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Week of July 22, 2013

Added benefits coverage in 2014; co-pays increase

More U-M employees will receive greater university contributions toward health care next year, and their disability coverage will get a boost, according to University Human Resources, but co-pay increases also are needed.

The university sets new health plan rates each year for its self-insured plans, but plans also are evaluated together on factors including how well the university is maintaining its cost-sharing ratio of 70 percent of aggregate health care costs paid by the university and 30 percent paid by the faculty, staff and retirees covered by the plans.

“Health care reform is an important addition to the mix,” says Laurita Thomas, associate vice president for human resources. “We have always analyzed the rates to ensure adequate funding of the plans, managed vendor contracts and costs, and tracked our health trends. That work has helped us do quite well to keep the rate of costs increases for our plans low, often well below U.S. averages. But, health care reform is one source that has introduced additional costs for the university, and we need to factor those in so that we can make adjustments and maintain our overall cost-sharing ratio.”

For instance, the additional costs of providing preventive care services and oral contraceptives at no cost to patients has helped to increase the overall university cost, taking it a bit further away from the 70/30 target that was set for cost sharing, Thomas explains. Changes like these are required as part of health care reform, and the university already provided supplies for patients with diabetes because of the medical value of prevention and consistent disease management, but added costs require adjustments elsewhere to maintain the overall balance.

Seemingly small changes can have a big impact on U-M costs because more than 90,000 people are covered by university health plans, and they fill nearly one million prescriptions each year.

Thomas says the Benefits Office is committed to looking at the complete benefits package so individual cost adjustments work together to maintain overall cost-sharing goals, and so the university can afford to adjust plan designs when changes could offer more or better coverage without overall cost increases. She says the enhancements to the university’s long-term disability plan that take effect next year are a good example.

What’s changing next year?

Expanded Long-Term Disability (LTD) plan coverage will be improved.

An extremely important plan, LTD provides up to 65 percent income replacement on the covered base salary and benefits continuation if a faculty or staff member becomes totally disabled and can no longer work. The plan will be enhanced in 2014 with:

• Increased university-paid coverage for income replacement (from $30,000 to $57,500).

• A shorter waiting period for new employees to receive university contributions (two years instead of four).

• Lower rates for those who elect additional coverage up to their full salary when their salary exceeds $57,500.

• Those who want to enroll or increase their coverage amounts can do so during Open Enrollment without providing a health statement of insurability.

Co-pays will increase.

• Medical: No co-pays will be charged for preventive care. Primary care office visits and urgent care visits will be $25, specialty care office visits will be $30 and emergency room visits will be $100. Co-payments for ER visits will be waived whenever the patient is admitted to the hospital.

• Prescription Drugs: The co-pay for generic tier-1 drugs will be $10, and $20 for brand name tier-2 drugs. The co-pay for tier-3 brand name medications will remain at $45. Savings Tip: Use NoviXus mail order pharmacy services for any ongoing maintenance medications that are taken regularly and save one third of the out-of-pocket cost over purchasing at a retail pharmacy.

More part-time employees will receive full university contributions toward health care.

Employees working 30 hours per week (75 percent effort) or more will be eligible for health care coverage with the same university contribution as full-time employees. This reduces the requirement for full university contributions from the current threshold of 32 hours per week or 80 percent effort.

Opt-out cash will be eliminated.

The university will no longer offer opt-out cash (currently $66.67 per month) to employees who waive U-M health care coverage.

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