The University of Oklahoma
(Norman campus)
Regular session - February 10, 2003 - 3:30 p.m. - Jacobson Faculty Hall 102
office: Jacobson Faculty Hall 206
phone: 325-6789
e-mail: facsen@ou.edu web site:
http://www.ou.edu/admin/facsen/
The
Faculty Senate was called to order by Professor Ed Cline, Chair.
PRESENT: Baldwin, Beach, Bradford, Brady,
Carnevale, Cline, Cuccia, Davis, Devenport, Ferreira, Fincke, Gensler,
Gottesman, Hanson, Hart, Havlicek, Henderson, Huseman, Kauffman, Knapp, Lee,
London, Madland, Maiden, McInerney, Milton, Morrissey, Newman, Pender, Ransom,
Robertson, Rodriguez, Rupp-Serrano, Russell, Scherman, Sievers, Striz, Taylor,
Thulasiraman, Vale, Watts, Wieder, Willinger, Wyckoff
Provost's office representative: Mergler
ISA representatives: Lauterbach
UOSA representatives: McFayden
ABSENT: Abraham, Bozorgi, Frech, Hartel, Magid,
Tarhule, Wheeler, Whitely
________________________________________________________________________________
TABLE OF CONTENTS
Health benefits
Senate Chair's Report:
Campus campaign
Budget
Computer policies --
Security, Acceptable Use
Faculty Compensation Committee
report -- budget cuts
Resolution on tuition and
fees
________________________________________________________________________________
The
Senate Journal for the regular session of January 13, 2003 was approved.
Prof.
David Carnevale, chair of the Employment Benefits Committee (EBC), explained
that every year for the last few years, we have been running a deficit and
projecting deficits in the future. The
EBC has been making adjustments in the plan by changing co-pays, pharmaceutical
payments, and other areas, and then the university usually puts some money
in. Still, the deficit has been getting
bigger every year, the cost to the university has been increasing, and the
benefit to the employee has been decreasing.
The university hired Mercer consulting firm to look at our situation in
a more detailed way. We are going to be
about $5 million short this year and will have to make up several million
dollars more next year. The deficits
are such that the EBC is at a loss as to how to pare the numbers down. Over the past three years, the university
has had to put in about $15 million dollars over what was budgeted. This has become a high-risk operation in the
context of other financial issues such as the possible reduction in the number
of classes, furloughs, cuts in salaries, and lay-offs. The administration is concerned about the
significant financial risk if the budgeted number is not reliable. In a meeting February 6, the consultants
recommended that the university end its self-insurance plan so that any inaccurate
projections are not the burden of the university. We are losing $500,000 a month currently. The consultant recommended that we go to the
state plan. Our current option 3 is
about 95 percent representative of the state plan. If we make that move, we still will have some outstanding debt,
and it will cost us money to go to that plan.
We will have to pay money for the privilege of reduced benefits. Prof. Carnevale said the administration was
trying to get information comparing the state plan with our option 2, Schaller,
plan.
Mr.
Joe Taylor, a Mercer consultant, gave a history of how we got where we
are. In 2001, the health care plan cost
about $27.4 million. In 2002 it was
about $38.8 million, a 41.8 percent increase or a 25.9 percent increase on an
employee-per-year basis. At that time,
the medical CPI was about 6-8 percent.
For 2003, the projected annualized cost is $43-45.5 million, or an
increase of 9.4-15.8 percent on top of the previous 25 percent. The budgeted amount, which includes
university and employee money, was $1.9 million short for 2001, $8.8 million
short for 2002, and is projected to be $4-6.5 million short for 2003. With deficits of this amount, the rates have
been too low for dependents. The cost
for both university and employee is anticipated to increase 15.5 percent for
2004. Given estimated expense of $52.5
million, the projected shortfall for 2004 is $9.8 million. Mr. Taylor then gave examples of how to
reduce cost by $9.8 million. About 9000
people are covered. Each
individual--employee or dependent--could pay an additional $90 per month. Family coverage would go up 15 percent on
top of the $90 per month. Another
option would be to reduce the plan design by 18.6 percent and charge more in
terms of deductibles ($500), out of pocket ($2500), and coinsurance ($25 for a
primary care physician, $35 for a specialist).
If we split the difference between these examples, we could charge the
employee $40-50 per month and reduce the plan by 12.5 percent, with a $300
deductible, $2300 out of pocket, and $20 office visit co-pay. The high PPO option of the state plan is
very close to this in benefit.
Prof.
