ABSENT (SUBSTITUTE): B. DeMent (M. Jernigan), S. Forsythe (A. Presley), C. Hendrix (M. Rolsma), D. Himelrick (F. Woods), E. Moran (R. Norton), J. Olds-Weese (L. Bell), P. Parks (C. Daron), H. Rahe (K. Cummins), D. Rouse (J. Grover), J. Sheppard (G. Morgan), B. Smith (S. Spain), D. Teem (R. Muntifering), T. Tidwell (C. McKemie), R. Webb (C. Walker), M. Williams (G. Mullen), D. Wilson (M. Matthews).
Chair Kent Fields called the meeting to order at 3:10. He remarked that the minutes from the meeting on October 3 were not ready yet so they would be considered at the November 14 meeting.
ANNOUNCEMENTS:
A. Senate Chair: Kent Fields
Fields announced that the only item on today's agenda would be the report from the
Insurance and Benefits Committee concerning changes to the current health insurance plan.
This report will be presented to the Board of Trustees at their November 3 meeting.
COMMITTEE REPORTS:
A. Insurance and Benefits: Proposed changes in health insurance policy-- Sherida Downer, Past-chair (A copy of the report was distributed with the agenda for this meeting.)
Downer began by informing Senators of some points she wanted them to keep in mind when considering the Committee's recommendations. First, all employees who retire at Auburn will be affected by the proposed changes. Second, higher education in the state is being held accountable for every dollar spent. Employee benefits are not likely to improve, so the committee is trying to ensure that we continue to receive the benefits we now have. Third, there is really no choice in some of the issues, such as what doctors charge.
The Insurance and Benefits Committee has been working on a new policy for about a year, because they believed that if the present policy was not reevaluated, it might be lost. Downer added that the committee needs input from everyone, but there is no way to make everyone happy. Auburn now has over 1,300 retirees, compared with only 100 in 1978, and "we have to pay for those 1,300 people." She said part of the concern was that Auburn would have to pick up retirees' coverage if federal Medicare coverage is decreased.
Downer said the committee's first recommendation to the President was that premiums not be increased this year. She said the committee thought there was enough in the reserve fund to cover another year. She added that premiums had increased from $45 for family coverage in 1984 to $137.50 in 1994; and the committee had tried hard to prevent another large increase.
Secondly, the committee examined benefits provided for A.U. retirees who are covered by Medicare, and decided to equalize the retirees' payments with those of current employees. The proposal is to increase a single retiree's premium from the current $16 to $19.50, so that when their Medicare premium is added in, they pay the same total amount in health care premiums as a current employee does ($65.50). Similarly, a retiree with family coverage would pay $45.50 instead of the current $35.50; with the Medicare premium added in, their total monthly expenditure would be $137.50. Another part of the Committee's second recommendation affects the share of a medical bill that a retiree pays. After the Medicare payment is calculated, the retiree will be required to pay a $100 deductible and then A.U. will pay the remainder.
The third proposal from the committee was a $5/$15 point-of-sale pharmacy card plan for current employees and retirees. A generic drug would cost the policyholder no more than $5 at the pharmacy; a non-generic drug would cost no more than $15. Blue Cross has a chart of what the $5 or $15 will buy, and the maximum quantities for different drugs. Downer stated, "The way we do it right now, is, you don't pay anything on your generic drugs--after you have a $100 deductible." If the drug is non-generic, you are refunded 80% once your $100 deductible has been met. With the card there would be no deductible; either $5 or $15 would be paid. Downer said this would benefit people who can't afford to pay the full cost at the time the drug is purchased.
The fourth item deals with the cost of premiums for future retirees, beginning October 1, 1996. Associate Professor Emeritus Gerald Wilt (VPB) asked if the Committee was dealing with Medicare Plan A as well as Plan B; Downer said the proposal includes both plans. For retirees who are single and under 65, the PEEHIP premium is $88, compared to $65.50 for the current A.U. premium. The committee is recommending that, over a period of 6 years, retirees' A.U. premiums be increased until they are paying 100% of the cost. Downer referred to a chart of sample costs that she said she would provide in the library and for posting on the A.U. network (see following table). She insisted, "In spite of what people say, PEEHIP really is as good as the Auburn plan." The choice will still be left up to the individual as to whether they remain on the A.U. plan or switch to the PEEHIP plan at retirement.
