Over the last year, Campus Journal has published numerous stories about the USNH benefits cost containment plan that has resulted in substantial changes to employee fringe benefits.
What is happening at UNH and across the university system is part of a nationwide trend. Everywhere, both within public institutions and private industry, organizations are struggling with how to address dramatic increases in the cost of fringe benefits, which are being fueled by skyrocketing medical care costs.
To give our readers a better understanding of what has led to USNH's effort, in today's issue we are publishing a special section, "The State of Fringe Benefits." In it, readers will learn why USNH is making changes to employee fringe benefits, how and why fringe benefits have changed over the years, and what USNH plans for the future.
In addition, UNH's John Seavey, professor of health management and policy, and Bob Woodward, Forrest D. McKerley Chair of Health Economics, explain what is happening at the national level regarding health care policy, and faculty and staff tell readers how they've taken advantage of some of their benefits.
USNH medical benefits costs are at a 15-year high, with year-to-year increases at levels not seen since the late 1980s. It's a national trend, one that is hitting hard both public institutions and private businesses.
"Benefits are in constant flux," said Joan Tambling, director of USNH Human Resources. "We have a history of trying to make our benefits as good as we can while containing the cost. Like private companies, we want a competitive benefits plan, and we want to contain costs."
"What's different is we want employees to be a partner with the change, whereas a lot of private employers don't. They will impose what's going to be the next change. We want people to participate and tell us what's most important," Tambling said.
In the last several years, USNH and UNH began trying to contain the cost of all fringe benefits, of which medical benefits account for the largest portion. Just in fiscal year 2002, USNH faced a $5.6 million deficit, which was anticipated to increase to a cumulative $45 million over four years if nothing was done to contain the cost of benefits expenses.
"We have been experiencing what everybody else around us has been experiencing. The University of Maine System, for example, saw a 47 percent increase in its health care costs from July 2002 to July 2003," Tambling said.
According to Mercer Human Resource Consulting, this year companies nationwide will face health care cost increases of 12 to 15 percent. That translates to workers bearing a greater share of health care costs. According to Hewitt Associates, a human resources consulting firm, the average employee contribution to health care premiums will hit 19 percent this year, 24 percent for dependent coverage.
Factors accounting for the rising health care costs include the growth in pharmaceutical expenses, expensive new technologies, aging of the population, increase in consumer demand, broader managed care networks, provider consolidation, and health care labor pressures, according to the Agency for Health Care Research and Quality, an arm of the U.S. Department of Health and Human Services.
Compounding USNH's problems is that state appropriation increases have not kept up with the increase in fringe benefits expenses. Over the last 15 years, state appropriations have increased 61.7 percent, while fringe benefits expenses have skyrocketed 172.2 percent.
Recent changes reflect USNH's long history of willingness to try new ideas in the delivery of employee benefits.
Since the 1970s, USNH has offered employees a medical plan, life insurance, dental insurance, long-term disability, tuition waivers, and retirement. Always looking for ways to improve benefits, in recent years the system has implemented wellness programs such as the Embrace Life Fully plan and Employee Assistance Program (EAP), employee flexible benefits, HMOs and managed care plans.
"We're always trying to find something that aims at keeping the employee benefits strong, but constrains the cost," said Joan Tambling, director of USNH Human Resources. "What are we, as an organization, if we don't care about our employees? Our asset as an organization is in the quality of our faculty and staff."
For example, USNH replaced its indemnity program with a point-of-service medical plan in 1998 after seeing yearly premium increases of 12 to 15 percent. Switching did not reduce any benefits, but it did result in a 5 percent decrease in yearly premiums.
Several initiatives have not only enhanced employee benefits, they have helped reduce USNH benefits costs. The EAP provides employees with counseling for mental health and substance abuse problems. Prior to offering the EAP, mental health benefits were USNH's single largest growing cost area. Implementing the program has turned that around.
The first year of the EAP, USNH saved nearly $1 million in mental health care costs. In 2001, 81 percent of USNH's EAP cases were closed without referring employees to the medical plan.
USNH has been equally as responsive in improving nonmedical benefits. While USNH has offered a tuition waiver for staff and their dependents since the 1970s, the system has continuously improved the benefit, most notably with the addition of noncredit courses in the early 1990s.
In addition, USNH contributes premiums equaling 1.5 times salary for life insurance and long-term disability equal to 60 percent of salary. In 1990, USNH added a flexible benefits program with four options for life insurance and three for long-term disability.
The core of USNH's fringe benefits were relatively stable and unchanging until the early to mid-1980s, Tambling said.
In the late 1970s to early 1980s, benefits became the subject of numerous federal and state laws as well as the subject of management and review by accounting standards boards. As a result, USNH has had an explosion of changes in the last 20 years to reflect this national interest. Many of these changes have improved employee benefits, while many have resulted in various changes and constrains.
