Effective January 1, 2003, UC employees can expect their out-of-pocket costs to increase and their benefits to deteriorate. The design of the plans will also be considerably different: there will no longer be a zero-cost HMO option; Aetna's UC Care will be replaced by a two-tier option offered by Blue Cross: the first tier will be an HMO; the second tier would cover (after meeting a deductible) 70% of the out-of-pocket cost of self-referring within the broader Blue Cross provider network. At a higher monthly cost, faculty will have the choice of self-referring within the entire Blue Cross network with 80% coverage of the provider's actual bill. The only zero-cost option remaining for UC employees will be a plan with a very high deductible, also administered by Blue Cross, that is intended to cover "catastrophic" costs. (The "catastrophic" coverage in even this plan, however, would be unlikely to function as a true "stop loss" unless the insured medical bills are less than or equal to the rate Blue Cross negotiates with its providers.)
Anticipating significant changes to faculty health insurance plans, CUCFA established a task force last year to enter into ongoing consultation with the UC Office of the President (OP). Our original intent had been to advise OP on faculty concerns about plan design and monitor the terms that OP was negotiating with the providers. Task force members were selected for their expertise, and we were particularly fortunate to have Richard Scheffler, who holds the chair in Healthcare Markets and Consumer Welfare at UC Berkeley, and Warren Gold, professor of pulmonary medicine at UC San Francisco.
The task force met with OP officials at length three times between February and August. We were given information in advance about the Request for Proposals (RFP) and the history of employee and employer contributions for each existing plan. At the outset, we stated our desire to influence the choice UC made among bidders based on plan quality, plan design, and the adequacy of provider networks. We had the opportunity to express our criticism of existing providers, and our principal concerns for the future, but OP reneged on its promise to provide us with information and analysis about the competing bids while the selection process was underway. Nevertheless, CUCFA had some influence on the criteria used on the eventual choice, and is now in a position to provide an independent and critical perspective on the issues that OP addressedăand should have addressedăin the bidding process. We have also offered to collaborate with OP in preparing educational materials on the new healthcare options so that faculty members will be able to make informed decisions during the Open Enrollment period this November.
The following summarizes some of the main points that emerged from CUCFA discussions with OP since February.
UC Contribution. Although health care costs have increased in the past few years, do not assume that OP's present policy is a simple pass-through. During the 1990's (as part of the shift to managed care) health costs decreased significantly. Instead of passing through these decreases in the form of lower employee premiums or better benefits, OP dramatically reduced its employer contribution, allowing plans to deteriorate and employee costs to rise. In 1992, for example, OP contributed $208 for one-party insurance, and $505 for families. By 1999 (in unadjusted dollars), these amounts had fallen to $146 and $405, while employee copays and coinsurance rose. This year, the employer contribution will be back to approximately its 1993 level, without adjusting for inflation. It is further notable that, despite anticipated increases in insurance bids of 16-25%, OP's budget request to cover this increase was in the range of 6-9%, and that it did not seriously bargain for more than the 6.7% increase for health care funding that it eventually got.
Premium Changes. OP has been struggling with the implications for insurance premiums of this year's non-budget, but it is clear that the premium increases for health benefits will be massive. In a year of negligible COLAs, this means an effective decrease in net compensation for all employees. There will, for example, no longer be a zero-cost option. The minimum cost of HMO insurance for the plans available in our area is likely to be c. $15-20 per month for individuals, and the provider networks and coverage may be somewhat thinner. As this newsletter goes to press OP has completed its calculation of the cost schedule for all plans, which will include a separate options for insuring families with children and a single adult and for insuring families with two adults and no children. There will also be a somewhat lower cost-schedule for employees earning less than $40,000pa. CUCFA is presently discussing with OP the date at which the employee healthcare costs for each plan will be considered final, and subject to disclosure.
UC Care. UC Care is dead, the victim of adverse selection compounded by rising healthcare costs. OP (perhaps rightly) sought to reduce the effects of adverse selection in future years by requiring bidders to pool risks more broadly across employee groups. As I understand it, this meant that the bidder for UC Care's successor would also bid on an HMO (managed care) ,PPO (Preferred Provider Organization), and a major medical (catastrophic coverage) contract. It also meant that the three-tier POS (Point of Service) option that was customized for UC Care would be standardized as a two-tier option.
