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FRIC meeting notes
April 05, 2013
Funded Retirement and Insurance Committee (FRIC) Minutes from April 5, 2013
Meeting was called to order at 11:30 a.m. in 302 USB.
Members in attendance: Steve Bernholtz, Nancy Davin, Katherine Dudley, Matthew Glasson, Mary Greer, Daniel Katz, Bernard Sorofman, Victoria Sharp, Katherine Tachau, Anand Vijh, Michael Wichman.
Members absent: Jon Garfinkel, Sheldon Kurtz, Heather Schnoebelen.
Administrative Officers present: Sue Buckley, Richard Saunders.
Guests present: Rick Borchard, Suzanne Hilleman, Joni Troester, Dianne Wasson, others.
- Nancy Davin chaired the committee.
- Committee members, administration representatives, and guests introduced themselves.
- The minutes of meeting from March 1, 2013, were approved unanimously.
- The discussion started with Richard Saunders giving a detailed update on the implications of the Affordable Care Act (more popularly known as Obamacare, henceforth the Act). The Act has many implications for employers and employees. At present, the implications are not fully known or understood. Saunders expects that the federal government will be sending out a great deal of new rules sometime during fall 2013 for the 2014 changes.
Some implications can be reasonably anticipated. Foremost, the university, like any other large employer, will have to monitor the health care insurance of its employees. It will have to make sure that all eligible employees are covered. There are stiff penalties for non-compliance with this requirement. The health care plan would have to include all employees working more than 30 hours a week. Recall that the university already covers all regular employees working more than 20 hours. There will be the additional burden because now the health plan will be required to cover all employees working more than 30 hours a week. That includes adjuncts, visitors, and temps. In many cases it is not clear how many hours a non-regular faculty member works, which is currently a departmental matter. Thus, new guidelines will have to be drawn to calculate the work load of such employees. For example, one anticipated federal guideline says that one hour of classroom time requires two hours of outside-classroom time. That means all faculty teaching at least 10 hours a week will have to be covered under the health plan. The departments would have to pay for this coverage from their budgets. One of the committee members asked whether student employees would have to be covered by the university’s health plan. Saunders clarified that graduate student employees working as a TA or RA more than 10 hours a week are already covered through contractual agreements with the Campaign to Organize Graduate Students (COGS). Other types of student employees might be covered if they meet the 30 hour rule.
There will be further requirements of the Act that affect the employees and in turn the university. First, in 2015 employers would have to mandatorily include all eligible employees under the plan, and the burden will shift to employees on whether they want to opt-out of the plan. Second, starting in 2014 there will be a federal guideline on out-of-pocket maximums. This could be something like $5,000 for individuals and $10,000 for families. By itself that may not sound like an additional burden because under the current health plan the out-of-pocket maximums are in fact lower. However, it could be a burden since the out-of-pocket maximums will include items currently not covered by the UI health plan, such as copayments. All these provisions cost money, and at present Saunders can only guess that the incremental cost to the university from covering the additional employees and providing the extra coverage could lie anywhere between $1 and $9 million.
As a miscellaneous requirement of the Act, Saunders informed the committee that the university would also have to pay various new Federal fees of around $1M per year for the next few years. Finally, the timeline of the Act is unclear. Some provisions would presumably go into effect on January 1, 2014, and some on January 1, 2015, while other go even further out to 2018. All-in-all, the university can look forward to many challenges and additional expenses due to the implementation of the Affordable Care Act.
- In previous meetings Saunders had informed the committee that John Hancock is not offering Long Term Care (LTC) insurance plan to any more employees beyond the 900 who have already bought the insurance. The new LTC provider is Genworth, and it has already enrolled 750 employees in its insurance plan. In addition, 37 employees are covered under the LTC insurance plan offered by Metropolitan, the provider before John Hancock. It is entirely up to employees whether they want such insurance. The insurance premium is neither tax-deductible nor it can be taken out of flex credits.
- Saunders informed the committee that after approval from the Board Office, and as already agreed with Principal Financial Group, employees retiring after July 1, 2013, will not be offered the free life insurance coverage of $2,000 to $4000.
- The UI Cambus has several routes. One of these routes covers Oakdale Research Park and makes a stop either way on 1st Ave and 9th Street in Coralville. This stop serves Iowa River Landing (IRL) facility of UI Hospitals and Clinics. Unfortunately, the place where the Cambus drops passengers at this stop is not paved. This can be a problem for passengers with some disability and during bad weather. During recent discussions with the university the City of Coralville has agreed to pave this location.
In response to further questions, Saunders pointed out that currently very few passengers are using this Cambus service to go to the IRL facility. The daily passenger volume is estimated at around six on the north-bound service and four on the south-bound service. The passenger volume may increase in the future. In any case, Dr. Rami Boutros from UIHC (University of Iowa Hospitals and Clinics) Administration and Dave Ricketts from Parking will attend a future FRIC meeting to discuss this situation.
- The next item was taken up by Sue Buckley. She informed the committee that the university is considering another early retirement plan. There have been two recent early retirement plans in 2009 and 2010. The 2009 plan required that the employee be over 57 years of age, but there was no requirement on years of service. 800 employees applied, and 335 were approved. The 2010 plan required that the employee be over 55 years of age and have at least 10 years of service. 250 applied and 88 were approved. In both cases, the early retirement required department’s approval. The plans were mainly intended to reduce costs without causing any disruption in work. Both plans were strategic in nature and not meant to be an entitlement or a benefit to eligible employees simply for asking. The plans gave the approved employees some additional benefits, such as health plan coverage and retirement plan contributions for several years. Both plans resulted in considerable savings to the university. The first plan is estimated to have saved $13 million in the first year and $65 million over five years. Similarly, the second plan is estimated to have saved $3 million in the first year and $13 million over 5 years.
While the university is contemplating another early retirement plan, the parameters are not yet clear. Any such plan requires approval from the Board of Regents before it is offered to the employees. While it is very preliminary, a few parameters have been thought about but are not final. The proposed early retirement plan could cover employees who are at least 55 years of age and have at least 10 years of service. There are 3,900 such employees. Some fraction of them will apply for the benefit, and a smaller fraction still would be approved. The approved employees would probably get five years of health coverage and some type of contribution to the retirement plan.
- The last topic of the day was the coverage of specialty drugs. Saunders informed the committee that there are many such drugs and circulated a list showing some of them from the Wellmark Pharmacy list. Specialty drugs are used by a very small number of patients and can be extremely expensive. Their costs are beginning to increase in UIChoice. The general pharmacy drugs taken by all covered employees and their families account for 17% of the total health care costs. This proportion is going down as there are fewer new drugs coming to the market and many old drugs are losing patent protection and becoming generic. At the same time, the proportion of health care costs accounted by specialty drugs taken by just a few employees is definitely up. It was 22% and 20% of the total costs in January and February of 2013. As an extreme example, one person is taking a specialty drug that costs $350,000 each time it is needed. Committee member Bernard Sorofman agreed to bring in a pharmacy expert to educate the committee about these specialty drugs that could become a bigger issue in future years.
- The meeting adjourned at 1 p.m.
Recorder: Anand M. Vijh