Medical benefits is an area in which USNH has been particularly responsive to both employee needs and the changing climate of health care. USNH's effort to continually re-evaluate medical benefits is in line with national trends in both higher education and private industry.
"Our goal is to have a competitive benefits package, because that's how you recruit and retain good employees," said Joan Tambling, director of USNH Human Resources. "USNH has engaged in two major studies of the benefits, one in the early 1990s and one last year, to determine how competitive our benefits are and where changes can be made. The result of these studies has been to suggest areas of both reductions and improvements."
Through the early 1980s, USNH had one indemnity plan with periodically changing carriers to deal with cost issues. In the early 1980s, HMOs were added ‹ Matthew Thornton and Healthsource ‹ with no employee contribution.
In 1989, a flat-dollar employee contribution was introduced and quickly changed to a percentage contribution in 1990. That same year, USNH added Flexible Spending Accounts for medical, dental and dependent care. These accounts allow employees to use pre-tax money to pay for care. In the early 1990s the HMOs introduced more managed care features, and USNH modified its indemnity plan to look more like a Preferred Provider Organization (PPO).
Various changes were made both to improve and restrain the plans in modest ways, such as adding co-pays for office visits, increasing pharmacy co-pays, improving mental health benefits, and adding Working Wonders.
In 1998, USNH discontinued its indemnity plan in favor of the point-of-service (POS) plan, significantly decreasing the cost of the medical plan while implementing coverage improvements and constrains.
In 2003 the employee contributions to the HMOs were increased. To receive the best rates possible, USNH contracted its medical benefits with a single provider, Cigna. That move alone resulted in just a 2.5 percent increase in premiums vs. 15 to 20 percent increases experienced in private industry.
For dental care, USNH added a "high" option - expanded dental benefits - in 1990. Small improvements were made to the plan in the mid-1990s, and in the late 1990s, USNH changed to Delta Dental, which provided a higher level of benefits.
In February 2000, same-gender domestic partner benefits were introduced, resulting in 21 employees adding partners to their benefit coverage. Today there are approximately 35 employees with partner benefits.
The U.S. health care system is market driven, so it is no surprise that costs rise along with the costs of other consumer goods. The pressing problem is that employers say they can no longer bear the increasing costs of insurance and must pass a larger portion of those costs on to their employees.
In addition, those without health insurance are not getting the care they need because they cannot afford it, and "safety net providers," or community health care centers that provide care to the uninsured and low income populations, are being hurt by cuts in Medicare and Medicaid reimbursements, as federal and state governments try to maintain or cut taxes.
As these challenges mount, who is going to pay for the health of this nation? The health care industry, says Bob Woodward, Forrest D. McKerley Chair of Health Economics, is not a single industry just as "health care" is not a single product or service. A number of industries, such as the pharmaceutical industry and the insurance industry, are showing profitability. It is the industries that depend on Medicare and Medicaid reimbursement - funded by taxes - that are showing declines.
"Almost all of the increases can ultimately be explained by the rising U.S. Gross Domestic Product (GDP)," Woodward says. "While the press is drawn to and likes to publish 'crisis' stories, the current increases are not unusual, especially in times following relatively stable expenditure patterns. Increases in health insurance are about 12 percent compared to inflation rates of about 2 percent."
The advent of managed care led to some short-term savings by reducing "slack" (waste) in the health care system and by restricting consumer behavior. But that slack was not a large amount and other factors such as technology, pharmaceuticals, consumer backlash, general inflation and the normal actuarial cycles have led to the return of increases seen in the past.
"There is a relatively simple formula to calculate the costs of medical care," says John Seavey, professor of health management and policy. "Costs equal the number of people covered times the number of services, times the reimbursement level for each service provided. In order to reduce costs, one of those variables must be reduced."
The Balanced Budget Amendment of 1997 did exactly that by reducing the reimbursement increases for most services and changing the way reimbursement was paid for many services. But it shifted the costs and responsibility for reductions to the states. As Medicaid costs for the states rise, they may decide to reduce the level of reimbursement to contain costs. The health care providers then increase their prices to other payers, leading to increased costs for those who are sick and increased insurance premiums for employees.
"It's a ripple effect for everything," Seavey says. "Government is limited in what it can do because current health policy in the United States relies upon the market to the fullest extent. That is one of the reasons why the United States spends almost twice per capita or twice the percentage of the GNP on health care than other industrialized countries. However, its indicators of health status are not as good as those of other industrialized countries. We spend more for less."
According to Woodward, it's the national "safety net" that needs to be better maintained in other words a "floor" to our health care system needs to be provided for those who cannot pay for it by those who can.
