From: University Senate Fringe Benefits Committee

To: President Glenn Mroz

Subject: Proposed Changes in Michigan Tech’s Health-Care Insurance

Date: October 9, 2013

 

Responsibility of the University Senate Fringe Benefits Committee

 

Section III.F.4.b.1 of the University Senate Constitution assigns to the University Senate responsibility for reviewing, making recommendations, initiating, and participating in the formulation of fringe benefits policy and procedures.  Section D7 of the Senate’s Bylaws assigns this responsibility to the Senate’s Fringe Benefits Committee.

 

The current version of the Senate Constitution was approved by the Board of Control on April 27, 2012; hence, the Senate Constitution is, in effect, Board of Control Policy.

 

 

The Issue

 

The University administration is currently considering significant changes in employee health-care benefits, possibly including dropping the Preferred Provider Organization (PPO) option and adding premiums to the High-Deductible Health Plan (HDHP) option (possibly per month, per dependent child).

 

 

Fringe Benefits Committee Recommendation

 

Given that,

 

1.  The Aon Hewitt study, “Preliminary Health Care Strategy and Pricing for 2014,” commissioned by Michigan Tech concluded that “The PPO and HDHP design differences have narrowed over the last two years,” and, as a consequence, “The actuarial value between the two plans is nearly equal” (slide 14). 

 

2.  The risk of behavioral hazard (health-care-consumption choices that are made to save money or avoid inconvenience in the short-term and wind up costing more money in the long term) may balance or outweigh the risk of moral hazard (health-care-consumption choices that are made frivolously because the consumer bears no financial cost for these choices).

 

3.  Of the 824 faculty and staff who completed the Fringe Benefits Committee’s 2013 Fringe Benefits Survey (a 64% response rate), 66% indicated that salary and fringe benefits are of equal importance in their compensation package, and 56% said that the benefits package was a very important factor in their acceptance of an offer of employment at Michigan Tech. 

 

4.  This reduction in health-care benefits may have unforeseen and negative impacts on Michigan Tech’s ability to recruit and retain top faculty and staff (goals articulated in Michigan Tech’s Strategic Plan).

 

5.  Senate constituents who have responded over the past two weeks to a Fringe Benefits Committee request for feedback overwhelmingly oppose these changes in health-care insurance, many pointing out that having two plans available allows people to choose the option that best suits them at a given stage in life.

 

6.  No reason other than cutting costs—which now appears uncertain—has been given for pursuing this course of action.

 

The University Senate Fringe Benefits Committee recommends that these changes in health-care insurance not be implemented at this time.