Speaking Out

---

PENNCare's Climbing Costs (HR's Reply, below)

According to your statement in the recent Almanac, Penn contributes 80% of the cost of benefits. I'm in the PENNCare plan right now, which will cost my family $2,568 next year (A 27.4% increase!!!). If I do the math that means Penn pays $10,272 of my PENNCare cost.

Total Cost: = $12,840 for Health Insurance Penn Contribution--80% = $10,272

My contribution--20% = $2,568

(PENNCare Plan)

I find that impossible to believe. While health care is expensive, it would not cost my wife and me $13,000 per year. Can you explain how you come to this figure?

I note also in the recent issue of Current, Jack, you said that the increase cost of $46/mo. in PENNCare is "offset by a wider provider network." Maybe for some but for me it's a gross/net extra cost of $46/mo.

I feel like I'm a silent partner in the operations of the University and it's health care providers but never to the upside, only on the expense side. Costs are never reduced and even in years when Penn may have a surplus, salary increases continue to exist in a very narrow range.

This puts a squeeze of those of us who try to excel in our positions but find the financial rewards resulting in us doing slightly better than breaking even, after taxes.

--Mark Dorfman, Political Science Dept.

---

Response from HR

The letter by Mr. Dorfman appears to indicate that he interpreted cost sharing to be 80% for all plans. In fact, the April 16, 2002 issue of Almanac stated, "Penn will contribute an average of 80% of the cost of benefits. On average, employees will be responsible for cost sharing the remaining 20%." These cost sharing percentages were derived by averaging the subsidies for all the plans and the subsidy level varies by plan. For example, the PENNCare subsidy is 73%, the subsidy for the Aetna HMO plan is 90%, and the subsidy for the Keystone HMO is 92%. For PENNCare, the University will contribute $6,978 for family coverage during the next fiscal year and an employee will be asked to cost share 27%, or $2,568.

Medical plan costs are determined not on an individual basis, but on the average expected cost for all plan participants, projected inflation increases and our past utilization experience with these plans. Mr. Dorfman is correct in his letter that health care is expensive. The fact is that national health care costs are increasing significantly, which means that health care premiums are rising as well. For prescription drugs alone, which are included in each of the plans, the average increase next year is expected to range from 20% to 30%. The University provides the prescription drug benefit as part of the medical plan at no additional cost to employees.

Each year, the University provides employees with the opportunity to evaluate their enrollment needs and make changes as they feel best suit their personal circumstances. If cost is a factor in their decision, employees have the opportunity to consider other health care options. As stated in Almanac on April 16, 2002, employees may choose the Point of Service Plan, which offers a very comprehensive benefit or they may wish to participate in the Keystone HMO or Aetna HMO. We recommend that employees choose their options carefully by balancing their personal needs with the plan description and the cost of the plan.

It is also important to consider that in calculating net cost, gross income is reduced by the amount of medical contributions; therefore, employees save in federal, FICA, and applicable state taxes. To the extent employees have un-reimbursed expenses or out of pocket costs, they can use the pre-tax spending account, which will also reduce their income for tax purposes.

Since we regularly benchmark our plans with those of other Ivy League and other research institutions, we know that the plans the University offers our employees are very competitive and are generous vis-à-vis the level of benefits. Our goal continues to be to provide our employees with a variety of health care options to meet their needs and provide the best possible value for them and their dependents.

-- John J. Heuer,Vice President for Human Resources

---

Speaking Out welcomes reader contributions. Short, timely letters on University issues will be accepted by Thursday at noon for the following Tuesday's issue, subject to right-of-reply guidelines. Advance notice of intention to submit is appreciated. --Eds.