University managing to control medical costs

COLUMBUS -- The Ohio State University is making progress in its efforts to control medical care costs, according to Larry Lewellen, associate vice president for human resources, thanks to an emphasis on wellness, partnerships with the Medical Center and Medical Mutual of Ohio, and smart plan management.

“We will continue to implement innovative methods to ensure quality, affordable care for the university’s faculty and staff,” Lewellen told the university Board of Trustees Friday (5/6).

Lewellen provided trustees with a cost management update for the faculty and staff medical plans by sharing comparisons of Ohio State’s plans with other employers and universities and outlining the measures the university has taken to contain costs.

Lewellen summarized a few of the objectives for the medical plans. “We want medical plans that support the recruitment, retention, performance and diversity goals of the Academic Plan,” he said. “And, we want to utilize the resources of Ohio State’s Medical Center to improve the delivery of quality health care to our faculty and staff and their dependents.”

In order to become an “employer of choice,” Lewellen said Ohio State’s benefits need to not only be top quality — comparable to other leading employers, both locally and nationally — but also leading edge. “We’re working to develop a personalized health care model that focuses on improving health and quality of life, which should help us to maintain the high productivity of faculty and staff talent,” he said.

Ohio State’s costs for its medical plans are increasing at a lower rate than those projected for plans nationally.

“Our data indicates a 7.5 percent trend rate for fiscal year 2005, while consultants are reporting national trend rates in the range of 10 to 14 percent,” Lewellen said. “By keeping our increase to a rate well below the national rates, OSU is saving between $3 and $8.2 million in additional costs.”

Projecting forward, using the national trend, if Ohio State’s medical plans are not cost-managed, costs could soar to more than $250 million for fiscal year 2009 up from $150 million for fiscal year 2004.

“If we can keep the trend at 8 percent instead of 11.4 percent, we could potentially save the university $28.9 million. That’s money we could instead use to meet our salary targets,” Lewellen said.

Lewellen also said that Ohio State’s administrative costs of 7.8 percent are half that of commercial plans. “Some of the reasons for this include the fact that we don’t support a sales force, advertising, investors or large capital purchases. The down side is that this may mean we aren’t investing enough in administrative services that support best-in-class management of a medical plan,” he said.

When compared to peers, Ohio State’s cost of $3,044 per member is less than the $3,081 cost on average at universities nationally and the $3,232 estimated cost for the state of Ohio, and only slightly more than the $3,031 average cost for Ohio employers.

Ohio State offers four medical plans for faculty and staff: University Prime Care, a base plan for network only services, used by 82 percent of those enrolled; Regional University Prime Care, for employees at the regional campuses and Extension offices, used by 9 percent of enrollees; OSU Health Plan, a preferred provider plan offering in- and out of-network benefits to 4 percent of enrollees; and the Traditional/Buckeye Health Plans that are managed indemnity plans and used by 3 percent of enrollees.

Ohio State’s ability to keep costs under control is driven by several factors, Lewellen said, including the recent switch to NGS American as claims administrator, partnering with the Medical Mutual of Ohio network to offer care for the Regional University Prime Care, Traditional and Buckeye Plans and increased use of generic prescription drugs. Ohio State is also benefiting from changes in plan management, increased co-payments and the fact that physician fee schedules have remained relatively stable.

“We are also seeing the fruits of our University Faculty and Staff Wellness Program, which is starting to attract national attention for its best practices,” Lewellen said.

Through efforts such as the annual Wellness Fair, flu immunizations, blood pressure kiosks and other worksite services, the Wellness Program is making a positive impact on the health of Ohio State’s employees, he said.

For this year’s short plan year (July 1-Dec. 31), Ohio State will not be increasing premiums. “We’re happy to report that for calendar year 2006, we’re expecting to keep increases to just 3 percent to 4 percent. At the same time, other employers will most likely be experiencing increases of 10 percent or more,” Lewellen said.