Both Woodward and Seavey agree that people can do a lot as individuals to cut health care expenditures - accept generic drugs, wear seat belts and motorcycle helmets, drink and smoke less, exercise more, practice safe sex, eat well and get eight hours of sleep. They also can vote for governments that advocate some sort of health care floor, be it a real public health system or expanded Medicaid.
Woodward adds that the university could help contain costs by giving researchers on its faculty access to its claims files, "so that expenditure patterns can be scrutinized and cost-saving methodologies might be evaluated."
"The university system is a small cog in the health care wheel," Seavey adds. "In the long term, there is very little the university itself can do to lower its costs, unless it reduces the number of people covered, the services provided or the payment for services. It can shift costs to employees, but there are 'costs' to this as well - reduced health and productivity of current employees and negative impact on recruitment.
"We need to accept joint responsibility for health care over the long term, because we will all be sick at some point, and we all want the best care possible," he says. "There is a myth that we cannot afford health care for all; in fact, multiple countries have demonstrated that it only becomes affordable when all are covered."
When the request for UNH faculty and staff interested in talking about the tuition waiver benefit went out, dozens of e-mail responses came in. Benefits are one of the most often cited reasons why people come and stay at UNH. For those wanting to further their education, or assist spouses/partners and dependents with their college education, the tuition waiver is among the most highly prized benefits.
At UNH full-time employees (100 percent time, benefits eligible) receive a full tuition waiver. Their dependents or spouse/partner receive a 50 percent tuition waiver. For more information, visit www.unh.edu/hr/tuition.htm.
We had people who had received multiple degrees, people with spouses who changed careers thanks to the benefit, and people who had put themselves as well as several children through school. It was hard to choose just three; their stories are below.
Alice Vosburg has been a UNH staff member in the Occupational Therapy Department since 1981.
"After successfully completing a Ministry Foundations Certificate Program at Notre Dame College in 1997, I felt there had to be something more. I needed another challenge. I decided to take my courage in hand and enrolled in a course in Critical Thinking through the College for Lifelong Learning (CLL), part of the University System of New Hampshire. My first attempt at college in the 1960s ended in my being asked to leave for 'lack of academic progress.' Successful completion of Critical Thinking changed my life. I went on to earn my associate's degree in general studies in 2001, and served as class marshal at graduation. Now a senior, I am pursuing a self-design major in Women's Studies through CLL. Without the tuition benefit, I would not be six courses away from earning a bachelor's degree, nor would I be thinking of applying for admission to UNH's Master of Arts in Liberal Studies program. To date the tuition benefit has paid $13,272 on my behalf. My expenses, including costs associated with two residential courses, books and materials, total only $1,525. Success in college has changed me, has changed my life. I'm more confident, my way of thinking has been repeatedly challenged, and each course stretches me in different ways."
Drew Conroy is an associate professor of applied animal science in the Thompson School. He went to school part time from 1994-2001 to earn his Ph.D. in Natural Resources, while teaching eight courses a year, advising students, writing a book, publishing 54 articles and serving farmers.
"Cattle are my specialty at UNH. My dissertation research was conducted in Tanzania, with the Maasai people. In Africa I worked with people whose entire lives revolve around their cattle. I specifically studied the sustainability of the Maasai people's adoption of oxen and its effect on land use. I made four research trips from three weeks to three months in length. I knew as a 30-something-year- old associate professor at the Thompson School, who enjoys teaching and the university environment, there was never going to be a better time to complete my degree. My wife thought it was an early mid-life crisis.
I knew a Ph.D. would only add credentials, which would assist me in a career in the academic environment. I examined the possibility of leaving UNH to pursue graduate school full-time, but was unwilling to give up my salary, benefits, my home (a farm with 15 acres in Berwick, Maine) and a job I really enjoyed. Taking courses one or two at a time worked well, but the key was a sabbatical, to really get a bunch of courses finished and dive into my research. "
Cari Moorhead is director of undergraduate programs and advising in the Whittemore School of Business and Economics. She started her graduate work in 1993, graduating in 1999 with a Ph.D. in Education. The title of her dissertation was "Queering/Querying Identities: The Roles of Integrity and Belonging in Becoming Ourselves."
"I really did not begin the program with an interest in becoming a college faculty member. I was not clear about what I planned to do with the degree to be honest. Part of my goal was to expand my educational base and in the process I thought that a path would emerge. As a staff person I was able to take classes for the cost of the books and the tax on the tuition waiver. This benefit seemed too good to pass up.
I did apply, and was accepted, to another school but if you factor the costs in terms of tuition, fees and loss of wages I knew I would never recoup my losses if I left my job at UNH to become a full-time student. I was able to complete all of my coursework while working full time at UNH.
