State health pilot to face future scrutiny

With the UNC system still awaiting legislative approval for its employee health insurance initiative, the plan already is drawing intense interest within the university and beyond.

The pilot program, if implemented, will be drawing scrutiny from lawmakers and state officials already concerned with the ballooning cost of health care and its impact on the state.

“I think that (the university is) trying to respond to the same problems that the rest of state government has,” said Sherry Melton, spokeswoman for the State Employees Association of North Carolina.

“Health care is such a concern for all state employees, and all state employees would like to have more choices.”

Providing more choices and better coverage has long been a critical concern for the university system, with officials calling North Carolina’s state health plan noncompetitive when weighed against the benefits offered by other states.

Employee satisfaction surveys conducted by the UNC-system Division of Human Resources found that just under 58 percent of university employees reported being satisfied with the state health plan.

UNC-Chapel Hill had the lowest reported rating of any of the 16 system campuses, with just 49 percent of faculty and staff calling themselves “satisfied” or “very satisfied” with their state health coverage.

“It’s important to have a health package that reflects that value, the value we place on the faculty and others that work for the University,” said Lewis Margolis, a professor in the maternal and child health department at UNC-CH and a member of the steering committee that helped develop the UNC health pilot.

The shortcomings of the existing state health plan — especially in terms of coverage for children and families of employees — consistently have been cited by system officials as an obstacle to attracting and retaining faculty.

The state health plan does not charge a premium for employee coverage, but the cost of including family members under the plan is substantial. Coverage for each child costs $178 a month, and coverage for a whole family is priced at $427.

Margolis said health benefits can play an important role in influencing career decisions, and not just for university or state employees.

“Health benefits are an important part of compensation,” he said. “Generally, health benefits and the fact that health benefits are linked to work does cause distortions in people making decisions about whether to take a job or leave a job.”

That fact is well-known to campus administrators who face the challenge of attracting talented faculty in a highly competitive environment.

“I think that the people who are concerned about hiring — this would be the (department) chairs and the search committees — they do express the concern that we are not competitive, not as competitive as we could be, as far as this particular aspect of compensation here at Carolina,” Margolis said.

Leslie Winner, UNC-system vice president for legal affairs, said system officials have been focused on those issues for quite some time.

“We’ve had concern from our administrators and our employees over the last several years, since the costs have gone up and the benefits have gone down in the state health plan.”

It was with these concerns in mind that officials in the UNC-system Office of the President decided last summer to make a push for the pilot program. A 20-member steering committee began meeting last August to study the feasibility of creating a university health insurance program independent of the state plan.

The university’s plan will include about 36,000 system employees, plus the families of those who decide to opt for dependent coverage.

“Obviously, it has to be a fairly big undertaking for us,” said Kitty McCollum, UNC-system associate vice president for human resources.

Using the same level of funding that the university now contributes to the state plan, officials believe they can provide UNC employees with more options and lower out-of-pocket costs.

“What they’re hoping to do is take the same amount of money they get from the General Assembly and redistribute how they spend that to help underwrite the cost of those dependent premiums,” said Ginny Klarman, manager of compliance and member services for the State Health Plan.

Klarman served on the university’s steering committee as a representative of the state plan.

Officials hope to provide a core Preferred Provider Option that will not charge any premium to employees and provide benefits similar to the state plan, along with three or four other plans that would charge an employee premium but provide more expansive benefits.

The university also hopes to implement a more comprehensive disease management program and broader preventative care options.

Even if the plan proves successful in providing better, more cost-effective coverage for university employees, some state officials are concerned about the potential impact on the existing state health plan.

“We’re concerned that it will drive up costs for everyone else in the plan,” Melton said. “It would definitely deflate the plan’s purchasing power and ability to negotiate rates from suppliers.”

Having such a large number of employees withdraw from the state plan could adversely affect the risk pool, she said, particularly because retired university employees will remain on the state plan.

The university would study the issue of retiree coverage after the pilot program has been under way for a couple of years, McCollum said. “We would determine what we want to do for future retirees after that point.”

Failing to include retirees in the pilot, Melton contends, is unfair because retiree health costs tend to be higher than those for active employees. More broadly, she said, the pilot itself raises questions of fairness.

“It is offering choice, and perhaps even richer benefits, to just a small segment of the state’s employees.”

University officials have said a successful pilot could serve as a model for the state health plan.

N.C. Senate Majority Leader Tony Rand, sponsor of the UNC Health Pilot bill, said lawmakers will be taking a close look at the concerns expressed by the state plan and the state employees association.

“The whole basis of insurance is spreading the risk across the broadest group that you can,” he said. “When you reduce the size of the group, you need to really look at what you’ve got left and what the implications of that are.”

The earliest the plan could be implemented, McCollum said, is July 2006. The pilot would run through 2012, giving university officials time to assess its impact.

There is no way to predict where the university will go from there, Margolis said, because the whole landscape of health care might have changed.

“To predict what things are going to be like in 2012 as far as health care, that would be quite extreme.”

Contact the State & National Editor at stntdesk@unc.edu.