new employees. Nonetheless, I ask you to evaluate the realities and implications of this situation. As you do, I think you will recognize the same two alternatives that I do: 1) discontinue this guarantee (I recognize that this would require modifications to the faculty and staff handbooks), or 2) be willing to pay even higher premiums in order to subsidize future employees' health benefits after they retire. Personally, I do not believe we can afford to continue to offer this type of coverage to future employees. Neither do I believe that elimination of this benefit will adversely impact our ability to recruit new faculty and staff because most other universities have made a similar decision or will be doing so in the not-too-distant future. (For your information, The Chronicle article cited earlier indicates that 37 percent of institutions already do not offer healthcare benefits for retirees.)
I seek your feedback on these various initiatives. These are difficult problems faced by all institutions. Although all the simple solutions have been exhausted, I am confident we can make decisions that are in the overall best interest of Missouri State University. We need to have a university-wide discussion on this topic. I look forward to your thoughtful appraisal and advice.