Oct. 21 - Nov. 3, 2005
Vol. 35, Issue 18
Back Issues
IN THIS ISSUE
Health premiums changing
Rainey: Campaign will be 'defining event' in taking U.Va. to top 10 to 15  

Cooper works to recriut minority vendors

Team, led by Dr. Dan Theodorescu, wins $6 million grant to study prostate cancer
Research hopes to unlock secrets of high blood preasure
Digest
Rolling Stones rock the town
"One-stop' online system allows users to reserve spaces across Grounds for events
'Grandpa Dick' band's No. 1 fan
'Handling Serious Matters Musically'
'The Slaughter of the Innocents' Nov. 4
Despite adversity his art comes from happiness

 

Health premiums changing
Cost reductions for some, cost increases for others

By Brevy Cannon

Full-time employees enrolled in U.Va.’s low-premium health plan will see a drop in their monthly rates, effective Jan. 1, 2006. Employees in the high-premium plan, however, will see their rates increase. And all members of the U.Va. Health Plan, regardless of their premium plan, will get a new prescription drug benefit: otherwise noncovered drugs can be purchased at a ‘volume’ price, which is usually lower — as much as 35 percent lower — than the retail price. There will be no other changes to the plan for the 2006 calendar year.

Monthly rates for the low-premium program will decrease across the board, to $13 for single coverage, $60 for employee plus spouse coverage, and $129 for family coverage. Monthly rates for the high-premium program will increase across the board, to $36 for single coverage, $145 for employee plus spouse coverage, and $279 for family coverage. (See chart, page 8, for more details.) The aggregated average change in premiums will be a 4.5 percent decrease for the low-premium plan, and an 8.55 percent increase for the high-premium plan.

The yearly cost differences between the low and high-premium plans will be as follows: low-premium single coverage will cost an employee $276 less than high-premium coverage; low-premium employee plus spouse coverage will cost $1,020 less; low-premium family coverage will cost $1,800 less. (Premiums are only part of the total cost of the plan, which varies according to usage.) (See “Hypothetical” chart.)

Last year, the total claim costs of the low-premium program (calculated per user) were approximately 50 percent lower than the total claim costs of the high-premium program, and the new changes in premium prices more accurately reflect that difference in actual costs of the low- and high-premium options.

The U.Va. Health Plan is self-insured, meaning that the premiums paid by employees and U.Va. must cover all the claims and administrative costs generated by the program. Total costs have risen rapidly, from $74.9 million in 2004 to $86.5 million for 2005 to a projected cost of $95.5 million in 2006 and premiums are rising accordingly.

“We created the low-premium plan so that every single U.Va. employee would be able to afford health insurance,” said Linda Way-Smith, executive director of employee benefits. “Based on the fact that low-premium claims, per person, are only half of high-premium claims, we believe that some employees are over-insuring themselves by choosing the high-premium program, and those employees could save money by opting for the low-premium program. So we have reduced the low premiums and increased the high premiums to more accurately reflect the actual disparity in claims costs for the two programs. Hopefully this growing disparity in premiums will encourage some employees to think hard about the possibility of saving money in the long haul by choosing the low-premium program.”

“We do think that employees with very low usage would be better off in the low-premium plan, because they should end up paying less for health care than in the high-premium plan,” said Yoke San Reynolds, vice president and chief financial officer.

Way-Smith outlined several reasons why the low-premium plan may be an attractive option for some. Office visits and drug costs are the most common healthcare costs in both programs, and those costs are the same in both programs (a $15 or $30 copayment for physician visits and tier-pricing for prescription drugs). For those who use in-network providers, the yearly deductible is $350 per person and $700 per family in the low-premium program, and there is no deductible charge for office visits, preventive care and urgent care physician services. The cost savings of the lower premiums will, in many cases, make up for the additional out-of-pocket cost of the deductible. “The low-premium plan is more cost-effective for people whose medical care consists of visiting a doctor twice a year for minor ailments,” Reynolds said.

“The main downside to the low-premium program is that you are vulnerable to a large bill for a major hospitalization, due to the 20 percent co-insurance requirement for all hospital care, but even that bill is limited by the $3,500 (per person) out-of-pocket expense cap.” Way-Smith said. Also, participants should look at the savings over many years. An illness in one year may make the low-premium plan less cost-effective for that year, but over two or more years, there is still a net savings.

