Click for Philadelphia, Pennsylvania Forecast

COUNCIL Report on the April 24 Agenda

2001-2002 Year-end Report of the
Committee on Personnel Benefits

April 18, 2002

The committee met six times this year. Health care costs and privacy were the two dominant issues discussed. The committee also discussed retiree benefits, parity of mental health benefits, dental benefits, pre-tax expense accounts, benefits administration, and long-term care. Issues involving health care providers were referred to appropriate staff.

Health Care Costs: During the past eighteen months there has been an extraordinary increase in the cost of health care benefits. It is estimated that the University's cost in the current fiscal year will exceed budget by nearly 30%. This topic was discussed in detail in a recent article in Almanac, Vol. 48, No. 25, March 5, 2002 ( That article also compared Penn employee benefits and costs with those provided by other employers in the Philadelphia area. We will not repeat that analysis here. Much of the committee's work this year involved this issue. The committee advises the administration on issues involving benefits and provides a venue for a candid discussion of ways to contain this increase as well as the manner in which the increased costs are shared between the University and the employees. Benefits are an important component of total compensation and are of concern to all employees of the University.

A large component of the cost of health care is the cost of prescription medications. The committee received a detailed report from Caremark on these increased costs. A major factor in this increase was the use of maintenance medications such as statins and anti-depressants. The cost of these medications is much less if they are ordered by mail. The committee discussed the advantages and disadvantages of requiring mail order fulfillment. As a result of these discussions the committee recommended that the administration use incentives rather than penalties to increase the use of mail-order fulfillment.

Privacy Issues: Last year's report on the privacy of personal information recommended that social security numbers not be used as client identifiers by any of our health care providers. Major steps were taken by most of our health care providers to implement this recommendation; however, Keystone continued to use Social Security numbers. The committee met with Keystone and restated our concern about this matter. As a result there have been two additional meetings between Keystone, Human Resource personnel, the chair of the benefits committee and the University's Chief Privacy Officer. Based on these meetings, we are optimistic that Keystone will change its policy early next fall.

Retiree Benefits: The committee received several complaints from retired faculty concerning a precipitous increase in the cost of the Penn Faculty Practice (PFP) Dental Plan for retirees. This is not an employee benefit since it is not managed by the University's Human Resources staff. Participants enter into individual contracts with the PFP Plan and pay the full cost. The chair of the committee met with representatives of the plan to discuss the issue and was told that the increase was needed to cover the services provided by the plan. As a result of this issue the committee became aware that there was no good source of information available on retiree benefits other than in one-to-one counseling. The Human Resources-Benefits Department has agreed to undertake a review of retiree benefits during the next academic year.

Mental Health Parity: Over the past two years there has been a movement toward parity for mental health benefits. In particular, the inpatient mental health benefit for the in-network portion of the UPHS (University of Pennsylvania Health Systems) Point of Service plan and for the Keystone HMO has increased to unlimited days. The inpatient mental health benefit for the Aetna HMO has increased from 60 to 90 days. The outpatient mental health benefit for the HMOs and in-network portion UPHS Point of Service plan has increased from 20 to 30 visits. This movement will continue during the next fiscal year with an increase in outpatient mental health benefits for the HMOs and in-network portion of the UPHS Point of Service plan from 30 visits to 60 visits.

Utilization and cost information for these benefits have been difficult to obtain. We have no information from the HMOs, only inpatient data from Plan 100, only outpatient data from the UPHS Point of Service Plan. The only full data is from PENNCare. These benefits are used by a very small number of participants. For example in FY 2001, only 0.2% (1 in 500) of the participants used the inpatient benefits for Plan 100 and PENNCare while 9% of PENNCare participants used the outpatient benefits (professional services). Total cost for PENNCare use of this benefit for FY 2001 increased by 22%; the cost increase in all other plans are unknown. Overall health care costs increased by about the same percentage between FY 2000 and FY 2001.

