Sustainable Benefits Task Force Presentation to USF Leadership Team

1. Sustainable Benefits Task Force Presentation to USF Leadership Team May 11, 2011

2. Cost Savings Options Based on Best Practices and Market Trends • The Sustainable Benefits Task Force has finalized its review of USF’s current benefits and potential opportunities for cost savings and/or changes in benefit design. • The following twenty-two options are being submitted to the Leadership Team and the Cabinet for consideration. Some are broad with many variables that will require further investigation. • Some of these options will require negotiation with USF’s various collective bargaining groups (see appendix for statement).

3. Outcomes of the Task Force’s Efforts • USF benefits package exceeds or equals its peer group in most areas. • Feedback from the USF community showed that members highly value their benefits and are highly sensitive to changes. • Any changes to the existing benefit package will require continued promotion and outreach. • The opportunities outlined in this report are options not recommendations and are based upon the over-arching mission of the University and its financial profile.

4. Outcomes of the Task Force’s Efforts (cont’d) • Interdependencies exist between benefits and market trends: • Options must be reviewed in the broader total rewards context not each benefit on its own; • Level of coverage and choice of benefit design will influence savings opportunities and migration/early adoption. • Implementation strategies may include a phased approach to change, grandfathering select benefits, etc. • Health Care Reform adds a level of uncertainty to future benefit design.

5. Outcomes of the Task Force’s Efforts (cont’d) • Cost estimates are based on broad assumptions derived from marketplace experience and industry practices including the following summary reports: • AON/Hewitt – peer review and benchmarking; • Advisory Board’s University Collaborative – self-funded utilization; • Towers Watson – employer benefit benchmarking, industry best practices. • Many of these options will require future monitoring of utilization, benefit expense and behavior change to determine actual cost/savings. • Savings may be short term, long term or one time.

6. Options — Medical

7. Option — Account Based Health Plan (ABHP) 1 Estimated 1st Year Savings: $10k - $20k

8. Option — Add PPO Low Option 2 Estimated Savings: $30k

9. Option — Spouse/Legally Domiciled Adult Surcharge 3 Estimated Savings: $120k

10. Option — Add 4th Tier to Benefits Coverage 4 Estimated Savings: $0

11. Option — Standardize Employee Contribution 5 Estimated Savings: TBD

12. Option — Contribution Rate Increase 6 Estimated Savings: $0 - $1m

13. Option — Implement Higher Lab Copay for Anthem Non Preferred Lab 7 Estimated Savings: $15k

14. Option — Revise Anthem Pharmacy Design (formulary with copay differentials) 8 Estimated Savings: $50k

15. Option — Implement Anthem Pharmacy Step Therapy Programs (w/MD ability to override use of generics) 9 Estimated Savings: $25k - $40k Step therapy programs encourage the use of cost-effective therapeutically equivalent drugs first, when appropriate. An employee will need to try an alternative drug before other drugs prescribed by his/her doctor will be covered. The physician can decide to write a new prescription or submit a written request for the employee to continue medication as prescribed (e.g., No Substitution Allowed/Dispense as Written).

16. Option — Review Health Plan Waiver 10 Estimated Cost/Savings: $36k - ($150k)

17. Options — Dental

18. Option — Implement Monthly Contributions 11 Estimated Savings: $150k - $300k

19. Option — Modify Plan to Create High and Low Plan Options 12 Estimated Cost: $175k

20. Options — Wellness & Insurance

21. Option — Expand Wellness Offerings 13 Estimated 1st Year Savings: $25k - $50k

22. Option — Life Insurance Coverage 14 Estimated Cost: $125k - $250k

23. Options — Tuition Remission

24. Option — Implement Benefit Waiting Period and Remove Payback 15 Estimated Savings*: $600k *Tuition revenue will also decrease; savings amount to be determined.

25. Option — Limiting Eligibility 16 Estimated Savings*: $180k-$1.8M *Tuition revenue will also decrease; amount of revenue reduction to be determined.