Options. Faculty will now have three meaningful options for health insurance (in addition to Prudential High Option): the first is an HMO (which will no longer be zero-cost); the second is a two-tier system (replacing UC Care) that allows members to move out of the HMO structure and self-refer with a PPO network (at additional cost); the third is a new option allowing members to self-refer within a broader PPO network with 80% coverage. (There will, in addition, be a zero-cost option that is recommended only for faculty who have their primary healthcare coverage through another family member.)
Provider Choice. During the course of our meetings with OP, the CUCFA task force relayed faculty concerns about the quality of Aetna's provider network for UC Care. OP was not surprised by these complaints, and emphasized that Aetna's relation with UC was the result of its purchase of Prudential. The solution, from OP's perspective, was to increase the number of bidders. Previously, it was said, there had been too few bidders because the requirements of UC Care were too specific. OP hoped that the new structure would elicit a greater number of bids from insurers with better provider networks. This hope was largely realized. The result is that Aetna has been replaced by Blue Cross, and the new POS plan will be called Blue Cross Plus.
CUCFA Issues. CUCFA's discussions with OP focused on two issues of plan quality.
(1) The first issue, was the accessibility of major medical centers (including UC hospitals) in the HMOs and in Tier 1 of UC Care (and its successor). We were concerned specifically that faculty on campuses without hospitals should not have to choose between having primary care physicians who are local and the opportunity to get secondary care at a major medical center. We were also concerned that faculty on campuses with teaching hospitals would continue to have to access those hospitals as providers.
(2) Our second issue was the practice of "balance billing." A brief explanation is in order. Faculty choosing UC Care based on the Open Enrollment literature provided might have reasonably believed that they would be reimbursed for 80% of their Tier 2 bills, and 60% of their Tier 3 bills, that the entire amount of their actual bill would count toward their deductible, and that all of their out-of-pocket (i.e., unreimbursed) expenses would count toward their stop-loss (i.e. catastrophic cost) insurance. These beliefs would be false. Under UC care, the insurer counts only the amount it would have paid to its lowest cost HMO contractor as "reasonable and customary" expense, and reimburses only 60% or 80% of this deeply discounted amount. Moreover, it is this amount (and not the actual bill) that counts toward both the deductible and the stop-loss, despite the fact that the providers operating outside of their HMO contracts customarily charge far more than they would to HMO patients. Thus, if a faculty member self refers, e.g. to Sloan-Kettering, the reimbursement would likely be far less than 60% of the actual bill, and if the actual bills continued to exceed HMO rates there might be no point at which insurance picks up 100% of the out-of-pocket costs. (In this sense, "catastrophic coverage" does not exist outside the HMO context.) CUCFA argued strongly that the practice of "balance billing" should be curtailed, and that to the extent that it is not, employees need to be informed of the practice during Open Enrollment.
OP Response to CUCFA. OP staff claim that CUCFA's input was influential on two counts.
(1) OP argues that the replacement of Aetna by Blue Cross has improved accessibility to major medical centers for faculty on all campuses. We cannot presently confirm that this is true on a systemwide basis.
The proof would lie in the Deloitte-Touche study of provider networks that OP commissioned as part of its bid-review process. In our April meeting we were promised access to this study, but it was later withheld because it was based on "proprietary information." We protested during our August meeting, and received a written response allowing us to examine and copy a redacted version of the D-T report. It remains to be seen how much will be made available to us, and whether we should join with other employee groups in demanding more. Although this information remains relevant to CUCFA in assessing OP's choice among bidders, it is less essential for individuals now that the Blue Cross UC website is available. We strongly advise indivudal faculty to consult () to determine the availability of their preferred healthcare providers (specialists, major medical centers, primary care physicians, etc.) within the Blue Cross network..
(2) The choice of Blue Cross should significantly reduce the problem of "balance billing" because no provider with a Blue Cross contract is allowed to charge more than the PPO rate to anyone insured with Blue Cross, even when they are out-of-area under an HMO or POS plan. In order to enforce this limitation, however, insured employees need to be informed of it, and of their vulnerability to "balance billing" in the event that they do not choose a provider under Blue Cross contract.
(3) OP has agreed to assist CUCFA in the preparation of educational materials on the choices available during Open Enrollment. In particular, these materials should address the issue of "balance billing"ăthe differences between the maximum that providers can bill under Tier 2 of the POS and their PPO contracts, as well as the adequacy of network coverage (including major medical centers) in the HMO, POS, and PPO options for each campus. CUCFA is currently reviewing a penultimate draft of this year's Open Enrollment document and will soon produce a supplement informing faculty of issues that are not fully disclosed and/or adequately explained.
We hope to have a public meeting on this issue in the next few weeks.