wfn.org | Board of Pensions facing medical benefits plan changes

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Note #6245 from PCUSA NEWS to PRESBYNEWS:

31-October-2000
00385

Board of Pensions facing medical benefits plan changes

Drug cost-driven inflation is forcing benefits cuts, possible dues increase

by Jerry L. Van Marter

SAN JOSE, Calif. -- The Medical Benefits Plan of the Presbyterian Church
(U.S.A.) is about to go through some changes, as the relative health cost
stability of the past few years in the U.S. shows every sign of giving way
to dramatically higher costs in the near future.

	The last time the denomination's Board of Pensions (BOP) increased Medical
Benefits Plan dues was 1993.

	Shortly after the Board's Oct. 26-28 meeting here, BOP president Rob Maggs
told the Presbyterian News Service: "Other denominations are experiencing
even greater challenges in covering rising health care costs.  From our
perspective we are hopeful that Congress will soon address what has become a
real national problem."

	The Board's first step -- the previously announced cancellation of the
one-half-of-one percent dues credit that has been in effect since 1997 and
of the dues cap on members' salaries (150 percent of the churchwide median
salary) after 2001 -- will almost certainly be followed by reduced medical
benefits and a dues hike or a combination of the two by 2002.  "It's an
unsettled situation," said the Rev. Adele Langworthy of Long Beach, Calif.,
chair of the Board's Healthcare Committee.

	Driven by skyrocketing prescription drug costs -- which are accelerating at
the rate of more than 20 percent annually -- projections by healthcare
consultants Milliman & Robertson show losses of between $4 million and $7
million in 2000 and 2001 for the Board's Medical Benefits Plan. "Benefits or
dues actions are necessary by 2002," Milliman & Robertson's John Cookson
told the Healthcare Committee Oct. 27, noting that with no changes, in the
worst case scenario, the Medical Benefits reserve fund could fall below the
Board's targeted minimum level during 2002 and will fall into deficit in
2003.

	"We've been there and done that," said the Rev. Gradye Parsons of
Louisville, recalling the early 1990s when the Medical Benefits fund was
nearly $20 million in the red.  "Never again."  The Medical Benefits fund
has annual revenue and expenses of about $100 million.

	With a greatly expanded Preferred Provider Organization (PPO) network under
Blue Cross/Blue Shield (known as Highmark) scheduled to kick in next year,
the Healthcare Committee agreed to defer final decisions on plan changes to
its summer 2001 meeting instead of determining them this winter.

	"We have the advantage of being able to wait and see the impact of the PPO
expansion," said David Nelson, a Board member from Louisville who works for
Humana.

	The Blue Cross/Blue Shield expansion -- from Pennsylvania Delaware and
Puerto Rico this year to 17 additional states and the District of Columbia
next year -- offers savings through broader access by plan members to
network health care providers and deeper discounts for health services.

	Cookson presented a number of scenarios for benefits changes which focused
on deductibles, co-pays and out-of-network provider co-insurance
reimbursements.

	He outlined estimated income gains which would result from discontinuing
the practice of applying office visit co-pays to deductibles ($1.3 million).
In combination with that change, increasing the out-of-network decuctible
from 1.5 percent to 2 percent and the maximum "out of pocket" limits from 6
percent to 7 percent would raise the gain to $2.9 million. A further change
to increase the in- network and non-network deductible from 1 percent to 1.5
percent and the maximum "out of pocket" from 4 percent to 5 percent would
bring the total gain to $5.1 million.

	Cookson said $10 million in savings are needed to maintain adequate reserve
levels.

	Healthcare Committee members spent little time talking about dues, which
are currently 16 percent of effective salary for the Medical Benefits Plan
(employing church organizations pay an additional 12 percent of employees
salaries for pension, death and disability benefits).

	And the committee could do little but mourn the state of prescription drug
costs.  "These 20 percent annual increases (in prescription drug costs) are
driven by new drugs and aggressive direct advertising to consumers," noted
John Jasin, the Board's director of healthcare delivery.  "And there is no
sense that anything will change soon."

	"This is really frustrating," agreed Nelson.  "There's no good way out of
it."

	About the only way to fight drug cost inflation, Healthcare Committee
members agreed, is to institute a percentage co-pay of about 20 percent for
prescription drugs rather than the current flat dollar amount of $15 per
prescription.

	Upon recommendation of the Healthcare Committee, the Board increased the
subscription rate for the Medicare Supplement program -- where two-thirds of
the costs are related to prescription drugs -- from $110 to $132 per member
per month, effective Jan. 1, 2001.

	Given the volatility of health care costs, Healthcare Committee members
agreed to take a strategic look at the Medical Benefits, Plan prior to the
Board's February meeting.

	Tinkering with benefits "seems like a strategy of chipping away at
benefits," said James Mortimer of Barrington, Ill., "and I'm not convinced
at all that that's the strategy we want to pursue."  He proposed a
two-pronged strategy focusing on creating incentives for plan members that
will improve health care cost trends and redoubling the board's efforts to
reduce costs.

	Nelson agreed.  "Forty-eight percent of our Medical Benefits Plan costs
come from drug costs and administrative and contractual fees, including HMO
premiums.  I'd like us to look more closely at those costs and not just at
benefits costs."

	In other actions Oct. 28, the Board approved:

	* a $1 million transfer from the Assistance and Retirement Housing fund to
the Medicare Supplement program for the year 2001;

	* target income levels for retired plan members receiving income
supplements of $20,400 for single persons and $24,600 for married couples;

	* election of Edward F. Driscoll, formerly a vice-president for CIGNA, as
the Board's chief information officer;

	* renewal of contracts with Intracorp and ValueOptions to handle case
management and utilization review of the Board's medical and mental health
programs, respectively;

	* an increase in the Medical Continuation Plan (mainly retirees and spouses
of retirees who are not yet eligible for Medicare) monthly subscription
rates from $296 to $306 for those enrolled in the Medical Continuation Plan
after 1986 and from $172 to $178 for those enrolled prior to 1987; and

	* a Christmas gift to income supplement recipients of $200 per individual
or $400 per couple.

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