Cuccia asked why the medical CPI was six percent, yet our increases were 15-20
percent. Mr. Taylor said two examples
were half of the prescriptions for antibiotics were unnecessary and people were
now having more than one heart attack or stroke. Prof. Cuccia commented that those issues affected everyone. He said he wondered what about us was
leading to increased cost relative to everyone else. Mr. Taylor said the trend rate of 15.5 percent was close to the
national average, but one factor unique to OU’s population was that the average
age was 2.5-3 years higher. For about
every five years of age difference, the cost difference is about 20
percent. Professors Cuccia and Hart
responded that that did not explain the significant difference between OU and
the national average. Mr. Taylor said
he did not know whether the change to the Schaller plans might have affected
the increase. Another contributing
factor is that OU has a higher female content.
Women go to the doctor regularly, which raises the cost. Prof. Cline asked how long the trend line
was. Mr. Taylor said the trend line was
27 months for the Blue plan and 15 months for the Schaller plan since the Schaller
plan started more recently.
Prof.
Gottesman asked whether the charges by physicians and pharmacies were higher
under the Schaller plan. Mr. Taylor
said the pharmacy contract seemed to have gotten a little bit better. One factor that could be pushing up some of
the cost is that health care clients, such as the medical center, who have
employees in the health care system, use it more. The difference in what people pay depends on the plan design,
demographics, and geography. The
increased cost is happening to everyone across the board. Physicians and hospitals are negotiating
better, which means the cost goes up.
Prof. Morrissey suggested that instead of looking at the increase over
the past four years, we should examine what happened in 2002, when we had a
huge increase. Mr. Taylor said there
was limited experience prior to that time because OU was insured with
Prudential. He did not find anything
out of the norm in terms of significantly different events. Prof. Willinger asked whether the consultants
had considered a major medical plan with a very high deductible, which would
allow individuals who were fairly healthy to avoid large premiums. Mr. Taylor said they had. Within the state plan, there are lower plan
values that cost less. They are
probably a bit better than major medical plans.
Mr.
Taylor made some observations about the situation. There are significant shortfalls in the budget, and the
organization does not have the ability to pay for shortfalls next year. Even with a planned 15.5 percent increase in
university funding, additional employee or university contributions would be
needed. Fully insuring would allow OU
to delegate network and funding to a third party. Some combination of plan design and contribution changes is necessary
to keep the plan competitive in the marketplace. We want to be able to attract and retain employees. The state plan, which OSU uses, would be
competitive. A transition to an insured
funding arrangement must be completed expeditiously. Every month we wait means another $500,000 of unbudgeted
expense. Prof. Rupp-Serrano asked how
this plan would compete out of state.
Mr. Taylor said Mercer had surveyed about 70 universities, including
several Big 12 schools, and about 3400 other employers. The average deductible was $250, and the
average employee contribution for single coverage was in the range of $60. The Oklahoma plan is competitive. The survey also showed that 50 percent of
employers said they would make employees pay a greater percentage of the cost
in 2003.
Discussing
short-term recommendations, Mr. Taylor said OU should move quickly to an
insured arrangement in order to get a consistent cash flow and have budgeted
expense equal actual expense. Replacing
the current option with the state plan--HealthChoice--is the best option, given
time and funding constraints. All
Oklahoma higher education public institutions participate in the state
plan. The recommendation is the
HealthChoice high option, which is close to our current option 3. It is about a 12.5 percent reduction in
benefits. Prof. Cline asked whether the
number and composition of doctors were comparable. Mr. Taylor said the network was broad, and he did not anticipate
a large disruption. The benefits office
has not had the opportunity yet to compare the networks. Prof. Milton noted that according to the
information on the web, the network seemed to be very extensive, but he could
not find pharmacy information. Mr.
Taylor said the state plan pharmacy is Medco.
All major retail chains are in the network. The pharmacy disruption for clients is usually 2-3 percent. Prof. Rupp-Serrano asked whether the high
option was the top option available in the state plan. Mr. Taylor said it was.
Prof.
Russell said he thought of insurance as something that reduced the risk, so he
wondered what kind of insurance the university had. Mr. Taylor said the university was self-insured and got
reimbursements for claims over $200,000.
Prof. Russell commented that in a real insurance plan, we would know
what our costs were up front. With
self-insurance, the plan managers manage our loss, but there is no business
model whereby they would work on our side.
Mr. Taylor agreed that with a self-funded option, the administrators try
to lower net cost, but they are not at risk.