Downer said the Insurance and Benefits Committee was especially concerned about people who retire before age 65. She said several retirees on the A.U. plan are working elsewhere and earning more than they did at Auburn, yet, current employees are subsidizing their health insurance. Downer said the fourth recommendation would give people time to consider whether they can afford to retire early.
Roy Wilcox (ME) asked whether, when a retiree reaches 65, the premiums would be lowered to the difference between the current A.U. premium and the Medicare payment, and Downer confirmed this. Ulrich Albrecht (MT) asked why a variety of rates were not available, depending on income. Downer acknowledged that University of Alabama based their insurance premiums on income, and she said the committee did consider that option. Cindy Brunner (Secretary) said it was hard to believe that the A.U. insurance program is not viable if increase premiums. Downer said that the program is viable at this time, but the goal is to try to equalize the contributions and to make the A.U. plan more like others in the state. Ron Herring (Employee Benefits) said the reserve fund will decrease by "a couple million dollars" without a premium increase this year. Also, retirees' claims exceed premiums by about $1.4 million, and the active employees pay for that.
Ulrich Albrecht said he did not understand the concern about current employees paying health care costs for retirees, because everyone eventually becomes a retiree. He asked that "social conscience" also be kept in mind. Ken Easterday (CT) pointed out that Medicare Part B premiums will probably escalate, and he asked if that was going to be factored into the new plan. Downer said that the Committee was unable to predict what would happen with Medicare premiums.
Bob Gastado (GL) asked if A.U. would supplement a retiree's PEEHIP premium if the retiree did not stay on the Auburn plan. Downer said the supplementation of PEEHIP that the Committee had offered for current retirees was rejected by retirees with whom she met. She clarified that recommendation #4 is for future retirees. She recalled that if current retirees moved to PEEHIP, A.U. could pay for their two additional coverage options plus the increase in their premiums, and still save almost $1 million. However, she said, that proposal is not a part of the plan being considered today. Cindy Brunner asked why the proposal to supplement a retiree's cost of switching to PEEHIP was withdrawn by the committee. Downer said that retirees were so opposed to a change in their insurance plan, that the committee withdrew its offer to supplement the change. Ron Herring said the proposal to supplement the switch to PEEHIP had been taken to the President; but Downer said the retirees had sent him a letter saying they did not want that offer. Brunner said she did not think retirees objected to their PEEHIP expenses being supplemented by Auburn; she thought the retirees objected to the fact that they were never able to discuss their transfer to PEEHIP and what costs and benefits they might face as a result.
Ethel Jones (EC) asked if someone could switch from the proposed A.U. plan to PEEHIP at any time. Downer said that transfer to PEEHIP can be done during their annual open enrollment period. Jones then asked if PEEHIP was a fully funded program, or if the legislature supports the plan. Tom Smith (FCD) pointed out that Auburn's insurance program is not fully funded either; almost no one has a fully funded program. Jones insisted that, because Auburn is self-insured, we make the decisions about our plan. The legislature has other items of concern, and it might decide that medical care for retirees is not a high priority. Downer said that was probably true.
Albrecht asked why, if PEEHIP is such a good deal, do the University of Alabama and A.U. have their own insurance. Ron Herring explained that A.U. would be required to pay about $208 for each active employee transferred to PEEHIP, and this would cost the University about $2 million more than what is put into our own plan. David Martin (PO) said that A.U. decided not to join PEEHIP when they had the opportunity to do so about 10 years ago. To join now, A.U. would have to pay the accrued liability of approximately $208 per active employee. He emphasized that none of the plans are fully funded, but the legislature, unlike the Board of Trustees, has the power to appropriate funds. If PEEHIP premiums go up because of an increase in claims, state employees complain to the legislature which then appropriates more money so that employees do not have to pay the full increase in premiums. On the other hand, A.U. has a state appropriation that the Board of Trustees has to allocate among the many cost of running the university.
