1. 1 The Coming Health Care Environment for Faculty at Bowling Green Howard Bunsis Professor of Accounting Eastern Michigan University Treasurer: EMU-AAUP; Michigan Conference AAUP; National AAUP Chair, AAUP CBC

2. 2 Roadmap National Scene in Health Care –Spending –Types of plans PPO, HMO, Traditional, HDHP –Types of out of pocket costs –National health care and triggers and co-ops Major Issues for Faculty –Cost and Choice –Drugs –Domestic Partner Benefits –Vision and Dental Bowling Green Considerations –BGSU is not broke! –Collectiveness versus individuality –Carrots versus sticks

3. 3 Health Care Facts U.S. government economists predict that public and private health spending will hit $2.5 trillion this year, taking up a 17.6 percent share of gross domestic product. Americans spend more per capita on healthcare than any other country at $7,421 per person. Studies suggest Americans get poorer care than people in other industrialized countries that have national healthcare plans. Source: Center for Disease Control, 2009; http://www.cdc.gov/nchs/data/nhsr/nhsr017.pdf http://www.cdc.gov/nchs/data/nhsr/nhsr017.pdf

4. 4 Americans Rate Public and Private Insurance Equally

5. 5 Health Care Since the Clinton Era

6. 6 How Do Americans Get Health Insurance: Source: US Census

7. 7 National Healthcare Spending By Source Source: U.S. Centers for Medicare and Medicaid Services; Office of the Actuary

8. 8 Object of National Healthcare Spending Source: U.S. Centers for Medicare and Medicaid Services; Office of the Actuary

9. 9 Percentage Changes in Spending Items: 1990 to 2007 Source: U.S. Centers for Medicare and Medicaid Services; Office of the Actuary

10. 10 Mercer Study on Healthcare Inflation

11. 11 Healthcare Inflation in the Future Reported in Wall Street Journal; July 17, 2009

12. 12 Plan Types Managed Care Plans –HMO (Health Maintenance Organization) –PPO (Preferred Provider Organization) –POS (Point of Service) –EPO (Exclusive Provider Organization) Traditional Indemnity Plan Account Based Health Plans (ABHP), or High Deductible Health Plans (HDHP) –HSA (Health Savings Account) –HRA (Health Reimbursement Account)

13. 13 Managed Care Plans PPO (Bowling Green) –Providers (hospitals, physicians) agree to provide services at negotiated fees. –You have direct access to specialists, –Out of network is allowed but more expensive HMO –Healthcare systems that manage both the financing and delivery of healthcare services to a specific group of people. –Before you see a specialist, you must go through your primary care physician (PCP) –Allegedly contain costs by focusing on prevention and primary care. POS: Hybrid of PPO and HMO EPO: Similar to PPO. –Lower Rates –Cannot go out of network

14. 14 Traditional Indemnity Plans You can go to any primary care doctor, specialist or hospital that you choose. These plans are dinosaurs

15. 15 High Deductible Health Plans: HRA HRA (Health Reimbursement Account) Funds set aside by employers to reimburse employees for qualified medical expenses, just as an insurance plan will reimburse covered individuals for the cost of services incurred. Must be funded solely by an employer. The contribution cannot be paid through a voluntary salary reduction agreement on the part of an employee. Employees are reimbursed tax free for qualified medical Employers have complete flexibility to offer various combinations of benefits in designing their plan. Contributions made by the employer can be excluded from gross income Reimbursements may be tax free if you pay qualified medical expenses There is no limit on the amount of money your employer can contribute to the accounts. Debit cards are typically used –Source: IRS Publication 969

16. 16 High Deductible Health Plans: HSA HSA (Health Savings Account) A tax-exempt trust that you set up with a qualified HSA trustee to pay or reimburse medical expenses you incur. You get a tax deduction that is FOR AGI, on line 25 of form 1040. The deduction is for contributions you make (or someone other than your employer) Contributions made by your employer are excluded from gross income The contributions remain in your account from year to year until you use them Distributions are tax free if you pay for qualified medical expenses Now the norm at Miami of Ohio: Deductibles –$2,000 single –$4,000 family deductible

17. 17 Types of Plans Offered Over Time Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008

18. 18 2008 Family Premium by Plan Type Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008

19. 19 Percent of Total Premium Paid by Employee Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008

20. 20 Choice (Source: Kaiser)

21. 21 National Healthcare Reform Problems: –46 million Americans without health insurance. This represents 15% of the United States population. –Healthcare spending is increasing faster than inflation, and employers, employees, and the government are picking up the tab. –By 2017, healthcare spending will be over $4 trillion, which will eat up approximately 25% of GDP.

