Last fall, when the University announced the introduction of long-rumored annual deductibles and coinsurance for certain health-insurance costs effective in 2015, some of the affected employees (faculty and nonunionized staff members, plus postdoctoral fellows) objected vigorously. This year, the discussion may focus on more familiar, if unwelcome, grounds: the higher premiums everyone will pay. According to information disclosed to covered employees on September 15 (and signaled in an e-mail from Provost Alan Garber on August 27), for 2016:
- Premiums will increase an average of 7.3 percent—reversing the 2.7 percent reduction in premium costs realized for 2015 (and 3 percentage points or so of cost increases avoided) as a result of the (nevertheless unwelcome) plan changes that took effect on January 1.
- A new, higher-cost point of service plan (“POS Plus”) will enable plan participants who wish to do so to eliminate the risk of incurring deductibles or coinsurance for in-network medical services—in return for bearing higher premiums. (Out-of-network charges, and out-of-pocket costs for in-network services, remain in place.)
- The progressive features of Harvard’s health plans, intended to buffer lower-income staff members from higher premium, coinsurance, deductible, and out-of-pocket costs (copays for office visits, for example) are being made more generous.
The 7.3 percent average increase in premiums, “reflecting medical price inflation and an increase in the cost of claims,” likely comes as a disappointment to the University’s benefits managers, as well as to those facing the higher bills. The increases, reflecting assumptions about medical costs and utilization anticipated in the next year, are apparently driven particularly by expensive new drug therapies in wide use, like new treatments for hepatitis C, and specialty drug therapies for cancers and other severe diseases.
The University has not released data on the effects of the plan changes implemented at the beginning of 2015, which were designed to influence beneficiaries’ healthcare choices over time, their decisions on whether to enroll themselves and dependents in Harvard’s admittedly generous plans versus other options their families may have (see past data here), and so on. Nor will Harvard’s health-benefits expense for fiscal year 2015 (including the first half of the calendar year, and thus half a year of experience under the new plan) be reported until later this fall—but the shift in costs to employees during 2015 was designed to save the University at least a few million dollars. Until more experience accrues and is made public, therefore, it remains uncertain whether the 6.5 percent compound annual growth rate in University health-benefit costs for fiscal 2008 through fiscal 2014 cited by President Drew Faust last November has been reduced.
The accelerating costs for employees’ share of their coverage, on the other hand, may become a cause for concern now. To cite a few examples:
- For an individual in the lowest-income cohort enrolled in the least expensive HMO, the monthly cost rises to $85 in 2016 from $79 this year (7.6 percent; the income tiers are adjusted for 2016, as discussed below); and for an individual in the highest-income cohort enrolled in a higher-cost point-of-service (POS) plan, the cost rises to $208 from $194 (7.2 percent).
- The equivalent figures for family coverage are $229, up from $213, for the lowest-income tier in the HMO (7.5 percent); and $563, up from $528, for the highest-income cohort in the POS option (6.6 percent).
POS Plus and Other Plan Changes
The point-of-service plans introduced in 2015 remain in place, at the new rates. But a new, higher-premium option, with no deductibles or coinsurance for in-network care, is available for next year—in response to President Faust’s directive to revisit Harvard’s health plans in the wake of employee objections last year. POS Plus will require $30 copayments for office visits and $100 for emergency-room visits, and $2,000 per individual/$6,000 per family maximum expenses for in-network, out-of-pocket care. According to prepared questions and answers made available to employees with the announcement of the 2016 plans, this option apparently responds to requests for known premium payments to defray some of the variable expenses introduced with the 2015 plans, and is embedded within a POS plan (but not an HMO) to afford maximum flexibility for employees who seek access to the widest array of behavioral-health professionals, including psychiatrists and psychologists. As a plan redesign, it is a relatively small-scale adjustment, shifting variable deductible and coinsurance costs to the monthly premium payment. Thus, it would appear to have little, if any, effect on the purchasing or use of care, relative to the more significant benefits changes put in place in the fall of 2014.