Gerald Wilt asked if the Board of Trustees could approach the legislature to ask for more money because of problems associated with our insurance. Downer said she thought it would be unusual for the Board to seek more money for our insurance. Jack Simms (retired- -JM) recalled a statement made at the retirees' meeting that A.U. was at or near the bottom in benefits compared to other universities in Alabama, except for medical insurance. He said the point was made that, if A.U. is at the bottom for everything else, why can't its retirees be at the bottom in this? Downer emphasized that, even with the increase in retirees' share of A.U. premiums, they would not be at the bottom. Wilt cited a table of institutional rankings published in the A.U. Report on May 22, 1995, listing Auburn at or near the bottom in each category of employee benefits. Wilt then read a statement from the A.U. Faculty Handbook concerning provision of health insurance coverage for retiring employees. Wilt suggested that retirees probably look at recommendation #4 as a violation of policy and breaking a promise. Wilt contested the view that A.U. retirees are wealthy; he said there are A.U. staff members who retired after serving A.U. for as long as 46 years but are still raising children and grandchildren, and do not own their own home or car. Wilt was concerned that those individuals would be particularly hurt by the new plan. He suggested that the "AU family" is beginning to break up.
Downer went on to the fifth item in the proposal, which involved the question of what should be done with current retirees. She said the first option is to "grandfather them in" at the current premium rates of $65.50 and $137.50. The second option is to charge them 100% of their A.U. premium by 6 years. The third option is to recommend that current retirees be moved to PEEHIP and have the difference in their costs funded by A.U.. She said retirees thought it was important to stay on the current plan because they understood it and were insecure about moving to a new plan; they were willing to pay the increase. Downer then read from tables comparing coverage under the A.U. plan with that provided by PEEHIP, for Medicare-eligible retirees and for retirees under age 65 who are not yet eligible for Medicare.
David Martin asked for clarification about the date of implementation of the change in premiums, because the table stated January 1; Ron Herring said the date would have to be September to allow for enrollment in PEEHIP by October 1, 1996. Cindy Brunner asked whether current and future retirees could be assured of full coverage for preexisting conditions if they moved from the A.U. plan to PEEHIP. Downer said that because it is a state employees' plan, coverage is guaranteed; Ron Herring emphasized that coverage is assured during the open enrollment period.
Gerald Wilt explained that retirees are mainly concerned about being covered by good hospitalization insurance. He said that is why the retirees responded the way they did. Cindy Brunner asked whether President Muse had already approved item #4, the committee's recommendation of an increase in future retirees' premiums to 100% of the premium cost in six years. Downer said she didn't know whether Muse supported that recommendation; he had received a letter regarding that issue but the letter stated that the issue was being taken to the Senate. Downer said the President wanted to know what the faculty thought about it. Ulrich Albrecht was concerned about the overall low level of benefits provided to employees at A.U., and he suggested that the University Senate make a strong statement of disapproval. Bruce Lewis asked about the implementation of the premium increases. Downer explained that, regardless of the year of retirement, all retirees would be paying 100% of the A.U. premium 6 years after implementation of the plan. Tom Smith said that, with respect to a "broken covenant," everything that has changed during the length of his employment could be considered a broken covenant. His departmental faculty wanted him to vote that all employees should share in the burden.
As chair of the committee, Downer moved for adoption of a proposal to increase premiums for current retirees to 100% over the next 6 years. Bob Gastado asked whether the premium figures in the table are fixed over the next 6 years. Downer answered that the premiums themselves might change; the proposal is to pay an increasing percentage of the premiums.
John Grover (Chair-elect) said the Board of Trustees is interested in looking at the health programs at A.U., including possibly changing the premiums. Grover said he spoke on behalf of the faculty, arguing that productivity is high although employee benefits and salary compensation are low. A Board member remarked that retirees seem unwilling to accept changes. Grover suggested that the progressive increase in A.U. premium cost was a way to make the PEEHIP program more attractive to retirees, and this would be especially true if the cost associated with the change to PEEHIP was subsidized by Auburn. The net impact would be the shifting of medical liability associated with retirees to the PEEHIP program, and this would be in the best interest of all concerned. Jack Sims argued that retirees had been told the PEEHIP plan was not as good as the current AU plan; Downer said the Insurance and Benefits Committee did not say that. Gerald Wilt said a Blue Cross/Blue Shield representative claimed the two plans are comparable, but the differences become more important as you age. Downer insisted that the PEEHIP plan was, in some ways, better than the A.U. plan.
Gerald Wilt said that a large part of the problem among retirees is that they are not represented in the decision-making process. They are essentially at the mercy of the Senate, and have no vote in the matter.
