Health Benefit Costs Affect Us All: Understanding the Issues

Double digit healthcare increases have been the norm for Santa Monica College and other California school districts throughout this decade. Between 2001- 2004, SMCCD expenditures for Health & Welfare Benefits have increased on average by 13% each year. What are the forces behind these skyward costs for employee and retiree benefits? How can we contain future costs and maintain the quality of what we currently have? And, if medical expenses are not controlled, how will this affect us all?

Let’s start with the basics. Healthcare increases are directly linked to how often we use
medical services and prescription drugs. As beneficiaries, we typically use these services for ourselves and our families when in need. Along with the huge numbers of baby boomers, health benefit usage has been on the upswing and, in turn, medical providers have simply passed the additional costs along to school districts subscribing to their healthcare plan. As a net result, public employers have been paying more each year for the same level of coverage but state budget allocationshave not been able to keep pace with these increases.

One example of a California Community College that recently changed medical providers and lowered their employee health and welfare cost is the Los Angeles Community College District (LACCD). In 2003, the LACCD Joint Labor/Management Benefits Committee (JLMBC) examined the rising cost of their healthcare plan and recommended that their Board of Trustees discontinue their existing medical plan and replace it with another less expensive one. According to the JLMBC, their decision to “contain costs while maintaining the quality of the benefits . . . has resulted in the ability of our employees to enjoy an outstanding benefits program.” One of the highlights of their new healthcare plan is that their eligible retirees and survivors enjoy a fully paid health care program.

The University of California Human Resources/Benefits Department has chosen to try and lower its’ costs through internal audit controls. According to UC HR/Benefits, they will soon begin initiating random audits of “20 percentof all UC members enrolled in medical plans.” Through the audit process, they will verify health and welfare plan eligibility of their employees, retirees and enrolled family members. Penalties are severe. According to UC officials, “failing to provide the required documentation when requested is a permanent de-enrollment (cancellation of coverage) of the ineligible individual.” Other public employers have chosen to offset the increasing financial burden by shifting the costs to their employees. This method typically results in higher deductibles, co-payments and prescription costs. An alternate benefits model is when employers offer their employees healthcare plans with a partial premiums which often typifies private sector medical plans.

The SMC Collegewide Benefits Committee has been meeting weekly to study, evaluate and recommend cost containment strategies. The issues are complex and the choices are many. To make wise and informed recommendations, we need information about your personal experiences, likes and dislikes of our existing Benefits Plan .

Please take a few minutes to complete our anonymous survey. Thank you.