More than 80 percent of employees would see increases capped at 3 percent.
Proposed changes to health benefits at the George Washington University in 2016 will limit premium increases to 3 percent for 80 percent of university employees and will introduce plan adjustments aimed at mitigating pharmaceutical, imaging and laboratory costs.
Changes endorsed in late July by the Benefits Advisory Committee—a standing committee of faculty and staff charged with providing ongoing feedback to the university’s Human Resources and Benefits Administration—include increasing segmentation among employee salary bands to introduce a graduated premium structure, removing a pharmacy deductible in the university’s Basic and Medium health plans and introducing a new network for labs and imaging that saves the university and employees money, said Sabrina Ellis, vice president for university human resources. In their endorsement, the BAC noted that it hoped the university would increase funding to the benefit pool.
“These concepts are solutions that have been put in place by many organizations to control health care costs,” she said. “They allow the university to take steps now that will reduce increases in the future.”
Ms. Ellis will continue communicating about the changes through the fall open enrollment period.
National health care costs have continued to increase in recent years. GW, Ms. Ellis said in a 2014 GW Today interview, has experienced a rapid increase in medical claims cost, stemming from higher fees required by medical providers and a higher utilization of brand name and specialty drugs.
The university, in consultation with the BAC and other stakeholders, has taken annual steps to manage costs. Last year, the BAC endorsed reducing an employee tuition remission benefit to lessen premium increases in 2015. In making the change, GW reallocated about $750,000 from its tuition benefit to its health plan benefit.
“With the support of many people across the university, we have been able to identify changes that will keep GW benefits on a positive trajectory for years to come,” Ms. Ellis said. “These decisions are not taken lightly. Our review process includes a lot of rigorous discussion, debate and at times, disagreement. Working together, we must determine how best to maximize the resources available while we continue to evaluate longer term goals and strategies.”
Left alone, health care costs at the university would increase 18.2 percent for all employees in 2016. The proposed changes limit the increase to 3 percent for approximately 80% of the 3,990 benefits-eligible employees who utilize GW’s health care plans, said John Kosky, associate vice president for HR talent management. The university spent $43 million in health benefits last year and expects medical and prescription costs to increase $3.4 million in 2016.
A tiered approach to premiums
As a self-insured provider, GW’s health costs are directly tied to plan usage, Mr. Kosky said.
“That means GW pays for claims out of university funds,” he said. “Our claims experience has a direct impact on how much our healthcare costs are going to increase the following year.”
The university is taking several steps to pay for the additional $3.4 million needed in a way that mitigates cost increases for employees.
GW plan management changes, which include increasing the fringe account, making pharmacy plan adjustments and adopting a new network for labs and imaging, will account for $2.42 million. Employee-funded premium increases will cover $887,000, mainly by introducing more salary segments to create a graduated premium structure. That maneuver was a recommendation of the Benefits Task Force, created in January to review the three major categories of GW benefits—health, retirement and tuition—and compare them with those offered by peer institutions. About half of GW’s peer institutions—including American University, New York University and Northwestern University—implement salary banding for premiums, Mr. Kosky said.
GW currently has two segments: employees making less than $35,000 annually and those making more than $35,000. The proposed new structure would add five more segments, creating salary bands among employees making between $35,000 and $240,000 a year. All employees making less than $120,000 a year would see premium increases limited to 3 percent. In raw dollars, that increase could be as low as $24 a year for an employee making $60,000 a year and enrolled in employee-only coverage on the university’s High-Deductible plan, Mr. Kosky said.
“In salary banding, the more you make, the more you pay,” he said. “The idea is to make sure the premium increase does not adversely affect lower compensated employees—to make that impact as minimal as possible. We want to be mindful of that. The Benefits Task Force was very interested in salary banding. They wanted to ensure it was a focus. Throughout the recommendations, salary banding was a recurring theme.”
The value of the high-deductible plan
Smart consumerism, Mr. Kosky said, can also help alleviate costs, both for employees and GW. In the proposed salary band structure, employees making more than $120,000 a year can reduce their premium increases by switching to GW’s high-deductible plan, he said. The plan includes a Health Savings Account (HSA), an account that allows the account holder to save and pay for eligible health care expenses tax-free, up to $6,650 per year.
An employee making $170,000 a year and enrolled in GW’s medium plan to cover a family, for example, would pay a premium of $745 a month for the year 2016. The same employee enrolled in the high-deductible plan would pay a premium of $288 a month for 2016.
A little more than 8 percent of GW employees are enrolled in the high-deductible plan, which was introduced last year during open enrollment. HSA balances roll over year-to-year and can be used for qualified health-related expenses or as a supplemental retirement savings account. Employees who leave the university can take their HSA with them. As part of the proposed changes, GW is looking to introduce an employer contribution in 2016.
“We had a very good enrollment in the high-deductible plan last year without any contributions,” Mr. Kosky said. “Looking at the market, a fairly high percentage of organizations offer contributions to HSAs. An employer contribution aligns our plan with the market and adds value to it.”
Pharmacy plan changes
The tiered premium structure was one of many proposed changes made in concert with analysis from the Benefits Task Force, which in its May short-term recommendations report urged the university to limit premium increases to 3 percent, in alignment with GW's annual merit salary increase. The task force currently is working on long-term recommendations.
Removing the pharmacy deductible, and making changes to the pharmacy plan to minimize increases, are two other proposed changes that make GW’s health plan more cost-effective and competitive, Mr. Kosky said.
In the proposed change, employees enrolled in the Basic and Medium plans would no longer be subject to a separate deductible for pharmacy (another recommendation from the Benefits Task Force). Few employers offering PPO plans include such a deductible, Mr. Kosky said, and it’s thought of as an uncompetitive feature of the plan.
A second proposed change to the pharmacy plan would move out-of-pocket expenses to a coinsurance model. Instead of paying fixed prices for generic, preferred and specialty drugs, employees would pay a fixed percentage, with maximum caps—the most expensive specialty drugs would be capped at $100, for example. The best economic deal, Mr. Kosky said, would depend on the drug and cost. It is another way employees can leverage consumer tactics to lower their out-of-pocket expenses and thus lower plan expenses. Other universities are employing this practice as a way to mitigate cost, Ms. Ellis said.
Network changes for labs and imaging services
To help pay for the $3.4 million increase, the university also is proposing changes to its labs and imaging network. The proposed changes would create a preferred network of 292 imaging and 166 labs in the D.C. area that would honor an 80/20 coinsurance ratio. Another 3,322 area imaging and lab facilities would follow a 60/40 coinsurance ratio. Lab Corp would remain the preferred vendor for lab work.
Costs for routine labs and imaging services vary greatly, depending on whether a facility is freestanding or affiliated with a doctor’s office or hospital, Mr. Kosky said.
“Being a self-insured plan, we want to make sure we’re paying the most competitive so we can keep costs down,” he said. “For outpatient services, we want you to go and get the MRI that costs $500 vs. one at the hospital that could cost $1,500. The new network provides incentives for employees to go to one of the network providers because it saves them money and the plan money because we have negotiated rates with the preferred network.”
Telemedicine and web services
In the proposed coverage changes, GW may soon add telemedicine services— remote treatment through United Healthcare’s virtual visit program—to help treat rashes, colds and other standard medical issues. Employees would pay for these services as a standard co-pay for an office visit.
Remote treatment would be an addition to United’s web services. The provider’s MyUHC app and website provides information regarding network status and location for care providers. The university’s plan also provides a free 24/7 nurse line that puts patients in contact with experienced registered nurses and a Health Advocate site to help plan members find the right providers and hospitals, estimate costs and navigate insurance plans.