22. 22 Public Option This is being offered as the best manner to cover the uninsured. Will cost at least $1 trillion over 10 years to cover the uninsured House Democrats: Surtax on wealthy Americans Senate Democrats: Tax employees for health benefits received Obama: Restrict deductions for the wealthy

23. 23 Surtax 1.0 percent surtax on AGI between $350,000 and $500,000 (singles between $280,000 and $400,000) 1.5 percent surtax on AGI between $500,000 and $1,000,000 (singles between $400,000 and $800,000) 5.4 percent surtax on AGI beyond $1,000,000 (singles beyond $800,000)

24. 24 Taxation of Health Benefits Basic premise: The IRS has an all-inclusive concept of income. Gross income is defined as ‘‘except as otherwise provided..., all income from whatever source derived. ’’ However, there is an exclusion for employer-based health plans. Some say these gold-plated plans encourage unnecessary medical spending, and employers reduce employee pay due to cost pressures If employees paid taxes on the premiums, it would generate $246 billion annually Obama is now open to this idea, though he vigorously opposed this during the campaign.

25. 25 Against Public Option By JOHN SHADEGG AND PETE HOEKSTRA WSJ 9/5/09JOHN SHADEGG AND PETE HOEKSTRA When was the last time you asked your doctor how much it would cost for a necessary test or procedure? In all likelihood, you can't remember. That's because your employer-provided health plan or the government "paid for it." In fact, you paid. We all pay for health care. There's no denying that our health-care system is complex. However, we can trace most of the problems in the current system to the lack of control individuals and families have over their care. If there's one lesson we've taken away from the thousands of citizens at town-hall meetings, it's that one massive health-care bill isn't the solution. Americans nationwide have voiced their desire for greater control over their care and for reform in digestible pieces. Here's how the debate over health-care reform breaks down, and what we believe Congress can do to solve these crucial issues

26. 26 Paul Krugman: NYT 8/9/09 Health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. Insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer Bottom line: We, as individuals, do not comparison shop for health care services

27. 27 Faculty Health Care at Other Institutions Alaska: In year one, the minimum University defined contribution is 85% of net plan costs Akron: Faculty pay a negotiated percentage of total health care costs Ohio University: Proposal to increase the rate that faculty cover from 10% to 25% University of Michigan: Decision has been made to increase this rate from 20% to 30% Western Michigan just agreed to increase this from 10% to 11% What is this rate nationally? About 26%

28. 28 Health Care Costs Pegged to Salary UC: –Single 0.50% of base salary –Double 1.00% of base salary –Family 1.35% of base salary Akron –1.2% to 1.5% of salary in 06-07 –Faculty will pay 15% of costs after 12/31/07 –How is this working? Do you recommend it? –Advantages –Disadvantages

29. 29 Prescription Drug Data Source: National Association of Chain Drug Stores, Alexandria, VA,

30. 30 Summary of Prescription Drug Data Source: National Association of Chain Drug Stores

31. 31 Employee Co-Pays for Drugs Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008

32. 32 Prescription Drug Tiers at Selected Institutions Bowling Green: $6 generic; 20% of cost if use network pharmacy; $125 limit on non- generics Eastern Michigan: $10/$20/$30 Oakland University: $10/$20 (in negotiations) Wayne State: $5/$10 (in negotiations) Wright State: Up to $12/$22/$60 Akron: $10/$20/up to $50 Kent State: 10%/20%/40% ($50 max) Central State and UC: $10/$20/$30

33. 33 Domestic Partner Benefits Not apparent these are offered at BGSU Michigan: Offer the benefits to all unmarried partners, even unmarried heterosexual partners. Requirements: Residency –The AEA resides in the same primary dwelling as the employee and has done so for a minimum of twelve (12) continuous months other than as a tenant; OR –The AEA currently co-owns or leases a dwelling with the employee. Joint Financial RelationshipJoint Financial Relationship –The employee and AEA have a joint checking account, joint savings account, or joint credit account. –The AEA has been designated as the primary beneficiary under the employee’s EMU life insurance contract, the employee’s will or a retirement contract held by the employee.

