JOURNAL OF THE FACULTY SENATE
The University of Oklahoma (Norman campus)
Regular session - February 11, 2002 - 3:30 p.m. - Jacobson Faculty Hall 102
office: Jacobson Faculty Hall 206 phone: 325-6789 FAX: 325-6782
e-mail: facsen@ou.edu web site: http://www.ou.edu/admin/facsen/

The Faculty Senate was called to order by Professor Al Schwarzkopf, Chair.

_____________________________________________________________________________

TABLE OF CONTENTS

Announcements:

Senate Chair's Report:

Health benefits for 2002-03

Faculty retention issues

_____________________________________________________________________________

The Senate Journal for the regular session of January 14, 2002 was approved.

The status of issues brought to the Faculty Senate for 2001-02 is attached. Only items that changed since the last meeting are included on the list.

The following faculty were elected to the Faculty Senate as of February 2002:

President Boren's response to the Senate's recommendation concerning the deadline for notifying tenure candidates that they need to prepare a dossier (see 1/02 Senate Journal) was, "The Faculty Senate's suggested change should be included in the Faculty Handbook."

Prof. Schwarzkopf reported that he had met with the Academic Affairs Committee of Student Congress about the Faculty Senate's proposal to shorten the "add" period (see 11/01 Senate Journal). The students have approved it in principle, but they would like late registration to last a full seven days and be available on the weekend. Prof. Schwarzkopf said the students had contacted other Big 12 schools and learned that the "add" period of most of the other schools was three to five days. The students are also in the process of developing a code of conduct, which would require students to sign a statement saying they understood what plagiarism and academic misconduct were. The Faculty Senate will be asked to take action on this proposal.

The Provost office is soliciting nominations for honorary degree recipients. Information about the nomination procedure is available at http://www.ou.edu/provost/pronew/content/memorand.html, under "Other Memoranda/Information."

Prof. Schwarzkopf summarized the current economic situation. The revenue from the state will be smaller than last year's, so President Boren asked departments to identify permanent two percent cuts. The governor is trying to hold education and health care as harmless as possible. Even with a level budget, we will have a decrease in spendable income because of increases in health benefits and utilities. Prof. Schwarzkopf said it is important to meet with legislators so they understand how cuts will affect the University. A number of states have worse situations than Oklahoma. It looks like we will have a tight year. Provost Mergler added that the state regents had asked the University to describe the impact of a 5 percent, 7.5 percent, and 10 percent budget cut. The administration responded that it would mean fewer tuition waivers, fewer scholarships for students, library cuts, and fewer instructional faculty. She said she viewed the request as an exercise and did not want faculty to be alarmed if they heard about it in press releases. She said she hoped we would not have to go through cuts of that magnitude.

Mr. Nick Kelly, Benefits Manager, and Prof. David Carnevale (Human Relations), Employment Benefits Committee Chair, were present to discuss the financial situation of the University's health care system. Prof. Schwarzkopf said he planned to distribute written material to the senators as soon as possible and ask the Faculty Welfare Committee for its reaction. The OU regents will take action at their March 27-28 meeting. Therefore, the Senate will have to vote at its March 11 meeting or vote electronically. Getting early feedback from senators will be important. It might be necessary for the Senate to empower Professors Schwarzkopf and others to work on last minute adjustments.

Prof. Carnevale said the Employment Benefits Committee (EBC) was established so that the human resources offices, staff and faculty, along with consultants contracted by the University to help broker between the EBC and the various providers, could make recommendations for the benefits program. Representatives from various companies sit in on meetings occasionally to answer questions. For the last two years, we have had increased health care costs and no reserve to absorb the increases. In past years, premium increases were covered by the reserve. We are running a 40 percent deficit in Blue Cross and a 20 percent deficit in Schaller-Anderson. If we did nothing, we would have a 39 percent increase in health costs. Delta Dental is proposing a 40 percent increase, so the EBC is considering whether to go with the Met Life dental plan. In prior years, we did not really have the numbers concerning our experience. Thanks to the work of the Faculty Senate, we are getting numbers from Schaller-Anderson on variables such as pharmacy, outpatient, and major surgery so we can fine tune the model. The University will budget 15 percent against the projected 39 percent increase. Prof. Schwarzkopf asked how much that meant in dollars. Prof. Carnevale said the problem was about $2 million overall. Prof. Schwarzkopf reminded the Senate that it takes about $1.2 million for every percent increase in salary. Mr. Kelly said the total health care plan is close to $30 million, so it will cost $3-4 million for the 15 percent. Prof. Carnevale said the EBC was considering the following proposals (distributed at the meeting), which would generate an additional 12 percent.

