Proposed changes to the Duke plan
As the deadline for settling on a health insurance for 2006-07 draws nearer, it is worth exploring where we are, what makes this year different from previous years and which options are before us. This post will attempt simply to lay out what proposals are on the table. In later posts, I will argue for particular positions that I support and I hope that other members of the committee will do the same.
[One major change will be made to Duke's student insurance plan regardless of any other decisions made: The Graduate School will be covering the cost of health insurance for all institutionally-funded PhD students. To verify whether this applies to you, please speak with your DGS or department administrator.]
Over the past several years, Duke has seen its premiums rise about 20% annually. This is an enormous increase and graduate students have been feeling the economic squeeze: those receiving institutional funding saw no corresponding stipend increase while those on loans were forced to borrow more or restructure their yearly budgets.
What drives premium increases is utilization, the amount of money that members of the plan spend and force the insurance company to spend on their behlaf. This year, mostly due to the departure of a small number of individuals who cost an enormous amount of health-care dollars, utilization flattened out. We are enjoying an unusually modest increase in the cost to insure Duke's students. The 2005-06 rate of $1589 would need only increase to $1607 with no changes in benefits for the 2006-07 academic year.
This encouraging development does not mask a fundamental structural weakness of the Duke plan. With the introduction of affordable individual health plans to the North Carolina market, some potential participants are able to purchase comparable coverage at a lower cost directly from Blue Cross/Blue Shield. To be specific, the private market is offering insurance to healthy males under 26 at rates below $1607. This has drawn a sizable minority of participants out of Duke's plan. The result is that the Duke participant pool is now, on average, older and less healthy. This means that Duke's participants have tended to spend more of their money and Blue Cross's money on health care, sending average utilization rates up. This means that our premiums have continued to rise. Finally, this has driven yet more young healthy males out of our plan. Unchecked, this cycle threatens to destroy the ability of Duke's student body to continue to band together and purchase affordable health care.
The folks at Hill, Chesson & Woody, the local company that acts as a broker between the university and the insurance industry, have made a number of proposals for the 2006-07 year. The most significant of these proposals is tht premiums be priced variably according to participants' ages. Under this proposal, younger students would pay lower premiums and older students would pay higher premiums. Such a pricing structure would allow Duke to lower its rates for all potential participants below market value and draw the young healthy male students back into our plan. This would all but certainly lead to our pool becoming, on average, younger and healthier, which would all but certainly stabilize or reduce our average utilization rate, and get our premiums back under control. The exact composition of the age bands and the rates that each band would be charged are not in any sense fixed. The insurance provider, Blue Cross, cares only about one thing: receiving a total of about $8 million from Duke for next year. How those costs are distributed is to be decided by us.
Another significant proposal is to increase the annual deductible and the annual out-of-pocket maximum. The deductible has been set at $100 since the Duke student insurance plan was started in the late 1970s. It has been proposed that the deductible be raised to $150 or $200. The out-of-pocket maximum is presently set at $1,000. It is proposed that this be raised to $1,500 or $2,000. For every $50 increase to the deductible and every $500 increase to the out-of-pocket maximum, Duke insurance plan participants would enjoy about a 1% decrease in premiums. Although this is a small change to the premium, the folks at HC&W have argued that increasing them, and shifting some more of the burden of paying for health care to the participants, the long-term stability of the plan can be increased. Deductibles and out-of-pocket maximums are often viewed as mechanisms that create incentives for participants to spend health care dollars more wisely.
The other two proposed changes involve spouses and children. Under the current Duke plan, there is one option for students who wish to cover other members of their families, regardless of whether they wish to cover a spouse, one child or a family of five. It is proposed to have a rider for spouses, and a rider for children. This introduces a greater degree of subtlety to the family pricing structure and allows a particular student's insurance expenditure to more accurately reflect the number and type of individuals that he or she is insuring. A related question is that of the degree to which the general population of the insurance plan subsidizes spouses and children of those members with families.
