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New health care benefits structure, rates announced

STANFORD -- Stanford University's faculty and staff services office has completed a health care plan for 1993 that introduces a new, four-tier rate structure and that, after negotiations with carriers, produced lower- than-expected overall increases in rates.

The new structure resulted from discussions with employees and retirees, and consultations with the Committee on Faculty and Staff Benefits and the staff Employee Roundtable, said Barbara Butterfield, vice president for faculty and staff services (formerly human resources). Among other things, the structure creates a new level of coverage for employees who need to insure a child or children but not a spouse.

The changes, approved by President Gerhard Casper and Provost Gerald Lieberman, will be detailed in the annual package that all employees receive before the November open enrollment period.

For coverage under health maintenance organizations (HMOs), some employees' contributions will go down, while most will increase from $2 to $14 per month.

Jim Franklin, director of compensation and benefits, said the increases were not as high as anticipated, and attributed that result to the long-term impact of previous benefit plan changes and to aggressive negotiating.

"Negotiations with one health maintenance organization alone resulted in an estimated $900,000 savings over initial quotes," Franklin said. "This savings is passed directly to employees and retirees in the form of lower rates."

Persons electing to take Blue Shield coverage (which about one- fourth of employees did last year) will pay markedly more: Employee contributions for Blue Shield will rise by $25 to $62 per month. That is because Blue Shield premiums will no longer receive special university subsidies to keep them artificially low and because the plan's already higher rates increased 11 percent.

"Contrary to common assumption, Blue Shield is not the insurer for the Blue Shield plan but only the administrator," Butterfield said. "Stanford actually self-insures this plan, paying both medical costs and associated administrative fees. In the past, Stanford has contributed an extra subsidy for Blue Shield subscribers to keep the cost to employees artificially low.

"The Faculty and Staff Benefits Committee and Staff Employee Roundtable overwhelmingly supported the idea of removing special subsidies for Blue Shield subscribers, and having individuals who chose more expensive coverage pay the difference. Unfortunately, Blue Shield rates are comparatively high, but this approach is reflective of the real costs."

Roundtable member Ben Asaro, manager of special projects in Facilities Project Management, agreed.

"A number of people on the roundtable are with Blue Shield, so removing the subsidy is going to have an impact on them," Asaro said. "But there was a general feeling that the whole concept of subsidies for one group is just not right. Most people - in fact, the roundtable overwhelmingly - supported removing the subsidy.

"Blue Shield takes a beating, but people have to make a choice and know the impact of what their choice is. If people are electing to take that coverage, they have to bear the full cost."

The new rates are shown in the accompanying charts. They reflect both changes in the rate structure and some additional coverages in the four options - Blue Shield, and Health Net, Kaiser and TakeCare HMOs - to make them more uniform.

For subscribers to individual coverage, Stanford will pay 90 percent of the total cost of the lowest cost plan. For subscribers to individual- plus-dependent coverage, Stanford will pay 75 percent of the lowest cost plan. In all cases, the employee will pick up the remainder.

For retirees, the university will pay a higher percentage of premiums (80 to 95 percent) to ease the burden on those living on fixed incomes.

Previously, under a complex formula, the university paid approximately 91 percent of the lowest cost plan for individual subscribers and from 64 to 73 percent for others. Franklin said the new rate structure responds to feedback during the past year from both faculty and staff.

(The rate structure changes do not apply to workers covered by the United Stanford Workers union contract. The university's contribution to those employees' health coverage is fixed by a three-year contract that was approved in the fall of 1991.)

Butterfield said that in discussions, focus groups and consultations with faculty and staff members "a clear feeling emerged that rates should be set in a rational and consistent manner that is easily understandable and affordable by all groups of employees."

With that in mind, the new structure recognizes the differences in child and adult dependents. The three previous options - employee only, employee plus one dependent, and employee plus two or more dependents - are replaced by four choices of coverage:

  • Employee only.
  • Employee plus spouse.
  • Employee plus spouse and child or children.
  • Employee plus child or children, a new level unanimously endorsed by the benefits committee and the roundtable to make coverage affordable for single parents.

Facilities' Asaro said he and his fellow roundtable members were recognizing reality in endorsing the new level.

"Typical family rates have considered a family to be a husband, a wife and two children," he said. "Today, that does not represent the full situation. And insurance rates for children are less than for an adult. So, a single mother having to take coverage for spouse and children is paying more than she should.

"In my case, I'm married and have three kids, so it has nothing to do with me. But I know a lot of single parents, and this is fairer for them. And I cannot think of a single person on the roundtable who did not agree."

Overall approach

According to Butterfield, this year's changes are meant to reflect the university's long-range health benefits objectives, announced a year ago. Those objectives are:

  • To provide affordable coverage in order to recruit and retain outstanding employees.
  • To protect all employees, retirees and their families from significant financial risk due to catastrophic illness or injury.
  • To support preventive care.
  • To encourage cost-effective competition among providers.
  • To balance university financial constraints with employee and retiree needs; and to make all plans tax-effective.

Those objectives last year led to the introduction of employee contributions to health-care premiums, meant to make coverages and costs more rational. That introduction, however, produced heated campus debate on health-care issues.

"Last year, we deferred the full effect of the increases," Butterfield said. "However, we cannot postpone reality forever, and reality has arrived.

"The 1993 employee contribution for individual Kaiser coverage, the lowest cost plan, will be $17, which is less than the $25 minimum proposed last year. The exact amount of the originally proposed increase was forgone in favor of the revised formula. This is a good solution that will stabilize the university's formula for the next several years. It should help us contain costs in a way that is affordable for all our employees and for the university."

Other changes in benefits this year include no charges for prenatal care under the three HMO plans, reduced co-payments for allergy shots and better coverage for people with special medical needs.

In 1993, all three HMOs will offer coverage in three areas: "durable medical equipment," prosthetics, and syringes and insulin for diabetics. (While each HMO has its own definitions, durable medical equipment generally includes such items as wheelchairs, braces and canes.)

The University Committee on Faculty and Staff Benefits consists of 13 members - six faculty members nominated by the Faculty Senate, six staff members appointed by the president and one student. Butterfield and Franklin are ex-officio members. The committee meets monthly during the academic year to formulate recommendations on benefits, which then are passed along to the president and provost.

The Employee Roundtable grew from a series of focus groups conducted in early 1992. While the focus groups were convened on a one- time basis to address health benefits issues, the Employee Roundtable is a permanent staff entity advising on a broad range of human resources issues. Staff groups and units across campus make nominations; Butterfield reviews these with the provost, and appoints the roundtable with a member from each school and administrative area.



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