Faculty Benefits Committee Meeting

Minutes, November 19, 2003

10:30 – 12:00

 

The following committee members were present: Dale Atkins, Michael Chang, Chuck Donbaugh, Michael Elliott, Blair Funderburk, Marc Goetschalckx, John Grovenstein, Jean Hudgins and Gayle Warren.

Health Care Trends

The committee reviewed an article entitled “Employer Health Care Trends” in the Autumn 2003 issue of tiaa-creffinstitute.org, put out by the TIAA-CREF Institute. The highlights are as follows:

§         While inflation and increases in workers’ earnings have remained very steady over the past 15 years (ranging between 2 and 5 percent per year for every year), changes in the cost of health insurance premiums have been highly erratic.

§         From a peak of 18% inflation in premiums in 1989, the rate of increase dropped steadily until it reached 0.8% in 1996. Since then, the rate of increase has risen steadily, reaching 14.5% on 2003.

§         The increases are found in all types of medical insurance, including PPO, HMO and POS plans. Inflation in managed care systems (14.5%) was not significantly below inflation in non-network systems (16.3%). Thus, the significant cost savings found by shifting to networks are no longer yielding additional cost savings.

§         Not surprisingly, employees increasingly regard health care as their most significant benefit. As some employers have moved to shift costs onto employees, costs to employees have increased both due to inflation and due to this cost shifting.

§         The system of health insurance is becoming increasingly stressed as inflation in health costs has, on average, doubled general consumer inflation and workers’ earnings increases over the past 15 years.

Long Term Care Insurance

The committee reviewed an article entitled “Do you need long-term-care insurance?” published in the November 2003 issue of Consumer Reports. A summary can be found at http://www.consumersunion.org/pub/core_health_care/000474.html. The highlights of the report were discussed as follows:

§         Consumer Reports (CR) found that long-term-care insurance remains risky because policies are only now becoming standardized, cost trends are difficult to predict over a 20 to 40 year time horizon, and because some insurers have shaky finances.

§         CR also found that the policies are expensive, generally useful for individuals who are 55 or older and either have a chronic medical condition or a family history of a debilitating illness and who have assets between $200,000 and $1.5 million. Poorer individuals should rely on Medicaid, while richer individuals should self-insure.

§         Policies vary considerably in what they cover, the conditions necessary to receive benefits, whether payments are increased for inflation, etc.

§         For group plans, the following characteristics are important:

o       the stability of the company is paramount.

o       group policies need to be uniform and easy to understand

§         The cost of the insurance will depend heavily on the policy’s conditions, such as

o       the elimination period (length of time until coverage starts after you enter long term care). CR recommends a 30 day elimination period.

o       the coverage period. CR recommends a 4 year coverage period.

o       an inflation rider is essential

o       type of coverage (e.g., home care)

o       conditions for qualification

§         While health insurance is only a yearly commitment, long-term-care policies represent a long-term commitment. They are similar to contingent annuities. Future conditions will vary not only based on inflation and the stability of the insurer, but also on future Medicaid and governmental policy toward long-term care.

§         The choice to offer these policies presents complex choices to employees considering buying the insurance.

o       Are there decision models out there to help us think this through?

o       Has TIAA-CREF done an analysis of long-term care policies?

o       What is the value of a policy like this as compared to saving an equivalent amount in a 403b account to self-insure?

§         Minimum participation limits are set at 15% of employees (by state law) in order to qualify to use payroll deductions to pay premiums. Otherwise, there are no minimums except if set by the insurance company.

§         This is not a substitute for Long Term Disability, which replaces income.

§         Blair will look into premium cost streams and check to see if he can find long-term-care cost/benefit calculators.

§         After the committee considers plan design, we should compare any group policy that we design to a similar individual policy through TIAA-CREF.

Sabbaticals

We discussed the legal basis for sabbaticals. Legally, sabbaticals could be considered to be a “gratuity” and therefore illegal under Georgia law, or as a “professional development opportunity” and therefore legal. Georgia Tech’s law department (Randy) is looking into this.

Do other units of the University System of Georgia have policies like sabbaticals?

The big issue is not whether individuals can create sabbatical-like leaves by structuring a particular deal (such as release time related to research or redirection of work load), but whether a sabbatical is a codified benefit, available by right. Any codification would need to identify the structure of the benefit, the qualifications, criteria for acceptable sabbaticals, and expectations.

Medical Care Expense Account

Based on discussions in our last meeting, Georgia Tech looked into the possibility of raising the medical care expense account limit from $2,500 to $5,000. Ceridian did discrimination testing on the medical care accounts from last year to make sure that such an increase would not predominantly benefit higher-paid individuals. The analysis passed this discrimination test (a requirement of the law that regulates flexible spending accounts), and Georgia Tech raised the limit, effective for accounts starting in 2004.

FlexPlans

Some thoughts:

§         FlexPlans are not discussed in the human resource industry much these days because it makes it very easy to reduce employer support for benefits.

§         A FlexPlan would kill off the indemnity health care plan since this plan costs twice as much as the lowest cost plan (Georgia Tech currently pays 75% of all plans, regardless of cost).

§         Higher levels of benefits (which are less politically sensitive) are a way to compensate state employees for limits on salary. A FlexPlan might make increases in benefits more equivalent to increases in salaries.

§         Rates of increases in flexplans are generally lower than increases in the cost of health care.

§         Georgia Tech primarily subsidizes health care costs, and health care plans already offer some flexibility (between plan types, with varying costs).

§         Flexibility between health care and other benefits (e.g., childcare) might be beneficial, but not if the total employer contribution drops in the process.

Next Meeting

The next meeting will be on January 14, 2004 at 12:30.