HARVARD GAZETTE ARCHIVES

University Benefits Committee Issues Annual Report

In its third annual report, the University Benefits Committee (UBC) reviews its work during the 1997-98 academic year and outlines issues to be considered in '98-99.

"In a rapidly changing health care market, the UBC has been an invaluable watchdog for the University as it tries to adapt to new policies and new circumstances in ways most beneficial to our faculty and staff," said Provost Harvey Fineberg, who chairs the UBC.

According to the report, two issues are of special interest: 1) the effect of prevailing rating practices in the health care industry, which result in a rapid acceleration in the costs of plans serving less healthy subscribers; and, 2) questions about shortcomings in the current staff retirement plan.

Health Plans

In '97-98, the UBC's Health Plans Subcommittee, recognizing that the last few years have seen many changes in Harvard's health plan options, recommended continuation of the existing range of health maintenance organization (HMO) and point of service (POS) health plan options for faculty and staff (Harvard/Pilgrim, Harvard University Group Health Program [HUGHP], Tufts, and Fallon). This goal proved to be more complicated than had been anticipated for two reasons. First, the bids from the health plans reflected a resurgence of inflation in health care costs. Second, substantial variation existed among plans, with the Tufts POS plan proposing an increase that would have resulted in premium increases ranging from 50% to 75% for subscribers. Consequently, the UBC recommended that, for one year only, the University subsidize the Tufts POS rates. (Even with this subsidy, premiums for Tufts POS subscribers will rise by approximately 20%.) The principal reason for the increase in the Tufts plan is the effect of several very expensive claims and the relatively small subscriber base.

According to the UBC report, the Tufts POS situation "illustrates what is, from the University's standpoint, a difficult feature of the current health insurance market. Insurers are seeking to make each of their accounts profitable, rather than spreading the risk across the community of accounts they cover. Accounts are experience-rated, and unfavorable experience (especially in a small account) leads to rate acceleration in a succeeding year. To the extent that faculty and staff risk is unequally distributed across health plans, Harvard can expect to see divergence in the rates for plans offered by different insurers."

During the 1998-99 academic year, the Health Plans Subcommittee will be developing and considering alternative strategies for Harvard's health benefit pricing policies, including the use of risk adjustment in determining employee contributions. The principle behind risk adjustment is that the University should insure the average employee in the standard health plan, and that health plan costs to individual faculty and staff members should neither fall nor rise because of plan selection decisions made by others.

The Health Plans Subcommittee took action in four other areas in 1997-98:

• The Subcommittee recommended development of a pilot program to address the "spouse here/family there" issue. The Tufts Associated Health Plan and HUGHP agreed to create a special plan "rider" to allow Harvard University family subscribers who choose the Tufts POS plan to select a University Health Services (UHS) primary care physician, while their dependents use physicians in the Tufts POS network. This rider option is a pilot for one year while enrollment and participant satisfaction are evaluated to assess whether the program should be continued and possibly extended to other health plans.
• The 60-day limit for hospitalization benefits related to mental illness and substance abuse has been lifted.
• HUGHP members in the Longwood area will be able to use an independent pharmacy in that area to fill prescriptions at the same benefit level as offered at the UHS pharmacy.