[Vision2020] UI Health Insurance

[Ron Force]

I've been trying to come up with an explanation for the disparate costs of UI Health Insurance vs. the state pool.  I retired from UI before the change to self-insurance, but checking with some people currently on board, I've come up with what I think is the answer.

The way health insurance used to work was that the university budgeted as benefits roughly
the same percentage of each employee's salary and then paid Blue Cross the same
amount for each employee.  The amount each employee had to pay per month out of their salary
was a fixed amount, the same for everyone, depending on which plan was
selected.  That's the way the current state insurance pool works.  This
results in higher-paid employees cross-subsidizing those who are paid less.

When the UI went to the "Choice Dollars" system and a basket of
benefits, each employee got whatever the amount of benefit dollars
was based on a percentage of their salary (Choice Dollars), ending the cross-subsidization of benefits. Thus, if you're a custodian, you're going to have a lot fewer "Choice Dollars" to put toward health insurance than say, a Dean would, thus having to pay a lot more out-of-pocket for the same plan.

Why would an organization switch switch from Egalitarian to Darwinian?  What follows is a vague recollection, so don't take it as gospel, just my personal opinion.  I seem to remember a number of discussions during the waning days of the Hoover administration.  I think they brought in several consultants all trying to deal with the rising cost of health services during a time of budget strain ( Boise Place).  I remember one proposed doing away with Student Health Services and turning Student Health "into a profit center". That proposal was not enacted, although they did reorganize SHS. The decision to self-insure was with the assumption that it would cost the university less than paying BC for a conventional plan.  They do carry a "catastrophic" insurance policy to cover any unusual expenses that can't be covered by their reserves.

I do remember at that time that in the wider world, conservative economists blamed the rising costs of  health services on insurance that was too generous, so that people overused health services, running to the Dr for sniffles, etc. They reasoned that if people had to pay more up front out-of-pocket, they'd consume less, lowering demand, and thus, prices (or the organization would pay out a lot less for health insurance).  That's the logic behind Plan H: if you don't pay out from the HSA, it's your money, so you're less inclined to seek treatment for every little thing, and that's why the system is designed to encourage everyone into Plan H.  It's this philosophy that I think was behind the change.

Sandra's already pointed out the problems with this approach: many poorer people can't afford to put much away. If you have a chronic condition, you need care, and your HSA never builds up.  If you're young, healthy, and relatively well off, Plan H is a sweet deal, even more so since the HSA dollars are pre-tax and worth a lot more to those in the upper brackets.  So the young and healthy go to plan H, and those who use more services choose the PPOs, which drives up their price even more.

Ron Force
Moscow, ID USA



      
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