Long-term Care: The committee reviewed the long-term care plan offered to the University's employees. Currently about 200 employees are enrolled in this plan. (An additional 200 individuals are enrolled in an individual TIAA-CREF plan). In many ways the long-term care plan resembles life insurance. If you sign up at a young age, say 30, the cost is relatively low but you must pay for many years. If you sign up when you are older, the cost is much greater. Like life insurance there is a fixed benefit and a strong criterion for payment of this benefit. To continue the analogy one step further, the current long-term health plan offered by the University has a non-forfeiture feature. The difference between non-forfeiture and no non-forfeiture is similar to the difference between whole life insurance and term life insurance. With the non-forfeiture feature you will get some benefit if you stop paying premiums. With no non-forfeiture feature, coverage stops if payments stop. The University's current vendor has several tiers of non-forfeiture plans available of which one is offered to University employees. As one would expect: the richer the non-forfeiture feature, the greater the cost of the benefit. The committee recommended that the University consider the possibility of offering a lower tier non-forfeiture benefit next year.

As one can see from the previous discussion, decision making with regard to long- term care insurance is not easy. It is even more difficult when one considers the variety of plans offered by external vendors (e.g., TIAA-CREF, AARP). There is no "standard" plan with respect to benefits and, consequently costs vary widely. The committee recommends that the University provide more information (on the web, in printed form, and in Almanac) to help employees make an informed decision on this issue.

Pre-tax Expense Accounts: Information about pre-tax expense accounts for health care and dependent care was published in Almanac of March 19 ( Reimbursements for such accounts may be limited by law under certain circumstances. Employees earning in excess of $85,000 in 2002 may be affected by these limitations, and should be sure to read the information cited above.

In response to an inquiry from an employee, the University published the amounts remaining in pre-tax accounts at the end of the 2000-2001 plan year. The amount was $73,200 or an average of $29.49 per participant in the health care spending account, and $15,900 or an average of $25.57 per participant in the dependent care spending account. As permitted in the relevant Treasury regulations, these funds were used by the University to offset the costs incurred in administering the plan.

Benefits Administration: The University is moving the health and welfare benefits administration services from Hewitt Associates to ADP starting in July 2002. The main reason for this change is that Hewitt is changing their administrative platform and a change by the University would be very costly. In addition, ADP will also be able to manage the tax-sheltered accounts and COBRA. The transition should be transparent to the University community.

Dental Benefits: We are pleased to report that in response to the committee's recommendation, maximum coverage for the MetLife Dental Plan will increase from $1,000 to $1,500 next year.

It is a pleasure to acknowledge the support provided to the committee by the Human Resources staff, in particular by Leny Bader, Executive Director of Benefits; Geri Zima, Manager of Benefits Administration; and Janice Gaspari, who provided staff support to the committee.

--Gerald J. Porter, Chair

Almanac, Vol. 48, No. 31, April 23, 2002


April 23, 2002
Volume 48 Number 31

James Wilson, director of IHGT, is stepping down as institute broadens it focus.
The School of Dental Medicine and the School of Nursing each recognize four of their finest for excellence in teaching.
The guidelines for faculty and staff salary increases for 2002-2003 stress merit and performance as the basis for any increases.
An invitation to commencement is extended to the University community.
The deaths of two former deans (Wharton & GSFA), an emeritus professor and an emeritus trustee.
University Council committee reports on the agenda for Wednesday's meeting include: Personnel Benefits, Recreation and Intercollegiate Athletics, and International Programs.
The Penn Reading Project has chosen the text for the incoming freshmen class; faculty members are encouraged to lead a small discussion group in September.
The A-3 Assembly seeks volunteers (weekly-paid employees) to serve on the Executive Board; 20 positions are available.
Penn faculty and staff are invited to the Children's Festival Opening Night Picnic and Performance, as well as a lunchtime party at the Museum to celebrate its new wing and courtyard garden.
The schools announce their graduation ceremonies and speakers.