Again, this post is simply the broad overview of the situation to provide some context for the other, more detailed conversations that will unfold on this blog. Please feel free to amend and correct things in the comments.
[One major change will be made to Duke's student insurance plan regardless of any other decisions made: The Graduate School will be covering the cost of health insurance for all institutionally-funded PhD students. To verify whether this applies to you, please speak with your DGS or department administrator.]
Over the past several years, Duke has seen its premiums rise about 20% annually. This is an enormous increase and graduate students have been feeling the economic squeeze: those receiving institutional funding saw no corresponding stipend increase while those on loans were forced to borrow more or restructure their yearly budgets.
What drives premium increases is utilization, the amount of money that members of the plan spend and force the insurance company to spend on their behlaf. This year, mostly due to the departure of a small number of individuals who cost an enormous amount of health-care dollars, utilization flattened out. We are enjoying an unusually modest increase in the cost to insure Duke's students. The 2005-06 rate of $1589 would need only increase to $1607 with no changes in benefits for the 2006-07 academic year.
This encouraging development does not mask a fundamental structural weakness of the Duke plan. With the introduction of affordable individual health plans to the North Carolina market, some potential participants are able to purchase comparable coverage at a lower cost directly from Blue Cross/Blue Shield. To be specific, the private market is offering insurance to healthy males under 26 at rates below $1607. This has drawn a sizable minority of participants out of Duke's plan. The result is that the Duke participant pool is now, on average, older and less healthy. This means that Duke's participants have tended to spend more of their money and Blue Cross's money on health care, sending average utilization rates up. This means that our premiums have continued to rise. Finally, this has driven yet more young healthy males out of our plan. Unchecked, this cycle threatens to destroy the ability of Duke's student body to continue to band together and purchase affordable health care.
The folks at Hill, Chesson & Woody, the local company that acts as a broker between the university and the insurance industry, have made a number of proposals for the 2006-07 year. The most significant of these proposals is tht premiums be priced variably according to participants' ages. Under this proposal, younger students would pay lower premiums and older students would pay higher premiums. Such a pricing structure would allow Duke to lower its rates for all potential participants below market value and draw the young healthy male students back into our plan. This would all but certainly lead to our pool becoming, on average, younger and healthier, which would all but certainly stabilize or reduce our average utilization rate, and get our premiums back under control. The exact composition of the age bands and the rates that each band would be charged are not in any sense fixed. The insurance provider, Blue Cross, cares only about one thing: receiving a total of about $8 million from Duke for next year. How those costs are distributed is to be decided by us.
Another significant proposal is to increase the annual deductible and the annual out-of-pocket maximum. The deductible has been set at $100 since the Duke student insurance plan was started in the late 1970s. It has been proposed that the deductible be raised to $150 or $200. The out-of-pocket maximum is presently set at $1,000. It is proposed that this be raised to $1,500 or $2,000. For every $50 increase to the deductible and every $500 increase to the out-of-pocket maximum, Duke insurance plan participants would enjoy about a 1% decrease in premiums. Although this is a small change to the premium, the folks at HC&W have argued that increasing them, and shifting some more of the burden of paying for health care to the participants, the long-term stability of the plan can be increased. Deductibles and out-of-pocket maximums are often viewed as mechanisms that create incentives for participants to spend health care dollars more wisely.
The other two proposed changes involve spouses and children. Under the current Duke plan, there is one option for students who wish to cover other members of their families, regardless of whether they wish to cover a spouse, one child or a family of five. It is proposed to have a rider for spouses, and a rider for children. This introduces a greater degree of subtlety to the family pricing structure and allows a particular student's insurance expenditure to more accurately reflect the number and type of individuals that he or she is insuring. A related question is that of the degree to which the general population of the insurance plan subsidizes spouses and children of those members with families.
Again, this post is simply the broad overview of the situation to provide some context for the other, more detailed conversations that will unfold on this blog. Please feel free to amend and correct things in the comments.