The cost of health care that the University offers to its staff and faculty has begun climbing as insurance rates at the University's hospitals have been rising.
Nationally, insurance carriers are generally raising their rates as a result of steadily growing settlements in medical malpractice lawsuits, security concerns arising from the September 11 terrorist attacks, weaker investments, and more frequent bankruptcies due to a weak economy, as well as inflationary pressures.
Accordingly, the most significant factor in the rising cost of health insurance at the University derives from costs associated with its hospitals, where costs for medical malpractice insurance have risen 83% since the 2001-2002 fiscal year.
"This is the worst I've seen it in years," said Jane McAtee, associate general counsel for the Office of Medical Legal Affairs. "When our costs go up at the hospital because of medical malpractice insurance, the people who buy our services--the insurance carriers--see their bills rise. So the patient's insurance goes up as well. Nationally, insurance costs are still skyrocketing at an alarming rate."
The University offers three HMOs (UCHP, Humana HMO, and HMO Illinois) to faculty and staff, in addition to the University's own Maroon Plan, a more comprehensive preferred provider organization administrated by Blue Cross/Blue Shield of Illinois. People on the HMOs must choose a primary care physician (PCP) from a selected network of providers, and all subsequent visits to other health care facilities must be approved by the PCP.
Subscribers usually have a $10 co-payment at regular office visits and a $50 co-payment for emergency care.
The Maroon Plan gives employees the maximum choice of doctors and hospitals, allowing subscribers to visit any eligible licensed medical provider in its own network, but pays 90% of the charges should the subscriber visit certain physicians in the Blue Cross/Blue Shield network. Because of its flexibility and wider choice of caregivers, the Maroon Plan charges a larger premium per month than the three HMOs.
The rising costs of insurance at the University's hospitals, however, will affect subscribers to the UCHP plan the most, as its network consists of mainly physicians at the University's hospitals.
A family on the Maroon Plan with an annual salary between $33,000 and $59,000 will see their monthly contribution--$127 last year--increase by about $8.00 in 2003.
According to G. Chris Keeley, associate vice president of the University Human Resources Management, the overall premium increase for the HMO health plans for Plan Year 2003, which began in January 2003, was close to 10%. Co-pays for prescriptions were increased for the Maroon Plan, UCHP, and HMO Illinois, while co-pays for office visits were initiated for UCHP and HMO Illinois.
The overall increase for the Maroon Plan was 7%. The lower increase for the Maroon Plan was possible because the out-of-pocket maximums were increased and a deductible was added, Keeley said.
In addition, the hospitals systematically attempt to keep insurance rates as low as possible by maintaining a standardized environment with diminished risk levels.
"Our program is somewhat unique in that we have our own self-insurance program. Actuaries come and look at the hospital's data, our claims data, our exposure (beds, births, etc.) and calculate our costs," McAtee said. "The actuaries are amazed at how good the hospital's claims history is and say this hospital is the best insurance risk they've seen."
Even with good credibility, the hospital cannot escape the higher premiums that insurance carriers set, particularly due to reinsurance and an increase in the number of personal injury cases nationally that had settlements over $1 million dollars for the plaintiff.
The University maintains that it is trying to keep health insurance rates as low as possible for staff and faculty by adapting plans to the changing demands of policy holders.
"For several years now, the University has been paying special attention to its health plans," Keeley said of the University's response to rising insurance rates. "A number of changes have been made to contain costs."
"Examples of these changes include carving out the dental plan, carving out the prescription drug component from the Maroon Plan so that the employee and the University pay wholesale versus retail prices, incorporating a price differential for generic versus brand drugs, changing plan administrators for the Maroon Plan to achieve greater discounts, adding a health management component to the Maroon Plan, and becoming part of a consortium of Chicago-area employers to strengthen our negotiations with the HMOs," Keeley said.
Yet Keeley predicts that the cost of healthcare is projected to grow at 16% next year despite the University's efforts.
"We will continue to look at ways to contain costs, while still providing good, affordable plans," he said. "Currently, the University is undergoing a benefits review, which includes assessing the major 'big ticket' cost items: retirement, educational assistance, and the largest cost item: healthcare."
The review is targeted to be complete by the end of June.