26. Options — Child Care Subsidy

27. Option — Change Income Basis to Household Income 17 Estimated Savings: $50k

28. Option — Decrease Child Care Funding Amount 18 Estimated Savings: $150k- $250k

29. Option — Fund Secondary Caregiving 19 Estimated Cost: $385k

30. Options — Commuter Benefits

31. Option — Direct Deposit to Clipper Card 20 Estimated Cost: $0 - $22k

32. Options — Retirement Benefits

33. Option — Add Automatic Enrollment into 403b Plan 21 Estimated Savings: $0 Automatic enrollment in the 403b Plan provides employees the opportunity to save; industry experience indicates that once enrolled few individuals opt out of the plan.

34. Option — Add Employee Contribution and/or Employer Match 22 Estimated Cost/Savings: $TBD

35. Areas for Further Investigation • Further explore on-campus health care service options for students and opening access to faculty/staff • Investigate other cost efficient retirement vendors and consider reducing the number of investment options • Systematically continue to review health plan designs, options, provider network, and industry trends (e.g., ABHP) • Review LDA definitions for consistency across all USF groups • Analyze all administrative costs for HR activities and services (e.g., outsourcing  cost vs. benefit) • Review other institution’s current health & welfare experiences (e.g., Implementation of their ABHP and its success at achieving their objectives)

36. Appendix

37. Statement from USFFA and OPE Local 3 • The USFFA would like to append this addendum to the final report of the Sustainable Benefits Task Force, which met from January – May 2011. We appreciated the inclusion of five Policy Board members who participated in all deliberations and decisions. The Task Force was made up of administrators, staff and members of various other constituencies at USF, some of us who are covered by collective bargaining agreements. In other words, some of us had to deliberate on two levels, first with the interest of the economic health of USF as an institution in mind, but second, in terms of the material interests of our unionized members. At times, this dual loyalty made the decision making process difficult. The final report contains a series of options that, if implemented, could help USF contain costs over time in the aggregate, while offering sustainable, competitive benefits. In principle we might agree to any combination of these options. However, the key: the final decision would very much depend on a total package of salary and benefits to be determined at the negotiating table. Therefore, we wish to state unequivocally that we oppose, on principle, any option in the final report that would raise costs and/or cut benefits to our members, and, when viewed in isolation, would amount to a reduction in our salary and benefits. We emphasize that we will take seriously all and any of the options in this report, but since they are all subject to collective bargaining, we can not endorse any option that would imply prior consent or approval to a reduction in salary and benefits before actual negotiations begin. • The OPEIU Local 3 stands in agreement and solidarity with the above statement made by the USFFA.

38. Cost Savings Assumptions Medical • The table below provides the assumptions used to estimate cost savings for initiatives

39. Cost Savings Assumptions Medical

40. Cost Savings Assumptions Medical

41. Cost Savings Assumptions Dental

42. Cost Savings Assumptions Other

43. Cost Savings Assumptions Other  Tuition Remission

44. Cost Savings Assumptions Childcare Subsidy

45. Cost Savings Assumptions Commuter Benefits

46. Cost Savings Assumptions Retirement Benefits

47. Cost Savings Assumptions Retirement Benefits

48. Illustrative Account-Based Plan with Health Savings Account • 90 - 100% in-network coverage after deductible & out-of-network Out of Pocket Maximum offers protection to those with serious health conditions. OOP Maximums represent 2011 Maximum allowed out of pocket limits 100% coverage after OOP Max In-Network Coinsurance 90% - 100% up to OOP Max $5,950 per individual $11,900 per family Out-of-Network Coinsurance 70% up to OOP Max $5,950 per individual $11,900 per family • More substantial deductible encourages member accountability for health care choices • Deductible can be offset by HSA funds (including incentive dollars for wellness program participation) • Employees have ownership over HSA dollars and tend to use them more judiciously • Offers triple-tax advantage • Balance rolls over to next year • Savings component allows employees to plan for the future and invest excess funds, if they wish Deductible, Coinsurance and Rx costs can be offset by HAS funds (with or without employer seed) & Incentives Deductible (In & Out-of-Network, cross-applied) $1,200 per individual $2,400 per family 100% Medical Preventive Care 100% Rx Preventive Care • 100% coverage for preventive care provides a generous up-front benefit

49. Illustrative Example Plan Designs PPO (High and Low) and ABHP * See next slide for comparable Kaiser benefit coverage.

50. Kaiser HMO - Benefit Plan