Jerome E. Coffey
Chair
MSU Benefits Committee
The MUS Benefits Program is in crisis. For the past two years claims expenses have been exceeding income by $1.5 million a year. The reserve fund is being spent down at an alarming rate and is fast approaching the mandated minimum amount. There has been recent political pressure from some sectors of the University community to merge the MUS Plan with the State Employees Plan. The Interunits Benefits Committee, charged with oversight and planning for the future of the MUS plan, has for a variety of reasons found it difficult to cope with these problems or come up with a coherent strategy for surviving the current crisis.
All should be reminded that our MUS Plan is self-insured. We pool or resources to pay claims and provide benefits. When the funds run out, we have few options. We can solicit more funding from the legislature; as we all well know, an extremely difficult prospect in recent years. Otherwise, there are no alternative but to raise premiums, reduce benefits, or do a combination of both. These are the Sophie's choices of self-insurance.
Until the current biennium the plan has been well designed, well managed, and fiscally healthy. We entered the biennium with strong reserves. The actions of the last legislature changed all that; it reduced the State's contribution to the Benefits Program $10.00 per month in fiscal year 1996 and $5.00 per month during the current fiscal year. We started the biennium with reserve funds of $6.5 million and are spending down these reserves at a rate of $1.5 million a year. In July 1997 we will reach the mandated minimum reserve level of $3.5 million and cannot continue to deficit spend beyond this point. Medical inflation has continued at a rate double the Consumer Price Index or approximately 8% per annum. What has happened to fiscal health of the plan has been absolutely predictable given the legislature's reduced funding and the current rate of medical inflation.
The MUS Interunits Benefits Committee formed an Executive Committee to do a complete plan redesign to put the MUS program back on a fiscal sound and sustainable basis. The Executive Committee met over the summer and the members returned to their respective campuses with a tentative set of proposals. There was widespread opposition to the proposals on a number of points: most objected to the elimination of vision coverage and, more importantly, there was a general feeling that the proposed increases in rates for family coverage were simply too great and unaffordable particularly for our lower paid employees. The MUS Interunits Benefits Committee meeting on September 26, 1996 adopted some elements of the Executive Committee's proposals (cafeteria style plan, hi/lo options), rejected others (immediate increase in pharmacy co-payments, exclusion of vision coverage) and sent back to the Executive Committee the difficult decisions on premium rates. It was also apparent at the meeting that there was some interest by President Dennison of UM in exploring the possibility of merging our plan with the State of Montana plan.
My assessment is that we are in a real crisis, that the threat to the autonomy of the MUS plan is significant, that the good will and trust developed over the summer by the Executive Committee is in danger of falling apart, and that the University is losing its voice in this process due to the lack of consensus by our representatives and our fractionalized voting on the Interunits Committee. Unless we are able to compromise our differences in committee and come up with a coherent redesign plan that can be supported widely by all of our constituencies and employee groups, we are in real peril of losing our collective voices in this redesign process and of losing the autonomy of our plan to those advocating merger.
There are three major issues facing the MUS Interunits Committee. I will outline each of the problems in turn and suggest appropriate solutions and actions that you might consider taking on your respective campuses.
Problem: The Interunits Committee was reorganized in 1995 by the Presidents' Council and the Board of Regents to make it representation coincide more closely with the restructuring of the University system. A review of the current membership shows that there was a significant shift away from faculty/classified/professional employee representation towards representation by full time administrators. Of the 19 current members of Interunits seven are faculty representatives, two represent retirees and one represents the classified employees; there are nine representatives with director or administrative status (management under labor relations definitions). The classified staff are particularly under-represented in the current configuration. Furthermore, there are voting members on the Committee that have a direct reporting relationship with other voting members on the Committee. Many of the voting members of the Interunits Committee are non-voting ex officio members of their respective local committees. All of this is widely perceived by unions and other employee groups as unfairly "stacking the deck" against full employee participation. This creates a political problem for the Interunits Committee in its attempts to convince the employees that we are acting in their best interests. The redesign process has made this credibility issue especially acute.
