Colleagues,

Last Spring the General Faculty approved the creation of a Trigger Committee that is "triggered" when proposed healthcare cost-share amounts are increasing by 6% or more. The Trigger Committee reviews all relevant data and reports to the General Faculty through the Faculty Salary Committee (FSC). Pasted below is the report from the Trigger Committee and FSC.

The FSC will also be making a presentation to the General Faculty on these issues at the November 21 General Faculty meeting. Stay tuned for the agenda and materials.

Susan,
GFS

MEMORANDUM
Faculty Salary Committee
Fairfield University
 

TO:                  All Members of the General Faculty
 
FROM: Faculty Salary Committee (FSC)* and Trigger Committee**
 
DATE:  November 11, 2014
 
RE:       Report from Trigger Committee and FSC on Health Insurance Cost-Shares for 2015
           
- WITH ACADEMIC COUNCIL MOTIONS ADDED AT THE END
 

On September 17, 2014, the Faculty Salary Committee received from the administration proposed health insurance cost-shares for 2015. These have employee cost-shares increasing by 14.7%. The Trigger Committee, approved by administration and the faculty last year, is “triggered” when cost-shares increase by 6% or more and is charged to determine whether the increase is justified and report their findings to the General Faculty through the FSC before the rates take effect.
 
In short, based on all the information provided to us by the administration, we find that the proposed health care cost-share increase is not justified. There is no evidence to indicate that the rates have been developed accurately. The rates are not consistent with agreements reached between the faculty and the administration in prior years.
 
1.      The amount that covered employees contribute to health insurance costs is increasing by 14.7%. The amount that the University contributes is increasing by only 2.5%. (Mercer “Fairfield University 2015 Medical and Pharmacy Projection,” 10/23/2014, page 8).
 
2.      From the data we have seen, there appears to be no connection between the premium determined for Fairfield employees by the administration’s consultant and any actual premium charged by Aetna for equivalent coverage. We are concerned that the administration (and its consultant) have an inherent incentive to overestimate projected costs. According to the University spokesperson, the rates were set after much discussion among administrators with many different positions being raised. Although the FSC is charged to discuss salary and benefits with the administration, the FSC was neither included in nor even aware of these discussions. The 2015 rates appear to have been set not in relation to any cost but to an already inflated 2014 budget.

3.      Faculty agreed to increase their share of premiums beginning January 1, 2014 in exchange for an increase to base salary of $1480 per employee. The employees’ share in 2014 (for Option 1 and HSA) did not reach the intended 20% of the premium (but, see 4. and 5. below). The administration’s proposal increases our share with no additional increase into base salary.

4.      The most recent figures for our most widely used plan (Option 1), show that the amount set aside to cover health care costs turned out to be higher than actual health care costs (Mercer's "Fairfield University Experience Report," 10/3/2014, page 9):
a.      Over 12 months ending August 2014, the budgeted cost of this plan is $6,571,097.

b.      Over 12 months ending August 2014, the actual cost of this plan is $4,011,001.

c.      Budgeted costs for this plan option are over actual costs by 63.82%  ($6,571,097/4,011,001) – a surplus of over $2.5 million dollars.

d.      The administration wants to raise faculty premiums for this plan by 15.1% for 2015.

5.      The most recent figures for our second most widely used plan (Option 4), show that the amount set aside to cover health care costs is also higher than actual health care costs (Mercer's "Fairfield University Experience Report," 10/3/2014, page 12):
a.      Over 12 months ending August 2014, the budgeted cost of this plan is $3,440,138.

b.      Over 12 months ending August 2014, the actual cost of this plan is $3,119,489.

c.      Budgeted costs for this plan option are over actual costs by 10.3%  ($3,440,138/3,119,489).

d.      The administration wants to raise faculty premiums for this plan by 15.1% for 2015.

6.      Instead of lowering faculty premiums to reflect the overcharge of 63.82% for Option 1 and 10.3% for Option 4, the administration is proposing to raise faculty premiums by 15.1% for Options 1 and 4. These two plans cover roughly 75% of all employees (faculty and staff).

7.      Looking further back, our actual costs for health care claims have gone down: health insurance claims for the current 12-month period (ending August 2014) are 7.55% lower than health insurance claims for the previous 12-month period (ending August 2013). (Mercer “Fairfield University Experience Report,” October 3, 2014, page 4)
 
8.      Over the same time period, the administrative costs have gone up: administrative costs for current 12-month period (ending August 2014) are 9.1% higher than administrative costs for previous 12-month period (ending August 2013). (Mercer “Fairfield University Experience Report,” October 3, 2014, page 4)

9.      It is important to put this current report in context. For decades, Fairfield University guaranteed healthcare for all its employees as a benefit of employment; this institutional policy was in the tradition of the Jesuits. A few years ago, the president pressed the faculty to share some of the rapidly increasing costs. After accepting below-inflation raises for many years (to absorb some of the above-inflation increasing costs of healthcare), the faculty reluctantly agreed to cost-share health insurance premiums, not inflated budgeted costs.

 
The Trigger Committee finds that the proposed cost-share amounts for 2015 are not justified and recommends that the FSC reject these rates for the reasons articulated here. The FSC agrees with  these conclusions and accepts the recommendation of the Trigger Committee. The FSC does not accept the proposed 2015 cost-share amounts.
 
The FSC would like to acknowledge the very hard work of the Trigger Committee under extreme time pressure, and both the FSC and the Trigger Committee would like to acknowledge the administration for sharing relevant data. The FSC will continue to work with the administration on this matter (a regular meeting is scheduled for Thursday 11/13), and we are working with the Faculty Welfare Committee/AAUP. Please watch your email for further information.
 
*FSC: B. Crandall, J. Dennin, R. Epstein, S. Huber, I. Mulvey
** Trigger Committee: J. Dennin, W. Hlawitschka, S. Huber, I. Mulvey
 

The FSC brought this matter to the Academic Council on 11/10/2014 as a Petition for Immediate Hearing, and the following motions were passed. The first and third motion passed unanimously; the second motion was 16 in favor and 1 opposed.
 
MOTION. The AC instructs the FSC to investigate the annual equivalent premium from Aetna for our health insurance options, and discuss the 2015 cost-share amounts with the administration in light of that information.
 
MOTION. The AC requests that the Executive Secretary send a letter to President Von Arx requesting that he send a representative to the AC to explain exactly how the health insurance premiums for 2015 have been determined.
 
MOTION. The AC strongly recommends that the MOU/BPO for next year has a cap on the increase for cost-share amounts.