The University of Oklahoma
Regular session - February 10, 2003 - 3:30 p.m. - Jacobson Faculty Hall 102
office: Jacobson Faculty Hall 206†† phone: 325-6789
e-mail: email@example.com†† 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
Senate Chair's Report:
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 OUís 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