When I had completed the data collection for my dissertation I was granted a six-month leave. This opportunity allowed me to work on transcribing my data. Once I returned to work I had a full year of writing to complete before I defended my work in April 1999. While this experience was very challenging it has truly been a life changing experience. Interestingly enough, after I completed the dissertation I returned to the Whittemore School of Business and Economics where I started my career at UNH back in 1988. Though my employment at UNH has gone full circle back to WSBE, the experience of completing the Ph.D. has truly illuminated the work I do with undergraduate students."
One of the more noticeable changes that occurred in the mid-1980s was a pilot to establish a new paid time program. Each institution could decide whether to offer the program - commonly referred to as "earned time" - to provide employees more control over paid time away from work.
At UNH, the operating staff - specifically facilities workers - requested that UNH implement the earned time/vacation system, which it did. PAT staff also were interested in the program, but an internal study revealed that it could not be implemented for PAT staff in a cost-neutral manner, according to USNH Human Resources.
Instead of designating leave time for a purpose, such as annual, sick and bereavement time (such as the system PAT staff use), operating staff accrue all time into one "pool" of earned time that can be used however they desire.
In addition, operating staff can cash out one day of earned time for three days of personal sick time that they build in a different "pool" of personal sick time. Any overtime operating staff accrue is deposited into their general earned time account and can be used for the 1-to-3 personal sick time conversion.
Finally, operating staff can carry an unlimited amount of earned time on the books. Theoretically, retiring operating staff could have several months of accrued earned time that USNH will pay out when they leave. PAT staff can carry no more than 30 days at any time.
When USNH implemented the earned time system, guaranteed paid time off was increased from 12 days per person to a minimum of 24 days per person per year.
According to Joan Tambling, director of USNH Human Resources, each method of paid time has strengths and weaknesses. The traditional program used by PAT staff recognizes and covers various personal needs, such as bereavement leave. But the employer, not the employee, determines what is valued in terms of paid time.
Under the earned time program, the employee determines what is valued in terms of paid time. For example, operating staff receive bereavement leave as part of their pool of earned time. If they do not use their bereavement time, they can take the time off and go on vacation.
In the late 1980s, PAT staff gained two additional vacation days, and in 2001, operating staff gained jury duty leave.
Federally mandated benefits changes also implemented include paid pregnancy disability, family and medical leave (guaranteed unpaid leave), and benefits for older workers (guarantees in life insurance and disability).
USNH retirement plans have grown and improved significantly over the last 20 years, with USNH today offering a competitive program with a maximum employer match that is rare in private industry.
"When compared to a group of 15 universities and private employers, UNH's contribution to its regular retirement plan is in the top 25 percent, according to a study conducted for USNH by Mercer Consulting," said Joan Tambling, director of USNH Human Resources.
Retirement benefits in the mid-1970s reflected one defined contribution carrier for PATs and faculty, and one defined benefit plan for operating staff. The defined benefit plan was noncontributory and unfunded.
In the late 1970s or early 1980s, USNH switched the defined benefit retirement plan to one that was contributory and vested. Shortly after, the system provided an option for operating staff to transfer to TIAA/CREF.
In the late 1980s, USNH provided cash-out features to TIAA/CREF. The early to mid-1990s saw the addition of Fidelity as a second retirement carrier, an increase in the employer contribution to retirement, and increased options for deferred contributions to Supplemental Retirement Accounts.
For early retirement benefits, USNH had a very generous but limited early retirement plan from the mid-1970s through the early 1990s, Tambling said. "It was limited in the sense that very few people could get it, but it in essence paid full medical coverage from age 55 to 65 and approximately 40 percent of salary annually," she said.
Beginning in the early 1990s, changes in accounting rules created incentives for employers to restructure retirement benefits. The result at USNH was the early retirement program was phased down and formally eliminated in 2000. As a replacement for early retirement options, USNH began using separation incentive plans in the mid-1990s.
At least since the 1960s, USNH offered a retiree medical plan designed to supplement Medicare. However, the program was unfunded, and when federal accounting standards required USNH to recognize unfunded liabilities, USNH calculated the liability to be more than $30 million. As a result, the program was closed to new participants. Then, current employees could either stay with the older plan (and continue to risk forfeiture if they left USNH prior to age 62), or have an additional 1 percent contributed to their defined benefit plan (TIAA/CREF or Fidelity). Employees who take advantage of the additional 1 percent and who contribute the maximum amount to their retirement plan - 6 percent - see an 11 percent contribution from USNH.
This means that USNH faculty and staff have a retirement program that matches $1.83 for every $1 contributed. The entire $ 2.83 is tax deferred and eligible for either a fixed growth rate (from TIAA) or growth rates as a result of bond or stock market growth.