(Pix ©Larry Catá Backer 2016)
There is a new orthodoxy in the development of benefits plans. Universities now appear to march in lock step both with respect to the forms and the socialization techniques that they use to purchase and then market their "benefits" products to their captive consumers--the populations of employees who are given little choice and whose employment sometimes depends on their willingness to pretend they like the stuff they are made to consume. Perhaps it is a function of the markets for benefit plans that have emerged over the last half century. Universities, like larger corporations , tend to purchase either off the shelf "manufactured" plans, or they cobble them together from benefit programs peddled by professional plan designers and managers--the same industry to appears to sell benefit bits and pieces to every large enterprise in this country.
There are benefits to buying manufactured plans, such as there are benefits to purchasing manufactured foods in the grocery stores. First there tends to be a lot of them,. They have long shelf lives. They are easy to consume. "Everyone" is consuming them--that is all one can talk about at gatherings of benefits plan consumers, the way the aisles of supermarkets are clogged with people whose carts are stuffed with manufactured consumables. And for the most part they are not very good for you in the long run.
That does not prevent people for engorging themselves on manufactured food. It does nothing to prevent universities and enterprises from feeding off of these prepacked plans--and then try to sell them to their stakeholders usually using many of the strategies that have also been manufactured for that purpose by and with the aid of those selling the stuff in the first place. Eventually universities and enterprises, like people, come to believe what they have been sold, and become wholly dependent on these manufactured products. That new normal makes alternatives--better and healthier in the long run--pricier and less available. And that scarcity then becomes the greatest selling point for the perspectives (the ingredients) that are used to manufacture these products.
As a consequences, as I have noted before (Benefits May Not Be Accessed!: Penn State and the Transformation of Benefits Policy in the Contemporary American Public University): (1) universities begin to think of themselves as insurance companies not institutions providing a benefit to employees with substantial positive effect on their operations; (2) the benefit itself is either viewed as a cost or profit center rather than as a value added to the operation and sustainability of the institution; (3) benefits are viewed as an instrument to manage the behaviors of employees on and off work; (4) plan administrators develop an obsession with cost--and indeed all benefits are increasingly viewed through the lens of cost and its mitigation--either by reducing access to payouts or by managing the behaviors of beneficiaries; (5) the ultimate aim, subconscious no doubt, is to view administrative objectives not in providing the best plan given fair valuation but to reduce the costs of the provisions of benefits while maintaining or increasing employee productivity. The result is an odd situation in which the benefits of health care plans are undervalued and its cots overvalued--where costing is privileged as a driver of plan design and institutional benefit is subsumed within a leveling hyper focus on cost rather than value.That, of course, follows from the way in which manufacturers of plans tend to conceptualize the enterprise of health care construction, which is driven in part by its conceptualization by a financial side of the university house. These plans, then, get it half right.
Yet it is possible to conceive of healthier alternatives to the manufactured for profit plans that are peddled by the industry in which universities shop for the benefits they mean to bring "home." The purpose of this report is to recommend core principles for the design of university health care plans. It offers four key principles that university benefit plans should embrace to make them better--to avoid the deleterious effects of the proffered for profit variations on manufactured benefit products, for something that adds value to the university as well as for the employee.
In the usual course, universities, and the faculties who in good faith seek to work with them tend to produce approaches to health care design and operation that reflect the operational premises that I have outlined above. Within the universe of those premises, the focus is on cost containment, managing behaviors of recipients, utilization analytics managed by and controlled by plan administrators but opaque to beneficiaries, and a highly controlled palette of choices designed to permit cost shifting from university to beneficiary. The objective, from the faculty perspective, of course, is to slow the erosion of health care benefits within a reality in which health care costs rise, under a regime in which cost and cost containment are the principle drivers of health care plan design and operation.
The Penn State University Faculty Senate Senate Committee on Faculty Benefits has undertaken such a role. In March 2016 it put forward an advisory and consultative report for the consideration of the Senate, entitled "Principles for the Design of Penn State Health Care Plans" (March 15, 2016). It puts forward six principles, all worthy, but all grounded in the animating premise that costs drive health care. These six include the following:
1. The principles of quality, transparency, accessibility, and cost effectiveness should guide the negotiation and management of contracts for healthcare services.
2. A principle of affordability and equity should guide the design of plans to incorporate features that make the plans affordable for employees below the median salary; however, the overall contribution of employees above the median salary should not exceed levels comparable to peer and industry trends.
3. A principle of choice for employees in health care plans should guide the annual design of plans with consideration of the levels of premium contributions and out-of-pocket contributions shared with employees.
