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Minutes of Benefits Advisory Committee (BAC): May 19, 2011


Attending: Lise Sanders, Steven Roof, Amy Diehl, Heather St. Germaine, Yaniris Fernandez, Jerry Bohdanowicz, Mark Abate (Strategic Benefits Advisors), Hilary Clark, Shelly Ruocco


After a welcome and introductions around the table the BAC looked at the Committee Charge and discussed that at some point the committee might have recommendations for changes to the Charge (faculty member not needing to be from the Compensation Committee, for example).


A question was raised related to the Charge. The Charge states that the BAC advises the AVP of Human Resources. The question is now the recommendations from the BAC to HR are or should be shared with the Budget and Priorities Committee. This question will be discussed again.


Next the BAC looked at the overview of all Hampshire College employee benefits, discussed overall benefits and benefit costs. Two areas of health and wellness benefits that will need BAC's attention are life insurance and medical insurance. Life insurance is being re-bid and HR has asked the life insurance companies responding to the request for proposals (RFP) to price a status-quo, age-based design and a design where employees could purchase additional life insurance if they wish (currently the design at most colleges and universities). The second is a more equitable option.


Mark Abate from Strategic Benefits Advisors, the College's benefits consultants/brokers, spent some time explaining the current state of health care costs. Annually the cost of health insurance nationally is expected to go up at least 10 -12%/year which is unsustainable. Mark explained that as doctors get less from government programs they are trying to get more money from the private sector. Many costs are going up including new treatments using new technologies, prescription drugs and the high cost of new biotech drugs, which can cost $2200/month for a prescription. Mark pointed out that the high cost of drugs is not only due to research and development costs but also on advertising with these two areas equaling $23billion/year. The high cost of covering medical liability for doctors and hospitals is another factor in the high cost of health care in the U.S.


There are many ways we as a College could help to lower our health care costs, and we will talk about these in future meetings. The goal is to have the health plan pay out less in health care payments to hospitals, pharmacies, etc., than what our employees pay in through their health insurance premiums. One way is to help our employees become more educated consumers. Right now most of us go for a test where our doctor sends us, but if we knew there was another location with the same service for a much lower cost (usually tests done in hospitals are much more expensive than tests at a free standing facility (e.g., for MRIs - Shields), we could opt for the less expensive option and contribute to a lower cost of health insurance. We learned that Cooley Dickinson Hospital's costs are among the highest in western MA, so if we could use incentives to encourage plan members to seek treatment at alternative facilities (when appropriate), we could lower our expenditures on health care, just by being more informed and asking for another option.


Other options will also be discussed. In short, here are some employer strategies being used in the U.S. today, some of which may work for Hampshire and some of which we may not wish to adopt:


1.     Educate employees on the benefits and costs of providers and give employees choices.

2.     Make sure the "right" employees are covered under the plan; for example, some employers have a surcharge if someone has a working spouse who doesn't go on his/her own employer's health plan.

3.     Aggressively manage the plan and vendors. Put health care out to bid on the market to get the best rate. Hampshire has been doing this for the past few years.

4.     Look at what is driving our health care costs up. If we understand the data, we are better positioned to make strategic design and program changes to mitigate future cost increases.

5.     Pay or play. For more services or more choices you pay more in health care costs. For example, an employee would pay a $250 co-pay at Holyoke Hospital but $500 co-pay at Cooley Dickinson. 


**These are all examples and not anything the College endorses or agrees to do at this time. They are only examples of what is happening in the health care marketplace.


Mark gave a short overview of health care legislation and possible changes in the future. Some are less likely to happen than others, so we will need to wait and see what legislation may come into play that may modify the current health care legislation.


Mark defined HMO vs. PPO, the two plans we have. The HMO (Health Maintenance Organization) is a plan that requires members to designate an in-network primary care physician and that physician manages the members care through referrals to in-network specialists. A PPO (Preferred Provider Organization] is a plan that has a network of providers, but there is also opportunity to use providers outside of the network with an increased out of pocket cost to the member. A primary care physician is not designated; the member manages her/his own care.


The BAC talked about various options for health care very briefly and will re-visit this at our June meeting and beyond. Plans can have an option where less is taken out of a paycheck, but there are high deductibles if someone gets certain care or checks into a hospital. Pricing for health care can have many options and designs and SBA will provide information at an upcoming meeting.


We talked about our "Experience Rating" a key concept in understanding health care costs. The rating shows how much the health plan paid out for claims compared to the amount the employees at the College paid in through premiums. For example, if we have an experience rating of 92, it means that for every dollar our employee paid in claims, the health plan paid out $.92 in costs. Health plans want to have about $.08 on each dollar for their overhead costs. If we have an experience of 110, the health plan is paying out $1.10 for every dollar paid to them in premiums, and this guarantees our health insurance rates will go up the next year.


The BAC spoke briefly about doing a survey with employees to see what they value in benefits. This will be helpful when weighing options for healthcare and other benefits choices and cost containment.


Mark pointed out that committees like the BAC often have longer meetings in January (to learn about things like survey information or information gathered at a benefits fair, or both) and in the end of June when most of the work has been done on plan designs for the year. September is also an important time to get updates on benefits negotiations and discuss what is locked in or not locked in for the upcoming year. The BAC hopes to meet monthly except in July and August when faculty are away.


The BAC will meet again on Tuesday, June 21, 2011, 10:00 a.m.-11:30 a.m. Please send all comments about these minutes to; your comments will be shared with the committee.

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