UA HEALTH INSURANCE TO RISE JANUARY 1, 2000

FAYETTEVILLE, Ark. — Faced with rising medical costs and a dangerously low cash balance fund to cover them, the University of Arkansas System will increase health insurance rates by 10 percent, effective January 1, 2000. The last increase occurred July 1, 1999.

The UA healthcare plan is self-funded, meaning it relies on premiums to support the plan. In the past year, the actual cost of benefits (money spent on medical services) has exceeded the amount of premiums paid by the employees. The monthly premiums from all UA System campuses are combined and deposited into a reserve account. Claims are paid from this reserve account. As of August 1999, the cash fund balance was a little more than $1.7 million.

"We need to have enough money in the fund to pay outstanding claims that have not yet been paid," said Barbara Taylor, associate vice chancellor for human resources.

Right now, it would take approximately $7 million to pay off those claims, leaving a current shortfall of $5.3 million, Taylor explained.

To build up the cash fund, the UA System has assessed each campus an additional amount of employer contributions. In September, the Fayetteville campus absorbed the cost of a 10 percent premium increase in an effort to not affect the employees’ share of the premium. In addition, the U of A has been paying between $77,000 and $118,000 extra each month since August to rebuild the cash reserve and will continue to do so through the end of the fiscal year.

There are currently 3,287 UA employees eligible for benefits. Of that number, 2,762 (84 percent) are covered by UA’s insurance plan.

On Thursday, Nov. 18, Graham Gillis, director of employee benefits and risk management for the UA System, will conduct group meetings with employees on campus to discuss the increase. QualChoice, the third party administrator of the UA plan, will have representatives on campus December 1, and possibly December 2-3, to meet one on one with employees to discuss the increase and expected changes in employee coverage.

The increase in health insurance premiums is not exclusive to the UA system.

"Everybody across the country is facing this," said Richard Ray, (payroll and) benefits director at the U of A. "It’s just how it is these days in the wake of managed care."

According to a 1998 report from the U.S. Office of the Actuary, Health Affairs, national health expenditures composed 13.6 percent of the gross domestic product (GDP) at $1.035 trillion. Health care costs are predicted to double by 2006 at $2 trillion. These increasing costs mirror a society in which the baby boom generation is approaching its senior years. The federal government estimates that from 1995 to 2005, the 65 and older population will increase by almost 75%.

"Managed care is just not working that well," Taylor explained. "I fully expect national health care reform to be on the federal government’s agenda for quite some time."

Another factor in the increase is the continued rising cost of prescription medication, Taylor explained. Prescription drug costs have risen nearly 400 percent in the past two years.

UA system employees will also see changes to their health insurance plan. Packets outlining those changes will be distributed to employees this week. Taylor noted, however, that preventative care would not change. Preventative care includes such things as annual physicals, well-baby examinations, immunizations and gynecological exams.

Employees enrolled in the Classic Plan will see their cost increase from $55.12 per month to $60.64 per month. A family enrolled in the Classic Plan will see an increase from $166.18 per month to $182.80 per month. Employees enrolled in the Point of Service plan will see their monthly premium rise from $78.10 to $85.92. A family enrolled in the Point of Service plan will increase from $235.44 to $258.98 per month.

Employees enrolled in the Classic Plan and Point of Service also will find that certain services that had been covered at 100 percent will have a 20 percent co-insurance payment. The majority of UA employees (1,874) have elected to enroll in the Point of Service Plan while 879 are enrolled in the Classic Plan.

Ray is hopeful that this next increase will be the last, at least for a while.

"We know costs are continuing to rise and that we will have to adjust accordingly, but for now, we’re hoping that we only have to have annual increases in the future," Ray said.

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