PROPOSED PLAN HIGHLIGHTS

• No increase in payments for any generic drugs
• Still no deductible on Option 2
• Dependent coverage credits on Option 3
• Two choices with Option 2: Lower co-pays for the University contracted network of facilities
• Nationwide network still available for all options

• Third tier of drug formulary priced higher
• Difference between in-network and out-of-network payments increases
• Employee premium for plans with broader choices increases

• Increase in deductible from $150 to $200
• Increased physician visit co-pay, $10 to $15
• Increase in co-insurance from 15% to 20%
• Increase in pharmacy co-pays from $10-$20-$30 to $10-$25-$45

• Increased hospital co-pay, different levels for direct contracts and PPO network
• Increased physician visit co-pay, $10 to $15
• Outpatient co-pays same as inpatient due to changes in medical pricing
• Increased pharmacy co-pays $7-$14-$28 to $7-$20-$45

• Designed for employees with dependents, could feature credit for dependent coverage
• Only change would be pharmacy over current year Option 3
• Will have same formulary and medical management as Option 2

Prof. Carnevale said one alternative would be to give people who opt out of coverage $50 instead of $95. The pharmacy plans could be combined under one administrator. Vice President for Administrative Affairs Brian Maddy is negotiating increased discounts with hospitals, networks, and physicians. Individuals could be encouraged to use certain facilities to generate savings for the plan and for the member. The nationwide network will still be available for all options. Mr. Kelly noted that only about 90 people signed up for plan 3--the "bronze" plan--so the administration is looking for some type of third option that would keep dependent coverage affordable for lower income employees.

Prof. Carnevale said the cost of generic drugs would remain the same, but there would be increases in the co-pays for non-generic medicines. The philosophy behind this change is that the employee pays more for choosing something above average. The EBC is talking about a way for people to appeal if they have no choice but to use a non-generic drug. Employees could still buy a three-month prescription for two co-pays. Nationwide, pharmacy inflation is 18 percent to 20 percent; for OU it is 30 percent. We are also higher than the average on outpatient utilization. Someone might need to make a judgment as to whether a procedure should be done as an outpatient or in the hospital. We are getting more major claims than the fiduciaries anticipated. The co-pay for a physician visit would increase from $10 to $15.

Mr. Kelly noted that we are working with six months of data to try to project out 18 months. The administration is trying to keep basic health care affordable. With the concept of choice, the individual will pay more to go to a certain network and to choose a drug that is not in the preferred category. He pointed out that typically, the higher cost drugs are in the third tier. There are only three ways to spread the cost: the University can put in more money, the employees can pay more in terms of co-pays, or we can try to get money out of the providers. Over 1000 retirees are in the plan, they are more expensive than active employees, and the University pays their full premium. This is a long-term liability that gets larger every year. Doctors are now in the driver's seat because there is less managed care than there was three or four years ago. The University is trying to build a network and give employees incentives to go to the most cost-effective providers.

