The Board of Regents voted Friday to sever its relationship with the State Employee Group Insurance Program and switch to a new self-insurance system to provide health care coverage for 32,500 University employees and their dependants.

The new program will allow employees to choose from four health care plans: limited HMO, traditional HMO, point-of-service plan and a new option that allows employees a wide selection of providers through a University-funded personal care account.

“(Switching providers) is an exciting option that we’ve had to consider. I’m very hopeful that we’ll be able to put in options that will benefit employees of the University,” said Regent Warren Larson.

“This is the right decision for the University and its employees,” added board Chairwoman Patricia Spence.

“At a time when the public is calling for increased accountability from the University and state funding is declining, the University has a responsibility to take steps that put it in the driver’s seat when it comes to health care benefits and health promotion activities,” she said.

Larson said staying with SEGIP was not cost-efficient for the University since the state’s Department of Employee Relations, which administers the SEGIP system, predicted a 20 percent jump in health care premiums during the next two years.

The new plan will cut the University’s spending on premiums by $20 million in the next two years, but will increase employees’ out-of-pocket expenses up to $364 for individuals and $866 for families.

Frank Cerra, senior vice president of the Academic Health Center, said increased premium costs for employees were inevitable.

“The cost of health care is going up. All we’re doing is changing the rate of change,” Cerra said.

“The self-insurance option offers the University a better opportunity to have flexibility in coverage, tailor to the needs of employees, promote efficient use of health services and develop innovative approaches to health benefits moving forward,” he said.

The new health coverage will take effect in January 2002.

While the board’s decision to switch providers impacts 11,000 non-bargaining, non-union employees immediately, 4,750 unionized employees are currently in negotiations with the University over benefits.

Many union employees expressed dismay over the institution’s decision to depart from SEGIP.

“I don’t think the University is taking a leadership position in this process. We don’t make the salaries of the public sector (to pay for increases in insurance),” said Nancy Wilson, a member of a union for University clerical workers.

“There’s the window – take a giant leap,” union member Kate Berzak told board members.

“Whenever the University says to trust them, that’s the time not to,” she said.

University officials anticipated displeasure from some University employees over the change.

“There will always be people who will be unhappy, and they are unhappy because the cost of health insurance is rising and we can’t stop that,” said Fred Morrison, chairman of the interim Health Benefits Committee.

“Change is always very difficult and we’re very concerned,” Larson added.

Costs to implement the self-insured system are estimated at $2.5 million, $2 million of which goes toward PeopleSoft, which will handle the planning and programming of the health care switch.

Under the new health care plan, the University will pay 86.2 percent of the total cost for employees’ health insurance. It currently pays 90.5 percent of the total cost.

The University has received health care benefits for its employees through SEGIP since the 1960s but has considered changing health care providers for more than three years.

After sending a Request For Proposal, the University narrowed its private provider choices to four companies: Health Partners, Patient Choice, Preferred One and Definity.

Regents will continue to discuss specific details of the plans in upcoming months. More information on health benefit plan
options is available at
www.healthbenefits.umn.edu.

Melinda Rogers covers the Board of Regents and welcomes comments at [email protected]