University of Minnesota Health Plan Task Force January 14, 1998
Comparison of Health Insurance Purchasing Alternatives
Executive Summary Introduction Current Shortcomings Trends Alternative Models Profiles Retirees Further Analysis Summary
Appendices: 1, 2, 3, 4, 5, 6, 7, 8 Glossary

Current Shortcomings in Plan Design and Process

These questions are prompted by several shortcomings with the existing benefit design of health plans offered to University faculty and staff for the 1998 contract year.

These shortcomings include:

Premiums are constant across all campuses, yet University faculty and staff at the three outstate campuses have fewer alternatives than are available at the Twin Cities campus. A change in the current purchasing relationship with SEGIP may have more significant effects for outstate faculty and staff than employees at the Twin Cities campus. Choosing one of the possible options - “winner take all”/total replacement - would result in the loss of HealthPartners Classic and/or Medica Primary in some counties. Every purchasing arrangement discussed below has implications for outstate counties equal or less significant than this case of total replacement. This first shortcoming is primarily an issue of access and quality of care for employees at outstate campuses.

The next three shortcomings all represent more expensive additions to the current benefits designed for the 1998 contract year. Only one of the six health plans - State Health Plan - covers medical services received outside of Minnesota. For faculty on sabbatical or employees with college-age dependents living in other states, coverage is only provided on an emergency basis for all health plans except the State Health Plan. The State Health Plan’s provision of out-of-area coverage is one source of “adverse selection” that the health plan would experience because University employees with dependents in college would choose this plan. The inclusion of University of Minnesota Physicians will unquestionably increase the cost of any and all health plans that add UMP to their networks of eligible providers. University employees have lost the convenience of seeing on-campus providers, unless they incur the sizable out-of-pocket cost of the State Health Plan. Similarly, better coverage for mental health services will only come at increased cost, which can only be mitigated with some type of utilization review or cost-sharing (e.g. copayments, deductibles and coinsurance) is required.

The fifth issue - greater rationalization of benefits for domestic partners and people with family coverage - can only be addressed by making administrative changes at the University and SEGIP levels. Current problems with rationalization include the requirement that all employees have University health insurance and duplication of benefits if University employees are covered under a spouse’s family coverage plan outside the University. No discussion or resolution to these types of problems are addressed in this report, but are listed for consideration by the Committee alongside the other issues.

The sixth and last issue deals with the long-term stability of existing relationships with providers. With the loss of Medica Premier in particular, 31% of all University employees were required to establish new relationships with different health plans and, potentially, with new providers. As one of many actors in the Twin Cities health insurance market, the University is limited in the degree of stability it can bring to the market. The University and SEGIP must instead strengthen relationships with existing health plans, and encourage the formation of new competitors than can meet the needs of University faculty and staff. The changes in 1998 health benefits were largely not in the control of SEGIP and the University. Even if the University had not been purchasing health insurance with SEGIP, premium increases probably would have occurred because Twin Cities employers saw premiums increase across the board. No employer or purchasing strategy was immune from premium increases in 1998, with the exception of the City of St. Paul (see page 31).

Before addressing each purchasing option, recent and expected trends in the Twin Cities health care market are presented.

Next Section: Trends