Prof. Hart asked where the remaining 12 percent of the deficit would come from. Mr. Kelly said they were still looking for additional savings but had not yet received the full cost from the actuary. Since there are no reserves, the University's contribution would have to come out of the University general fund. Prof. Hart asked about the discrepancy in deficits between the two plans. Mr. Kelly said with Blue Cross, there is no management of care as there is with Schaller-Anderson, there is no pharmacy formulary, and most of the retirees, who tend to be a less healthy population, stayed with Blue Cross. Provost Mergler asked about the number of employees in the two plans. Mr. Kelly said for active employees, the ratio of people enrolled in Schaller-Anderson to Blue Cross is about two to one; it is the other way around for retirees. Prof. Roegiers asked whether it would be feasible to buy drugs from Canada. Mr. Kelly said he could raise that idea with the pharmacy benefit manager. Prof. Scherman asked whether there would be an increase in premiums. Mr. Kelly said the premium increase, probably close to 15 percent, would be contributed by the University. The dependent coverage would probably increase 15 percent. Some consideration is being given to providing credit for dependent coverage on plan 3. Noting that the deficit was based on the first six months of the fiscal year, Prof. Magid asked whether deficits tended to drop off at the end of the year. Mr. Kelly answered that we had a tremendous deficit with Blue Cross for the first couple of months because they were paying the tail of claims from the previous year for people who switched from Blue Cross. November and December tend to be high months, then it falls off a bit but probably not enough to make a big difference. Prof. Magid asked whether the changes were set in stone if we ended up with a smaller deficit. Prof. Carnevale replied that if the numbers look better later in the year, then everyone would decide whether to put the money back into the plan and/or reserve fund. Prof. Schwarzkopf asked whether anything was being done to manage the reserves. Prof. Carnevale said the EBC was discussing the reserve situation. He said in a world where health care goes up every year, some radical thinking should be done. One idea is to have one plan. Prof. Schwarzkopf said if we had a less costly increase and a rise in the reserves, then we should have a gentler increase next year.

Prof. Schwarzkopf asked for a list comparing this year's features to the proposed features and for information on the annual out-of-pocket maximums. He said the senators should be prepared to decide to what extent they would willing to participate in a HMO-like plan in order to save money. He said they should think about what they would be willing to pay to retain the freedom to go to the doctor they want without having to go through a primary care physician. Prof. Kenderdine asked whether it would it save money to designate one pharmacy for each campus. Mr. Kelly said they had had some discussions about those kinds of things and could look at that again. Prof. Schwarzkopf said the Senate needed to discuss the fact that most retirees are in Blue Cross. He asked the senators to let the Faculty Welfare Committee know about any problems they are having with Schaller-Anderson. An option that should be considered is whether to designate Schaller-Anderson the preferred provider and make those who stay with Blue Cross pay the full difference in premium. He encouraged individuals to show their doctors the formulary and discuss whether they could prescribe less expensive drugs. Prof. Schwarzkopf reminded the group that the University's health care plans are self-insured, which means we pay Blue Cross and Schaller-Anderson just to administer the plans. One of the issues that the Senate will have to talk about is maintaining health care versus salary. Provost Mergler pointed out that the dollar figure requested should be for the Norman campus. Prof. Schwarzkopf said the Senate would need to know which of the three plans would be the default plan, that is, the plan for which the University will pay. Traditionally, the University has paid for the lowest cost reasonable plan. Prof. Magid said the Senate should also find out how much of the raise figure is for salary and how much is for fringe benefits if we are going to make these kinds of economic comparisons. Prof. Schwarzkopf said it was important to know about any concerns as soon as possible so that adjustments can be made in the plans.

Prof. Hawthorne asked whether it would make much difference to increase the physician co-pay by another $5. Mr. Kelly said he would provide a list showing the effect of various changes. He said the largest amount of money comes from a change in the deductible, then pharmacy, and then hospital co-pay. The physician's co-pay is probably last in terms of the total dollar amount. If the physician or pharmacy co-pays are raised too much, then people will not go to the doctor or get medicine as they should. When asked about trade-offs, Prof. Hawthorne said he might be willing to pay $25 to see a doctor in exchange for not increasing the deductible or pharmacy as much. Prof. Schwarzkopf noted that the Senate would be voting on an approximate plan since some of the numbers could be adjusted up to the time the proposal goes to the regents. Prof. Carnevale said the EBC would meet two more times this month. Prof. Schwarzkopf said he assumed faculty would want to keep health care under control even at the expense of a very small raise.

Prof. Schwarzkopf said unless there was a reason to bring the resolution concerning faculty retention issues (see 1/02 Senate Journal) off the table, he would suggest deferring discussion.

The meeting adjourned at 4:40 p.m. The next regular session of the Senate will be held at 3:30 p.m. on Monday, March 11, 2002, in Jacobson Faculty Hall 102.

____________________________________
Sonya Fallgatter, Administrative Coordinator

____________________________________
James S. Hart, Jr., Secretary