4. A principle for overall cost sharing of 75% university and 25% employee should guide the determination of contributions to meet the annual full cost of healthcare (university cost, plus employee premiums, plus employee out-of-pocket costs).
5. A principle of informed utilization should guide the implementation of a data warehouse and cost transparency tools that provide the following: a) analytic capabilities for conducting secure and anonymous studies of university employee health care utilization and provider costs. This will allow better design of future healthcare plans, contract terms and vendor management; and, b) cost transparency and analysis tools to aid members in better understanding the costs and quality of care received, and so plan their utilization of health care services.
6. A principle of fostering and promoting a culture of health, which is included as a thematic priority in the university’s 2016-2020 strategic plan, should guide the design of plan features and programs that promote healthy choices and activities, shared efforts to establish tobacco-free campuses, and support the consistent and effective management of health risks.
These principles are by and large useful, and consonant with the line university administrators have taken over the last year. They incorporate, in principles form, much of the conceptual framework put forward by senior administrators in an exposition of the university's line delivered at the January 2016 Penn State University Faculty Senate meeting (Penn State’s Health Care Advisory Committee: The View Forward (January 26, 2016)).
But this line also exposes the lamentably narrow scope of the premises within which senior officials have chosen to conceptualize health care planning and the consequences of that narrow doctrinal thinking for health care plan design as well. That is unfortunate. There was a lamentable tendency to detach health care planning from an seamless integration within the operation of the university, and thus detached, to view it as an autonomous cost the tinkering with which would have no collateral effects on university operations. Even transparency appears skewed toward costing and cost reduction--thus there is a focus on university access to data--with an indirect erosion of privacy--and a controlled transparency directed toward stakeholders providing them with a very well managed set of information within which they might be helped to proper decision making. More important, the hyper focus on costing numbers revealed no equal effort to price the services. And it was unclear how, if at all, in a cost obsessed approach, the value or contribution of health care to the productivity (and thus productive value) of the university was priced and folded within the costing of health care.
Nonetheless, these limitations do draw attention to an important element of health care planning. They become less useful when they are put forward as the totality of factors that a university ought to consider in health care planning. I offer an additional set of principles that help to balance the cost based principles proffered in the report in hopes of strengthening the report so that it might contribute more coherently to the aggregate operations of the university. In designing and implementing university health care plans, in negotiating with third party providers, in monitoring and assessing the provision of health care under its plans, and in the provision of health care and administrative services under any health care plan, the university will strive to adhere to the best of its abilities and in good faith to the following basic principles:
Guiding Principles for University Health Care Plans
Guiding Principles for University Health Care Plans
The University, through its employees, administrators, service providers and other thirds party providers, has a responsibility to undertake the conception, implementation and administration of its health care plans in accordance with the following principles:
1. A principle the the University will not seek to profit financially from it’s own provision of medical services through its health plans and of pricing university provided services at cost.Rationale and Brief Explanation:
Services, and especially medical services within the scope of a health care plan that are provided by the university ought not to become a profit center for the university units providing the services. Nor should it be "priced" above the actual costs to the university to provide those services. Neither the university, nor any of its units, will not seek to make a profit from providing benefits or health care services. The university will account for the pricing of the provision of its services in a transparent and open way.2. A principle of honest and transparent pricing of health care costs and of avoidance of inflexible contracts with health care plan third party administrators or providers.
The university has a responsibility to avoid "blank slate" contracting with service providers in which it loses control over both the pricing and provision of services through the plans it purchases. The university should steer clear of lengthy, inflexible contracts, especially as it renegotiates its contracts with outside providers. The university fails in its core responsibility to oversee its health care plans when it has neither information nor control over key aspects of health care services, of health care provisions, or of health care pricing.3. A principle of reducing the costs assigned to health care plans by assessing against such costs the value contributed to productivity.
The university has a responsibility to treat health care plans as an integral part of its productivity enhancing strategies. That, in turn, requires the university to net the value of productivity gains against the costs of service provision. In other words, productivity gains will not be captured to the university but accounted as a cost reduction value of health care plan provision. That, in turn, should be the basis of the cost sensitive approach to health care plans that the university has already embraced.4. A principle of ethical decision making and enhanced accountability evidenced through the periodic audit of such plans, periodic reports on compliance with the Penn State Ethical Decision Making Model, and the public disclosure of the results of both to stakeholders.
The university has a responsibility to ensure that its health care plans are operated consistent with a set of service missions that are publicly articulated and assessed regularly. And shared governance, especially where the university stands in a fiduciary relationship to its employee participants, who contribute financially to the operation of the health care plans, gives rise to a responsibility by the university to provide stakeholders meaningful opportunity to monitor and assess both the plan and the university's own oversight, including discussion of failures by the university to adhere to these principles.
