The changes were recommended by the University Benefits Committee (UBC), a standing committee composed of faculty and administrators that makes recommendations on benefits affecting faculty and exempt staff. The application of benefits to unionized staff is governed by the terms of the collective bargaining agreements.

Provost Fineberg, who chairs the UBC, commented, "The UBC has worked hard during the last year to monitor Harvard's benefits programs in light of changes in the cost of health care and the needs of our community. The adjustments in medical rates will ensure the continuation of good health care benefits at reasonable costs for both our active and retired employees. The increase in paid parental leave recognizes the importance of family obligations and the University's commitment to policies that ease the burden of balancing these responsibilities while working for Harvard."

Health Plan Rates

According to Barbara McNeil, Ridley Watts Professor of Health Care Policy at the Medical School, who chaired the UBC's subcommittee on Health Plans, during the last few years Harvard has experienced increasing disparities in its health plan rates, due in large part to the differing demographics and health status of Harvard enrollees in each plan. Because each insurer bases its premiums on the Harvard population in its own plan, plans attracting a younger and healthier population have been able to offer lower premiums than those with enrollees who experience substantial and continuing health care expenses. Plans with a significant proportion of older and sicker participants are passing on escalating rates to the Harvard community, and these plans are becoming prohibitively expensive.

"The UBC has worked for the past year on an equitable solution to the problem of rising rates in some of the health plans," said McNeil. "We are in the midst of an era of rapidly escalating health plan premiums. The UBC, reflecting input from the Harvard community, wishes to preserve choice in health plan options. The new system adheres to the true concept of insurance, by spreading the cost for the most expensive medical needs across the entire University population. In this way, plan participants are not penalized unduly for their own ill health or that of others in their plan."

This system, otherwise known as risk adjustment, will be implemented for the next benefits election period, 2000. Risk adjustment makes internal modifications to health plan premiums to account for extraordinary health expenses and for differences in age and gender, both known to be related to the cost of care.

Once these adjustments have been made, the University's contribution to health premiums will continue to be a fixed amount based on the lowest-priced metropolitan Boston health plan and the salary of the plan participant. The salary bands used to determine the University's rate of contribution will remain the same: those earning less than $45,000 per year receive an 85 percent contribution from the University; those earning between $45,000 and $70,000 per year receive an 80 percent contribution; and those earning more than $70,000 receive a 75 percent contribution.

Risk adjustment results in an increased cost for the University, since the fixed contribution will be based on a premium that has been adjusted upward. Faculty and staff will see little change in their premium costs. Enrollees in health maintenance organizations (HMOs) can expect increases ranging from $0-$14 per month, depending on health plan choice and salary level. Those in point-of-service plans are likely to experience monthly rate hikes of $2-$18 per plan.

Provost Fineberg commented, "Considering the double-digit increase in premiums being experienced by most employers, the University Benefits Committee has done an extraordinary job tackling a very complex issue, while also keeping costs under control. I am very grateful to the leadership of professors Barbara McNeil, Peter Marsden, Joseph Newhouse, and David Cutler for working long hours to devise a system that preserves choice and equity."

Elimination of Soft Cap on Retiree Medical Benefits

In 1996, the University introduced changes in cost sharing for retiree medical benefits. For those individuals who retired from Jan. 1, 1996, onward, Harvard pays between 50 percent and 80 percent toward the cost of the Medex plan. (Medex is the most expensive retiree medical plan choice. Harvard also offers Medicare HMOs, for which it pays the full premium, since premiums for these plans are one-third to one-half that of Medex.) The 1996 changes also included a provision that would have somewhat limited Harvard's obligation toward retiree medical costs beginning Jan. 1, 2000. The so-called "soft cap" would hold the annual increase in Harvard's contribution to retiree medical benefits to 1 percent less than the growth rate in Medex costs.

"With January 2000 fast approaching," said Fineberg, "the UBC, under the leadership of Professor Daniel Meltzer, reviewed the rationale behind the soft cap, first proposed to protect the University from skyrocketing health care costs. They found that the cap, which is very difficult to explain, was both a possible disincentive to retirement and a poor protection from the risk of serious inflation in health care costs. The UBC's recommendation to eliminate the cap has been accepted by the deans."

Parental Leave

With strong support from the University's Advisory Committee on Work and Family, the UBC recommended that paid parental leave be expanded for Harvard exempt staff members. Commenting on the change, Provost Fineberg said, "The need to balance professional duties with outside responsibilities, including family obligations, affects most of us at Harvard. Expanded parental leave will offer some added relief to those who need to spend time at home during the critical first weeks with a new child."

The new benefits will allow birth fathers and adoptive parents who are primary caregivers to take four weeks of paid parental leave, an increase from the one week allowed presently. Birth mothers who are primary caregivers may also take four weeks paid parental leave in addition to the eight weeks available through the short-term disability plan for the disabling period immediately following delivery.