Mr. Julius Hilburn, Human Resources director, pointed out that the
university did try to manage the third party administrators. However, we do not have the same leverage as
in an insured arrangement, and the risk belongs to us. Prof. Hart remarked that we have the ability
to control the way the plan is administered.
Mr. Taylor replied that clients make decisions to make benefits more
generous, and there is cost associated with that. When asked whether the Goddard physicians and pharmacy were part
of the state plan, Mr. Taylor said we would ask the state for that if Goddard
was not already included. Mr. Hilburn
added that that was a priority for us.
Prof.
Striz asked whether the deficit had been paid by the university. Mr. Taylor said the university had paid all
the claims. The deficit is in terms of
what we had planned to spend. Prof.
Striz urged the administration to provide a comparison of options for family
coverage, not just individual. Mr.
Taylor said the HealthChoice web site showed the various rates. Prof. Striz said he understood that it was
harder to get claims accepted through the state plan. Mr. Taylor said whatever is covered should be priced and paid
appropriately. The issue may be that
people did not understand what was covered.
Prof. Milton asked what this would cost the university compared to the
present plan. Mr. Taylor said it would
be $2 million more than the current budgeted amount. The state rates are based on a calendar year, and the state rates
are likely to increase about 17 percent in January. Prof. Cuccia asked whether the university would continue to
contribute if we switched. Mr. Taylor
said it would. Prof. Cuccia said the
state plan also was self-funded, with a risk pool as poor as ours. Mr. Taylor answered that because the pool
was larger, there was less fluctuation.
Prof. Cuccia noted that the state plan costs were three times the
national average, just like ours, so we could anticipate increases year after
year. Prof. Wieder commented that only
the deficit would be cured by this option; there would be increases in cost
each year out. He said he thought the
university went to self-insurance because it was difficult to get companies to
insure the population of the university.
He asked whether we would be charged at the same rate as the other
institutions in the state. Mr. Taylor
said the state would charge the same rate for everyone. Prof. Striz asked whether the state plan was
in debt at this time. Mr. Taylor said,
"Not to my knowledge."
Turning
to long-term options, Mr. Taylor said the university could determine if options
to HealthChoice were viable. Other
ideas include tiered networks where physicians and hospitals are paid a
consistent amount, taking care of the really sick people who represent 50-60
percent of the cost, and increasing the utilization of Goddard. One way to reduce cost is to engage
employees as consumers. Prof. Hanson
commented that the military plan pays doctors only what Medicare pays, so it is
hard to find doctors who will take military patients. Reimbursements cannot be driven down too low. Prof. Knapp asked whether cancer and heart
problems accounted for the high cost claims.
Mr. Taylor said those were two, but muscular-skeletal issues and having
babies also were high in our population.
Other health conditions include respiratory problems and diabetes. Prof. Watts asked about differences between
younger and older age brackets. Mr.
Taylor said a person 55-60 in age costs about 50 percent more than a person
35-40. Prof. Havlicek said he
understood we expected to benefit from the state plan because it was larger
pool. However, we will be giving up
some degree of control. He said it
would be useful to project what really would be gained in 3-5 years in terms of
reduced variability of the larger plan and to know whether the state plan could
get a better deal at the point of service.
Mr. Taylor said it was reasonable to assume that if a plan brings more
bodies to a physician, the physician will offer more discounts. However, the consultants had not done a
service-to-service comparison of an office visit under each contract.
Ms.
LaDonna Sullivan, a staff member on the EBC, asked whether the state plan had a
national network available for employees who travel routinely out of
state. Mr. Taylor said the network for
out-of-state providers was not particularly strong. Prof. Milton asked whether we could change our mind in the future
if we chose the state plan this year.
Mr. Taylor said the university could opt out, but it would not be
allowed back in for 12 months. It is
important that we not lose our flexibility.
Prof. Striz said the state and university plans were offset by six
months. Mr. Taylor said it might be
possible to opt in or out at a different time period than the state's.
Discussing
the portion of claims paid by the university, Mr. Taylor reiterated that the
university picks up everything under $200,000, and the re-insurance picks up
the large claims above that amount.