34. 34 Bowling Green Health Care PPO with the following out of pocket factors: –Premiums (comes out of your paycheck) –Deductibles (now $200/$400/$600 for in-network) –Co-Insurance (now 15%). If the doctor’s bill for a visit is $500, you pay 15% of this. –Co-pays – mostly for drugs. –Total out of pocket maximum is the sum of deductibles and co-insurance, and for 2009 was $800/$1,600/$2,400

35. 35 The Future of Faculty Health Care at Bowling Green Faculty will not be receiving any raise for the 2009-10 academic year. There are certain to be increases in out of pocket health care costs that will be imposed on the faculty. These increases will likely be anywhere from 1% to almost 5% of an average faculty member’s salary. Therefore, faculty are taking a significant pay cut for the 2009-10 academic year. Is this necessary or appropriate?

36. 36 Bowling Green is Not Broke For most universities, the recession has not had a large negative effect on total revenues. The main categories are tuition, the state appropriation, and auxiliaries. Enrollment typically goes up in a recession; BG has flat enrollment for 2009-10 BGSU has an A2 bond rating from Moody’s, which is a solid rating. At BGSU, in 2008, the state provided about 24% of total revenues The last published statements are for the year ended June 30, 2008, and the State of Ohio Board of Regents gives us as assist But why do we always have to cut our budgets? It is a made-up crisis. Remember, budgets are plans, not actual results. Bond ratings are based on actual results.

37. 37 Revenue Analysis (Source: BSGU Audit Reports) Tuition declined 2% from 07 to 08 after increasing 6.5% for 2007 The investment loss in 2008 was the main driver in the decline in total revenue

38. 38 State of Ohio Metrics Senate Bill 6 was enacted in 1997 to increase financial accountability of state colleges and universities by using a standard set of measures with which to monitor the fiscal health of campuses. The year end financial statements are used to create such measures. Three ratios and four scores are generated.

39. 39 Actual Metrics Viability ratio: Expendable net assets divided by plant debt. Primary reserve ratio: Expendable net assets divided by total operating expenses. Net Income Ratio: Change in total net assets divided by total revenues.

40. 40 Moody Scores of BGSU vs.. Ohio Peers (Carnegie Research Public Universities)

41. 41 What Do We Learn? The score in all three years indicates that BGSU is in a strong financial position. It is unlikely this situation has changed much in 2009 The main reasons for this strength are: –Large amount of reserves –Relatively low level of debt BGSU is in a strong position when compared to the research (per Carnegie classification) public universities in Ohio

42. 42 Faculty Salaries in the BGSU Budget (Source: BGSU Education Budgets)

43. 43 Faculty Salaries: BGSU vs. Ohio Peers Source: AAUP 2008 Salary Survey

44. 44 “Healthy Living Choices” At Oakland University, the administration proposed that faculty pay higher premiums if they: –Have a BMI over a certain number –Take more than one drink per day –Are a smoker Faculty can pay less if a doctor certifies they are succeeding in a weight reduction program, drink less, or are in a smoking cessation program.

45. 45 Healthy Living Choices at BGSU? It is 90 miles from Bowling Green to Rochester, Michigan These universities all use the same consultants. Watch out!

46. 46 Collectiveness Healthy Living Choices is in contrast to some basic concepts: –Basic concept of insurance, where risk is spread over a large number of people –Concept of acting collectively, where both the employer and employees are better off –People respond better to carrots, not sticks. The program should look to improvements from a large group of people, and not penalize individuals Can be a win-win

47. 47 Concerns About Unions Will we all get the same raises, regardless of performance? –Not if you do not want to. –Merit pay is a significant feature of many AAUP contracts Will there be a secret ballot for any election? Yes! Don’t unions just protect poor performers? –We make sure the contract is adhered to. –If a faculty member violates the contract or university policy, we work with the administration in determining the appropriate discipline.

48. 48 Bringing People Together Collective bargaining brings the faculty together from across disciplines, colleges, and campuses It does not have to be – and in most cases is not – an adversarial relationship with the administration. Grievances are few and far between. The contract is an excellent vehicle for solving problems.