The principles articulated above are rich and complex. But they all are consistent with the great principles of university governance at Penn State, with Penn State’s values, it ethics and its service mission. What follows is offered as a way of expanding on some, but by no means all, of the premises that underlie each of the principles.
1. A principle that the University will not seek to profit financially from its own provision of medical services through its health plans and of pricing university provided services at cost.
The university must avoid using the construction of health care plans to profit from the provision of services. Health care plans may be a business for the entitles through which the university contracts for services, but it is not the business of the university. Particularly as the university seeks to reduce its costs, including administrative costs, it will not just be paying for medical services under a health care plan (the essence of self insurance), but it will be paying itself for the services it provides. That creates a possibility, or the appearance of the possibility, that the university can profit from its own expenditures. Where payment is shared with employees--at matching rates that appear to increasingly shift financial burdens form the university onto employees, then it begins to appear that the employee is paying the university for services that the university itself provides. Services, and especially medical services within the scope of a health care plan that are provided by the university ought not to become a profit center for the university units providing the services. Nor should it be "priced" above the actual costs to the university to provide those services. To do otherwise is to create the appearance of a situation in which (1) cost drives the parameters of scope of health care plans and its pricing; (2) the university controls the price of the services it provides; and (3) can then control the entire structure of benefits planning. To say that the university has no control over the pricing of the medical services it itself provides because of has ceded pricing to a third party is neither an excuse nor is it excusable. And it might give rise to the sort of conflict of interest that the university has itself determines may not accord its its own ethics principles. Neither the university, nor any of its units, will not seek to make a profit from providing benefits or health care services. The university will account for the pricing of the provision of its services in a transparent and open way. That is especially important where, as here, the university is spending not only its money but substantial amounts of the funds of its employees in plans which it controls.2. A principle of honest and transparent pricing of health care costs and of avoidance of inflexible contracts with health care plan third party administrators or providers .
The university should strive to ensure that all health care services provided by university units are priced at actual cost. As the university increasingly becomes self insured it acts through service providers and other intermediaries. The university has a responsibility to avoid "blank slate" contracting with service providers in which it loses control over both the pricing and provision of services through the plans it purchases. The university should steer clear of lengthy, inflexible contracts, especially as it renegotiates its contracts with outside providers. The university fails in its core responsibility to oversee its health care plans when it has neither information nor control over key aspects of health care services, of health care provisions, or of health care pricing. This responsibility is more acute when the services are provided by the university itself. Penn State Purchasing Services adheres to the National Association of Educational Procurement (http://purchasing.psu.edu/code-ethics); the university's health care related purchasing ought to comply as well. The university must avoid putting itself in a situation where it might appear that though it may be responsible for the provision of services it has no access to or ceded control over the provision of services or administration of health care plan contracts that result in pricing or administrative decisions that are inimical to the university. The University should not seek to shield itself from accountability on the basis of agreements with service providers it may have itself negotiated. Nor should the university claim that its planning is cost driven and then suggest that it has no role in determining the cost of services. That creates a situation where the only means for reducing costs is by requiring changes in stakeholder benefits and access to benefits rather than on robust negotiation of benefit costs.3. A principle of reducing the costs assigned to health care plans by assessing the value contributed to productivity.
The university has a responsibility to treat health care plans as an integral part of its productivity enhancing strategies. It is not a separate business with the university's own employees as clients. To that end the benefits of health care plans, properly assessed, ought to reveal the gains in employee productivity that are the result of or to which the services made available through health care plans, contribute. If health care plans are to be driven buy costs, it is the responsibility of the university to fairly assess those costs. That, in turn, requires the university to net the value of productivity gains against the costs of service provision. To fail to net productivity gains against costs unfairly distorts both the costs and value of operating a health care plan and hinders effective and fair decision making about health care plans. Application for this principle advances the University's strategic objectives of sustainability and contributes to administrative regulatory coherence. It ensures that the university's policies can be operated in a way that most efficiently maximizes the synergies possible through the coordination of university operations, appropriately measured. The university should ensure that health care plans measure productivity and sustainability gains from the provisions of services through health care plans. The value of these positive effects on university operations ought to be be netted against (used to reduce) the overall costs of the provision of those plans. In other words, productivity gains will not be captured to the university but accounted as a cost reduction value of health care plan provision. Productivity gains, then, ought to count against the costs of programs designed to increase productivity—like health care plans.4. A principle of ethical decision making and enhanced accountability evidenced through the periodic audit of such plans, periodic reports on compliance with the Penn State Ethical Decision Making Model, and the public disclosure of the results of both to stakeholders.
