Letter to the Faculty and Staff Community

TO: U-M Faculty and Staff Community
FROM: Paul N. Courant, Dr. Robert P. Kelch, Timothy P. Slottow
SUBJECT: Recommendations on Health Insurance Premium Design

October 26, 2003

As you may read in Monday’s issue of The Record, the University of Michigan’s Committee on Health Insurance Premium Design has finished its work. Appointed in April, the committee had a very specific charge—to recommend the best design for health insurance premiums paid by the University and the co-premiums paid by employees for the health and drug insurance coverage of the employees’ choice. Those recommendations were received in the Office of the Provost earlier this month in the form of a comprehensive report. Among the changes that have been proposed are a new premium-sharing model that better reflects the cost of choosing more expensive insurance plans; a greater University contribution toward the coverage of employees and retirees than that of spouses and dependents; and the addition of a fourth tier to our premium structure, which reflects the lower cost of insuring children in our plans.

Although the issues surrounding health care costs are complex, our most basic goal remains the same—preservation of our individual choice of high-quality plans, while encouraging that we all share in our responsibility to understand our options and to choose the lowest cost plan that will fully meet our needs. The committee recognized, as we do, the importance of continuing to provide comprehensive plans that help maintain our competitive position with peer educational institutions and other large employers. As part of its work, the committee reviewed health benefits offered by other top universities, major employers in the region such as Pfizer and General Motors, and other regional health care systems, and developed their recommendations such that the proposed premiums for 2005 are more generous than the median figures for the employer groups that were studied.

The recommendations represent a solid step forward in developing our own long-term approach to dealing with the rapid and severe escalation in health insurance costs with which all large U.S. employers are now struggling. At U-M, premium costs have risen more than 14 percent per year since 1999. The annual insurance premium per active employee has jumped 62 percent, while the annual premium per retiree has increased a staggering 164 percent in the same span of time. Clearly, we all have an interest in and obligation to respond to these increases which, in dollars, have amounted to a five-year upsurge in the University’s health insurance spending from $85 million to nearly $175 million. These challenges show no sign of diminishing in the foreseeable future, so we were fortunate to have the counsel of some of the country’s leading experts in health policy, public health, and health management on the faculty-led Committee on Health Insurance Premium Design.

The University’s executive officers and regents will make a final decision about the proposed 2005 health insurance benefits structure by the end of the fall term. In the interim, a number of campus programs will be held so that faculty, staff and retirees can learn about the recommendations, ask questions, and offer feedback to University leadership. A website has also been created (www.umich.edu/~hraa/chipd/), where you will find detailed information and a complete copy of the committee’s report. In addition, we invite you to send your comments and questions to chipdcomment@umich.edu. Your comments will be treated confidentially, and they will be compiled and shared with the University leadership.

We encourage all faculty and staff to take the time to be fully informed about the recommendations, whether by attending one of the campus presentations or by visiting the website.