POS Plus naturally does not come free. For the highest-income family plan, it costs $594 per month: $31 monthly more than the POS plan with coinsurance and deductible exposures in 2016, and $66 monthly more (12.5 percent) than that POS plan costs this year. The higher premiums are apparently meant to cover all the higher insured costs for POS Plus beneficiaries; that is, employees who enroll in HMO or regular POS plans are not expected to subsidize the additional coverage being bought by those who enroll in the POS Plus program.
Current and continuing HMO, conventional POS, and Preferred Provider Organization (PPO) plan users will no longer face cost-sharing deductible and coinsurance payments for outpatient diagnostic laboratory tests and x-rays, consistent with the provisions of the POS Plan. But those savings will be offset within those plans by raising the beneficiaries’ copayment for office visits from $20 to $30.
One implication of introducing POS Plus is further complication of Harvard’s menu of plan designs: there are now nine offerings for the faculty, nonunion staff, and postdoctoral population, including two high-deductible plans—and an equally broad array of offerings under the plans negotiated for the various bargaining units representing unionized employees. (What administrative costs the University and its plan providers incur for introducing new designs like POS Plus is not known.)
Another implication is that more structural plan designs, which might address the actual costs of medical coverage by tailoring more closely what care beneficiaries can access (see the discussion here), are not yet in sight. Provost Garber’s August letter explicitly noted that a “tiered” network “deserves more study to determine how it could be included in our health insurance plans and how to communicate the distinguishing features of such plans, and their consequences for faculty and staff who choose them.” But introduction of such a plan does not appear imminent.
The bluntest form of a tiered network would cause beneficiaries to incur high out-of-pocket costs if they chose to resort, say, to an expensive hospital versus a cheaper one—or would prohibit access to such providers altogether. Moving in that direction obviously involves administrative complexities, such as the communications to which the provost alluded: how to assure that beneficiaries know where their primary-care physicians have referring and admitting privileges when hospitalization is required, for example. It also has political complications: in the Greater Boston market, and beyond, the Harvard Medical School-affiliated academic medical centers, and particularly Massachusetts General and Brigham and Women’s hospitals, are known for world-class care—and world-class pricing to match.
Making Healthcare More Progressive
Harvard’s health-benefits program has a rare, and perhaps even unique, feature. The University’s subsidy for employees’ health coverage has for years been made progressive by sorting those who enroll into income tiers. Within each tier, Harvard calculates a subsidy based on a core, relatively inexpensive insurance plan, and applies that sum to each of the plans offered. The salary tiers in effect since 2007—under $70,000; $70,000 to $95,000; and over $95,000—have now been adjusted. For 2016, the tiers are bumped up to those with incomes under $75,000 (the most heavily subsidized plans); $75,000 to $100,000; and over $100,000. This in part rectifies some diminution of the programs’ progressiveness during the past decade as wages have increased, and helps offset higher premiums.
In addition, Harvard has reimbursed out-of-pocket costs above certain thresholds. Before 2015, those reimbursements applied to copayments for office visits and prescriptions, above certain levels of incurred expense. In 2015, the reimbursement program was extended—for insured individuals and families with incomes as high as $95,000—to the new deductible and coinsurance expenses. In 2016, eligible staff enrolled in HMO, POS, or PPO plans with incomes of up to $90,000 (individual coverage) or $110,000 (family coverage) are eligible, and the schedule of reimbursements is consolidated and tilted more toward the lowest-income participants. Under this new schedule of reimbursements, according to the provost’s letter, covered families with salaries below $70,000, and individuals with salaries below $40,000, may see lower out-of-pocket maximum expenses than they face this year.
To Open Enrollment
After wading through these disclosures and comparing coverage and premium costs, employees will make their selections for health coverage in 2016 during the open enrollment period, November 9-23.