David Martin asked if there were any groups besides the Insurance and Benefits Committee that are examining this issue. Ron Herring said the figures on Downer's charts had "come from the administrative area." Downer said it was asked at a previous Trustees' meeting how much it cost to cover retirees' health insurance.
Tom Smith pointed out that, if the Insurance and Benefits Committee is the only group investigating retirees' insurance and it is advisory to the President, the Board can do whatever it wants. Cindy Brunner mentioned a recent newspaper article which reported that President Muse had appointed a task force to study managed care for employees and students at A.U. She asked if anyone knew anything about that task force and its activities. Ron Herring said he had attended a meeting of the task force, and they were not considering retirees' insurance, but they were looking at whether an H.M.O. is a "viable option." Kent Fields said that he had been told the task force was dealing only with the Drake Health Center.
John Hung (EE) asked why the sentiment of the Senate was only requested on item #5 of Downer's report, when several of the other recommendations are just as controversial. He asked whether the other recommendations would be brought back to the Senate; Downer said they would not. Fields reminded Senators that the motion on the floor involved item #5 only. He said he would convey opinions about the other items to the Trustees.
Fields restated the motion and Tom Smith called for the question but discussion continued.
Sue Finn-Bodner (VR) pointed out that, because of savings from increased premiums from future retirees and from movement of retirees to PEEHIP, she favored "grandfathering" current retirees in on their current plan.
Fields said that a vote in favor of the motion would be a vote against grandfathering current retirees. The motion was to increase premiums for current retirees so that they would pay 100% of the premium cost after 6 years. The motion failed by a show of hands.
David Martin moved that current retirees and those who retire before September 1, 1996, be "grandfathered in." He argued that there is a moral obligation to continue to cover them on the A.U. plan; and there is a need to provide incentives to employees to encourage participation in retirement programs such as that offered last summer. Martin's motion received multiple seconds.
Cindy Brunner supported the motion, pointing out that the Senate ought to support such a recommendation on behalf of its retirees, even if the Trustees choose to disregard it later.
Kent Fields called for the question, and the motion to continue current retirees and employees retiring before September 1, 1996, on the A.U. plan carried by a voice vote.
John Wilhoit (AE) pointed out that there was considerable sentiment against the committee's fourth recommendation. He asked Downer if consideration had been given to alternatives to the recommended increase in premiums for future retirees. Downer said retirees' benefits are better because of Medicare, not because of what A.U. offers. John Hung asked if the President wanted the Senate's opinion about item #4, and Downer said that the President would like to hear if the Senate is strongly opposed to that item. Hung moved that item #4 be discussed at a future Senate meeting, but Kent Fields said that was not practical because the recommendations would be presented to the Board before the Senate meets again. Hung then moved to recommend that the Board defer consideration of the progressive increase in premiums for future retirees (item #4) and David Martin seconded the motion.
Martin pointed out that current retirees had been "grandfathered in," and no one knows how changes in Medicare might affect future retirees' health care costs. Cindy Brunner supported the motion, suggesting that the Insurance and Benefits Committee could develop a plan that is more compassionate and creative. Herb Rotfeld (MT) expressed concern that the Faculty Handbook makes a promise of insurance coverage, and the Handbook would need to be changed if recommendation #4 is implemented. David Martin agreed that a change in the Handbook might be necessary before retirees' insurance is modified. Bruce Lewis agreed that there is a pact with existing employees, just as there is with retirees. He also pointed out that the Administrative & Professional Assembly does not yet have its Welfare Committee in place, and he thought it would be wise to allow them an opportunity to discuss this issue. Alex Dunlop (EH) supported the motion because, unlike current employees, retirees have fixed incomes. Therefore, he argued, it shouldn't be considered inappropriate for current employees to shoulder a greater part of the health care burden.
Sheri Downer remarked that it might be more appropriate to ask the President, rather than the Board of Trustees, to defer consideration of item #4; John Hung accepted this as a friendly amendment.
Kent Fields called for the question and the motion to ask the President to defer consideration of item #4 passed by a voice vote.
OLD BUSINESS: None.
NEW BUSINESS: None.
RESOLUTIONS: None.
A motion for adjournment passed by a voice vote; the meeting was adjourned at 5:00.
Respectfully submitted,
Cindy J. Brunner, Senate Secretary