Of course, each employee must decide which health insurance program best serves his or her unique needs. Important factors to consider in making that decision are your monthly cash flow and budget; your tolerance for unplanned expenses; and your typical healthcare usage patterns, explained Way-Smith. And, she added, if you change programs and don’t like your choice, you can always change back next year.

Regardless of their plan, employees and those covered on their plan can take advantage of a new drug benefit available in 2006. This fourth-tier drug benefit covers prescription drugs that were previously not available through the U.Va. Health Plan, including nonsedating antihistamines such as Claritin; diet pills; nicotine gum; travel-related drugs; vitamins; cosmetic drugs such as Propecia; and infertility medication. The consumer will still pay 100 percent of the cost of these drugs, but it will be a discounted price negotiated by U.Va.’s Pharmacy Benefit Manager instead of the full retail price.

Drug prices vary frequently, so average savings with the new benefit also varies over time, even for a single drug. However, Health Plan Ombudsman Joanne Hayden did an internal study that compared the prices on Oct. 7, 2005, of five common drugs (Xenical, Calcitrol, Prenate Elite, Zyrtec and Allegra) at CVS, Wal-Mart and through the U.Va. discount plan. The price of a 90-day mail-order supply from U.Va. was, on average for those five drugs, 17 percent cheaper than a 90-day supply from Wal-Mart, and, on average, 22 percent cheaper than from CVS. The best savings available in the U.Va. plan was for Xenical, which, for a 90-day supply, cost 35 percent less than from Wal-Mart or CVS.

These newly covered drugs can be bought at participating local retail pharmacies like CVS, and by presenting your health plan card you will pay the discount price. In rare cases a large volume store like Wal-Mart or Sam’s Club may actually sell a particular drug at retail for a lower price than the U.Va. discount plan can offer; in such cases the customer will still get the lower of the two prices.

This year, the Open Enrollment period, when you can switch between the high- and low-premium plans, runs from Oct. 31 to Dec. 2.

To help employees make that decision, U.Va. Health Plan representatives will be giving 45-minute presentations at the fall Faculty/Staff Resource Fair on Nov. 10, in Newcomb Hall. The presentations will begin on the hour, every hour, from 9 a.m. until 4 p.m. This will replace the information sessions that were offered around Grounds in previous years. Representatives from all benefits programs — health insurance, life insurance, dental and eye-care, retirement and disability — will be available at the fair to answer any questions.


Costs
Low-Premium Savings
Coverage Type

Low-Premium Program
(Monthly Rates Falling)

 

  High-Premium Program
(Monthly Rates Rising)
  Premium Cost Savings
if Enrolled in Low-Premium Plan
compared to High-Premium Plan*
 
Year 2005 2006 2005 2006 2005 2006
Single $16 $13 $33 $36 $204 $276
Employee + Child $72 $52 $124 $125 $624 $876
Employee + Spouse $75 $60 $130 $145 $660 $1,020
Family $161 $129 $250 $279 $1,068 $1,800
Double State $116 $93 $203 $234 $1,044 $1,692

* Difference in yearly premium costs only. Yearly total costs will vary based on actual usage. See box below.


Hypothetical yearly total cost comparison of health programs
Scenario: You have single coverage and you visit a network primary care physician twice during the year — once for a sore throat and once for a yearly physical.
Billed items Low-premium program High-premium program
Annual premium costs,
single coverage (2006)
$156
$432
Wellness visit — annual routine physical
$15 Office visit copayment
$15 Office visit copayment
Wellness visit — lab work
(allowable amount $37)
$0 (No co-insurance cost for wellness tests up to $150)
$0 (No co-insurance cost for wellness tests up to $300)
Sick visit — sore throat
$15 Office visit copayment
$15 Office visit copayment

Sick visit — throat culture
(allowable amount $22)

$22 (Applied toward annual $350 in-network deductible)
$2.20 (10 percent co-insurance)
Total yearly costs
$208
$464.20

2006 Plan Highlights

  • Low-premium rates will decrease
  • High-premium rates will increase
  • New drug benefit
  • Open Enrollment: Oct. 31-Dec. 2
  • Nov. 10: attend a 45-minute Health Plan benefits presentation, which begins every hour, on the hour, from 9 a.m. to 4 p.m. in Newcomb Hall

 




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