This principle of fully assessing productivity gains against health plan costs includes a principle of sensitivity to diversity issues in health care plans that emphasize culturally appropriate care. It is now well known that medical services may depend, in some respect, on the race and ethnicity of patients. The university should be aware of the work of agencies such as the National Institutes of Health, National Institute on Minority Health and Health Disparities. It should ensure that health care plan design and implementation is sensitive to issues that may impact minority health and access to appropriate treatment and ensure that third party providers use their best efforts to avoid practices that may exacerbate practices that may (inadvertently) produce health care disparities. The university will work toward health literacy among providers and participants in its health care programs. To that extent the university ought to ensure appropriate education on culturally appropriate care and educate both its plan administrators and its employees on ways to mitigating these problems.
The university's public service mission should incorporate the understanding that the university ought to serve as a model in its operations. That principle gives rise to a responsibility to operate in a way that provides guidance for others. That guidance is ineffective where the university's operations remain hidden from view. This is especially important in the area of health care where university policy affects many. There are no secrets in operating a health care system. Beyond those issues of privacy to which law speaks, the university has a responsibility to demonstrate its responsible behaviors throughout its operation. This applies particularly in those areas where the university holds funds in trust for others (the contributions of employees toward health care plans). Basic principles of fiduciary duty, here combined with the responsibilities of a public mission university to serve as a model, give rise to a responsibility to ensure appropriate accountability, through auditing, and full transparency through the distribution of auditing reports to university stakeholders. Those auditing reports should focus not just on the reporting of activities but also test the costing, pricing and operations of the system. This is more important in the administration of health care plans in which the university also administers employee contributions. The university has a responsibility to ensure that its health care plans are not operated against its "clients" but consistent with a set of service missions that are publicly articulated and assessed regularly. And shared governance, especially where the university stands in what might reasonably be understood as something like a fiduciary relationship to its employee participants, gives rise to a responsibility by the university to provide stakeholders meaningful opportunity to monitor and assess both the plan and the university's own oversight. But this auditing principle also has a qualitative feature. The university should explain how it has adhered to these principles and where it has not adhered to the principles, explaining the reasons for the failure to adhere.
Enhanced accountability ties health care plan administration more closely to a core Penn State value—that of ethical decision making—especially in the construction, conceptualization and provision of health care plans. Penn State University is rightly proud of its pioneering efforts to introduce ethics in decision making. Penn State has declared a commitment to the the principle that “Activities conducted by individuals on behalf of the University must be fair and appropriate and avoid even the appearance of unethical behavior.” In particular, Penn State’s Ethical Decision Making Model: Guiding Questions is “designed to encourage us to pause and think about the implications and consequences for decisions that we make on a daily basis. The model is based on the Penn State Values and was developed by the University Ethics Committee in conjunction with the Rock Ethics Institute.” The five core clusters of questions for ethical decision making are critical to fair and ethical approaches to health care planning and operation: (1) gather the facts; (2) determine the ethical issues; (3) consider ethical principles, responsibilities and Penn State Values; (4) identify those impacted; and (5) explore possible solutions and actions. It is particularly with respect to the second and fifth of these that health care planning could be usefully directed. The university ought to have a responsibility to ensure that it has not blindly applied an ideology of plan design and operation that serve others and that is not closely bound up with the university’s own values. The university ought to have a responsibility to ensure that it considers all alternatives, not just those on offer from third party providers or those that have been embraced by other institutions. Penn State does its own values a disservice should it seek to embed its policymaking within a herd instinct mentality in which alternatives are considered and rejected merely because “everyone else has.” Penn State’s own ethical principles emphasize this obligation by specifying the sorts of questions administrators ought to be asking in making policy: “How does each possible solution: — Reflect the Mission of the University? — Embody Penn State Values? — Model the actions of an ethical leader? — Establish a precedent for future situations? — Impact all parties involved? — Address the moral feelings and judgments we had?” The university has no doubt sought to embed these critical analytical structures in its decision making, but it has not managed to disclose to its stakeholders how that process has been embedded. There is no transparency and thus no assurance or assessable actions that stakeholders may rely on in engaging with health care planning decisions.
The university has a responsibility to ensure that not only ought its administrators comply, transparently, with the Ethical Decision Making Model, but that all of its health care plans are administered in compliance with its ethics based decision models. And the university has a responsibility to demonstrate the ways in which such ethical decision making has been incorporated into its administration of health care plans at Penn State.
 Penn State University Ethics, (http://universityethics.psu.edu/university-ethics)
 Penn State Ethical Decision Making, available (http://universityethics.psu.edu/sites/universityethics/files/135437_b_pennstatevalues_decisionmakingflyer_and_questions.pdf).