Prof. Hart asked about the time line for the study and when the decision
had to be made. He said many of his
colleagues were upset about this issue, particularly about the out-of-network
service. He said we needed more time to
make the case for a new plan and we needed an explanation of why our costs went
up so much. Mr. Taylor said the sample
plan design he put together turned out to be similar to the state plan, so the
consultants thought the state plan seemed to be a reasonable solution. One of the major reasons for the increase
from 25 to 40 percent in cost per employee was because additional people were
being covered. Fifteen percent of the
cost was due to the trend. The
remaining 10 percent could be explained by cost utilization, such as average
age and gender. Prof. Hart said he
thought the cost was being driven by drug companies and doctors. Mr. Taylor clarified that the $52 million
projected expense was if we continued the current plan and current
contributions. If we moved to the state
plan, that amount would be reduced, and the contributions would be close to the
current option 3. Prof. Milton said our
option 3 might be better than the state plan because it is much better out of
state. Mr. Taylor responded that if the
projections were off again, the university would bear the risk. Prof. Milton observed that the state could
easily increase its premiums in January.
Prof. Kauffman asked how much the $52 million would be reduced under the
state plan. Mr. Taylor said a 12.5
percent benefit decrease was equal to about a 12.5 percent decrease in
cost. The consultants used a modeling
tool to determine that a dollar going into the current plan would pay at about
88 cents in the state plan.
Mr.
Hilburn said information will be sent out to employees, which will include the
rationale for considering the state plan.
He encouraged employees to attend one of the health care forums. He is working with the administrator for the
state plan to get additional information, for instance, how the state plan
works when an employee or retiree is out of state. The Human Resources web site will show a comparison so that
everyone will have a clear sense of what is changing and how. Prof. Hart said it appeared that employees
were not being given other options from which to choose. Mr. Hilburn said a final decision had not
been made. The EBC will make its
recommendation later this month. Prof.
Carnevale said the EBC had talked about raising premiums and reducing
benefits. What is required now is
something severe. One thing we lose if
we go to the state plan is governance.
On the other hand, with our current plan, we cannot guarantee that the
budgeted number is a good number and that the university will not have a
deficit. Prof. Hart pointed out that
the university now wanted employees to pay for the deficit. Prof. Carnevale said he could understand why
the university did not want to pick up the deficit any longer. Our traditional way of dealing with the
problem will not resolve it.
Prof.
Pat Weaver-Meyers (University Libraries), a faculty member on the EBC,
suggested that the web site compare the state plan with what the OU plan would
be rather than the current plan so that people would not be confused. Mr. Hilburn said the most meaningful
comparison, and what has been requested, was how the state plan would differ
from what we have today. Mr. Nick
Kelly, Benefits manager, said the delivery system was important but was not the
major issue. No matter what we
did--self insured, fully insured, or state plan--our benefits would look like
the state plan or our current option 3.
Prof. Striz asked if it was possible to keep the same level of benefits
at a higher cost voluntarily. Mr.
Taylor said it was better to bring all the risk into one pool. Mr. Hilburn said he would make it clear that
retaining our current level of benefits was not an option, given the financial
situation of the university. Mr. Taylor
suggested a triple comparison on the web site that would show our current plan,
what we would have to drop to, and the state plan. Prof. Cline encouraged the senators to talk with their
constituents and send questions to the Senate Executive Committee, who will
transmit them to Human Resources.
Prof.
Cline announced that the campus campaign was about to start. He encouraged everyone to donate. Gifts of any size are welcome. It is important to contribute because a high
percentage of donors from the campus is encouraging to outside donors. Last year, about 20 percent of faculty and
staff gave to the campaign. The hope is
to raise it to 25 percent. All
unrestricted gifts will go to the Sooner Heritage Scholarship fund for students
with financial need.
At
the last chairs and directors meeting, Provost Mergler set out some conditions
under which furloughs would not be necessary: no further cuts by the
legislature, passage of the tuition bill, and deferred deposit of one month's
defined benefit contribution. Prof.
Cline noted that the graph of the 1980-2001 student-faculty ratio (attached)
illustrated the damage that occurred because of furloughs in the 1980s.
Because
the senate lost a quorum, Prof. Cline said the proposed computer policies and
Faculty Compensation Committee report would be voted on next month. He said he would ask the senate to vote on
the tuition resolution (attached) by
e-mail. [Note: The resolution was approved by the Faculty
Senate by a vote of 46 in favor and one abstention; 5 did not vote.] Prof. Cline said the Staff Senate planned to
approve a similar resolution.
The
meeting adjourned at 5:03 p.m. The next
regular session of the Senate will be held at 3:30 p.m. on Monday, March 10,
2003, in Jacobson Faculty Hall 102.
____________________________________
Sonya Fallgatter, Administrative Coordinator
____________________________________
Valerie Watts, Secretary