All of the University of Arkansas System's campuses are reviewing options to handle an increase in employee health insurance premiums.
The increase will take effect July 1, though most campuses hope to have a set plan by May 1. It comes as Arkansas lawmakers are wrapping up their legislative session and not significantly increasing funding for higher-education institutions. At the same time, universities are preparing budgets based on projections for state funding and drafting proposed tuition and fee rates for the next academic year.
The systemwide increase was prompted by more than 100 insurance claims above $100,000 each in one year, UA System President Donald Bobbitt has said. The system's insurance plan lost $15 million in 2014, and while some of the claims were paid under catastrophic insurance coverage, the number and size of the claims were higher than expected. System officials are planning for an average of 19 percent increase for all of its 11 campuses, and are working with college and university leaders on options for their employees, Bobbitt said.
The system provides health insurance to its employees via United Medical Resources, an arm of UnitedHealthCare. Across the system, 36,321 people -- including 17,031 employees and 19,230 spouses and dependents -- are participating in the self-funded plan.
The system's academic medical center and Fayetteville campus saw a 3 percent rate uptick in January. The other nine campuses dealt with 10 percent increases in July 2012. The entire system saw rises in 2009.
News of the increases has left officials for campuses at Fayetteville, Little Rock and at the University of Arkansas for Medical Sciences weighing the options.
At Fayetteville, human resources employees and interim Vice Chancellor for Finance and Administration Tim O'Donnell will evaluate recommendations on how to pay for the rise in rates, according to a memorandum from Barbara Abercrombie, the associate vice chancellor for human resources, to United Medical Resources-insured employees. The increase amounts to an extra $5 million a year.
"The options could include either charging the employee the 19 percent increase in premiums equally among all employees; a change in the employer/employee ratios related to the cost of premiums and the percentage that the university subsidizes as a benefit of employment, minimizing increases on employee only coverage; developing a strategy to mitigate the cost for lower paid employees, and other possible scenarios," Abercrombie wrote in the March 20 memo.
The number of employees enrolled in the plan at the Fayetteville campus was not immediately available last week because the university was closed for spring break. UA-Fayetteville has about 4,500 employees.
The university now subsidizes about 81 percent of the cost of insurance. The employee pays the remainder. In total, the university pays $25.1 million into the plan, and employees pay $6.3 million, spokesman Steve Voorhies said.
He added that officials at the 26,237-student campus "are vigorously examining cost savings" and want to give the employees as much information as possible so they can decide on their coverage.
"We are still looking at how we will administer this additional cost among our employees and are investigating several options including developing a strategy to mitigate the costs for lower-paid employees, perhaps using a tiered system," Voorhies said in an email. "We will also be encouraging employees to study their plans and ask questions that might result in cost savings -- Would moving from the Point of Service Plan to the Classic Plan be a better choice for an individual or family, for example."
The Classic Plan offers lower premiums to employees than the Point of Service Plan, but it doesn't offer out-of-network benefits unless the beneficiary needs emergency or urgent care while traveling.
UAMS has absorbed past increases in employees' premiums, but it cannot continue to do so, its spokesman Leslie Taylor said. This month, UAMS had another increase -- this one of 14 percent -- but chose not to pass it on to employees, Jeff Risinger, UAMS' associate vice chancellor and chief human resources officer, said in a March 24 memo to employees.
"We certainly can't absorb an increase as large as the one projected," Taylor said. "We have been fortunate since 2009 in not having had to increase our employee premiums as other health insurance programs have had to do. But, those days may be at an end, and the experience of the past year may signal a need to re-evaluate and modify [the] plan design for the benefit of our employees."
For the 19 percent increase in July, UAMS will need to find some $12.9 million, she said. UAMS employs 10,915 people. Of those, about 8,700 employees are on the health insurance plan.
On average, UAMS subsidizes about 76 percent of the cost for employees on the Classic Plan and about 69 percent of the cost for employees on the Point of Service Plan. An employee on the Classic Plan would pay $84 a month -- and UAMS $253 a month -- for coverage. An employee on the same plan with dependents would pay $255 a month, with UAMS picking up $940 a month.
Taylor said UAMS will find the money for its yet-to-be-determined share of the costs, but she assured that it will not tap tuition revenue, grants and contracts, and philanthropic gifts.
Throughout next year, Taylor said, UAMS will evaluate health insurance plan options that could deliver improved service at a reasonable price.
Like UA and UAMS, UALR has not yet decided how to handle the uptick in rates. UALR has 1,271 employees insured under United Medical Resources. UALR's total increase is about $1.4 million. The university currently subsidizes between 75 percent to 84 percent of the cost, said spokesman Judy Williams.
For example, a single employee on the Classic Plan pays $60.64 per month, while UALR pays $300.40. Under the family plan, an employee pays $182.80 per month while UALR pays $960.35.
The previous increase for UALR employees was absorbed by the university, Williams said.
"Whatever cost that will be [paid] by the university will become one of the overall budget requirements as we plan next year's budget," she said in an email. "All expenditure requirements are weighed against all sources of revenue as we develop a proposed budget. Any one item alone, such as insurance costs, doesn't necessarily affect tuition and fees, since the entire budget must be analyzed in order to project tuition and fee requirements."
Metro on 03/29/2015