Executive Summary

The Task Force on Health Insurance of the Faculty Consultative Committee at the University of Minnesota commissioned this report to investigate alternative health insurance purchasing strategies to the current partnership with the State of Minnesota. This report addresses a variety of models for the committee to consider and also reports on health insurance options that other organizations provide for their employees. The other organizations include Macalaster College, the University of Wisconsin, Penn State University, Medtronic, Toro, and the City of St. Paul. Three member companies of the Buyers Health Care Action Group are discussed briefly. Retiree benefits for several Big Ten Universities are also discussed.

There are a variety of models which are considered in this report. The main options are as follows:

• Adoption of the BHCAG model - this option would be for the University to join BHCAG with the state to supply health insurance to their employees. This option should reduce costs, but will also decrease choice and has insurance risk.
• Addition of the BHCAG model to conventional plans - this option would allow the University to join BHCAG and also offer other conventional plans. This option would allow for more choice, but will not offer as much cost reduction and it has insurance risk.
• Independent adoption of BHCAG model with the State - this option allows the University and the state to directly contract with care systems to provide health care for their employees. This option has possible cost reduction benefits, yet increases insurance risk.
• Adoption of BHCAG model without State and BHCAG - this option would allow the University to directly contract with care systems to provide health care for its employees. The pool of employees would be smaller and thus the bargaining power less and the insurance risk increased.
• Total replacement - this option involves obtaining health insurance from only one health plan. The cost should be reduced by placing all employees in one plan, yet the choice for employees would be dramatically reduced.
• Remain in current partnership with the state - this plan would maintain the status quo in how health insurance is offered to employees of the University.
• Remain in current system without the state - this plan would offer the University the option to negotiate with insurance plans and choose plans which better meet the needs of the employees of the University. The costs might increase with a smaller pool of employees, but choice would be better fitted to University employees.
• Medical Savings Account - this plan allows the employees access to a flexible spending account which they use to choose their health insurance. This offers the employees more control over the insurance options they purchase, but it may lead to negative effects on employee purchasing decisions and employee health.