Solutions and Proposed Actions: There is little that can be done at this point to reconstitute the Interunits Committee. However, everyone needs to articulate the genuine concern that we have for the lowest paid amongst us and the actions that must be taken to keep the plan affordable for all of our employees. We must urge our Presidents and Chancellors, when the time comes to appoint or reappoint members to the Committee, to consider these issues of fair representation and credibility and appoint new members from the under-represented groups.
Problem: The threat to the autonomy of the MUS Benefits Plan is real and should not be ignored. I believe that the suggested merger with the State Plan should be opposed and the pressure to do so by Dr. Dennison should be resisted for the following reasons:
Solutions and Proposed Actions: Your local Benefits Committee should be asked to support the continuing autonomy and economic viability of the MUS Plan and to vote accordingly on the Interunits Committee. Your President or Chancellor and his or her Executive Council should be urged to go on record as opposing the suggested merger with the State Plan and to present the arguments for the continuation of the MUS Plan to the Presidents' Council and the Board of Regents.
Problem: The basic redesign plan proposed originally by the Executive Committee of Interunits met mixed responses on campus review. There was strong support for a cafeteria style plan with hi/lo options and strong opposition to the elimination of the vision benefit. The proposed increase in premium rates for spouses and families was widely opposed and the $130 per month increase for family coverage seems simply unaffordable for most of our employees. There was some tolerance for increasing the deductibles and the co-payments on the pharmacy plans. It is apparent that the proposed premium structures are too great an increase and too much to do at one time. Any attempt to impose these rate increases will likely lead to widespread labor unrest. Yet if Interunits fails to come up with a viable redesign plan, then a forced merger with the State Plan becomes all the more likely.
Solutions: I would argue that the State contribution to the benefits plan should not be viewed as an entitlement given to the individual employee solely for his or her benefit. Rather it must properly viewed as a capitation fee provided by the State with the legislative mandate of using the pooled resources to provide the greatest amount of benefit to the largest number of employees and their families at the most affordable prices. In keeping with this principle I would like to advance a "shared affordability" strategy whereby any increases in the State contribution in the next biennium be pooled with the purpose of minimizing the impacts of the plan redesign on spouses and families. The State has indicated its willingness to contribute an additional $20 per month to the plan in the first year of the next biennium and $25 in addition to that during the second year. I am assuming that these additional funds will be forthcoming and have adjusted the premium rates accordingly. Based on this "shared affordability" approach and assuming that the State contributions will be increased as agreed, the redesigned plan would have the following outline:
Mercer and Co., our benefits consultants, have taken these assumptions about increased contributions and the plan redesign outlined above, done the appropriate calculations, and conclude that this proposal would curtail the deficit spending and put the plan on a fiscally sound and sustainable basis. Most employees should be able to afford a $50 per month increase in costs and those that cannot will have a very good basic plan to fall back to.
Proposed Actions: I would ask that the Presidents/Chancellors and their Executive Committees support this "shared affordability" strategy and the plan redesign outlined above and that they ask their respective members on the Interunits Committee to give their full support to this proposal and cast their votes accordingly. I would further ask that the Presidents/Chancellors carry this proposal to the Presidents' Council and the Board of Regents and urge their endorsement of the plan. Since this strategy is totally dependent upon an increased contribution of $20 in the first year of the next biennium and an additional $25 contribution in the second year, I would ask that the Presidents/Chancellors and the Presidents' Council go on record as supporting the tentative benefits agreement with the State and request that the legislature allocate the funds accordingly. We must all lobby our State representatives to fund fully the proposed benefits package. The entire proposal hinges upon an legislative increase in the benefits allotment from $225 to $245 per month in the first year of the next biennium and a subsequent increase to $270 the following year.
It is my considered judgment that the strategies and proposals outlined above represent our best hope of maintaining the economic viability, affordability, and autonomy of the MUS Benefits program over the long term. We must all take the appropriate political steps on our respective campuses to ensure that this "shared affordability" strategy will succeed.