Employee Health Care Re-Examined

Author: Nicolas Emery

Proposed changes to the Middlebury College health insurance system will require employees to cover a portion of their health insurance costs. The amount an employee will have to pay will be based upon a percentage of his or her salary. Workers most affected by these proposed changes are single full-time employees and two-employee households. Currently, neither group is required to contribute anything towards their insurance.
Middlebury began 2001 with $1.4 million in reserve for health care expenses, but by the end of the year the reserve had been completely depleted and the account had incurred a $300,000 deficit.
President John McCardell responded by forming the Health Insurance Review Committee (HIRC) to propose significant changes to the health insurance system, under which all College employees are covered. The HIRC is comprised of representatives from the administration, the faculty and the staff of the College.
The proposed change, which will go into effect Jan. 1, 2003 if approved by the President, is to transform the health insurance plan into what is known as a "universal-progressive plan."
Middlebury College is not alone in trying to compensate for rapidly rising health insurance costs. According to Professor of Political Science David Rosenberg, a member of the HIRC, "The health insurance problem is national," and the primary problem resides with the United States government providing increasingly lower reimbursement rates for Medicare and Medicaid. Other factors exacerbating the health insurance crisis are the inflation of medication costs, aggressive and expensive marketing campaigns by drug companies and more costly medical technology services.
Rising prescription drug costs posed the most significant problem for Middlebury's current policy. In 1999 the drug plan cost the College $641,648, but by 2001 the price nearly doubled to $1,207,990. The increased cost for prescription drugs is due to heavy use of the newest and most expensive brand-name prescription medications, which are marketed by drug companies that spend millions of dollars on advertising campaigns, driving up the price of their products. The College's prescription drug costs have increased beyond the national average. This inflation is attributed to the generosity of Middlebury's current benefit plan compared with those of other colleges and local employers. The College's plan also does not offer incentives to buy the significantly less expensive generic versions of drugs.
Currently, Middlebury's health insurance plans are self-funded, meaning that the College manages its own health insurance instead of purchasing it from an outside party like Blue Cross/Blue Shield. This arrangement means that Middlebury has more control over its own policies and it allows the plan to be cheaper because the College does not make a profit off employee insurance.
Middlebury's independent plan, however, also means that the College must cover the costs, which have risen drastically in recent years. The College currently pays approximately 75 percent of employee health care costs, leaving employees to pay the remaining 25 percent, but this was not enough to cover the expenses in 2001. With the proposed changes, the College will continue to pay 75 percent, but the remaining balance will come from the employee's contributions based on their salaries.
While researching possible changes, the HIRC compared Middlebury's policy to 20 comparable institutions, including Amherst, Williams and Colby, as well as local employers. They found that Middlebury's plan with the proposed changes is still significantly better than at least 75 percent of all other investigated plans.
When asked how the proposed changes would affect him, Matthew Hotte of Dining Services said, "They'll be taking three percent of my salary, which ironically takes away the 2.5 percent raise I got this year. But don't get me wrong, we're glad to have the
College's policy anyway."
Middlebury College is not immune to the health insurance problems facing employers throughout the country, but the HIRC has attempted to research the best possible solution to the shortage of funds.
"I've got mixed feelings," said Mike DeGray, also of Dining Services, "But just try to go buy insurance somewhere else. With the little we pay, the College is doing well. I sure can't complain."