Employee health care costs skyrocket

The University is searching for ways to tame employee health care costs, which shot up 18 percent to $36 million this fiscal year.

Executive Vice President and Treasurer Lou Katz said GW is footing an extra $6.5 million due to costlier medical services, newly hired faculty and staff, and several “high cost claims.” He warned that costs would continue to spike “significantly” with the full rollout of the Affordable Care Act next year.

“If we didn’t make any changes, [the cost] would be significantly higher. We’re doing everything we can to reduce what the increases will be for the people covered by the plans,” Katz said.

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Executive Vice President and Treasurer Lou Katz said health care costs are putting a dent in the University budget, mostly due to recent high cost claims.

A review committee made up of professors and administrators over the next several months will focus on ways to change GW’s three United Healthcare options to cut down on costs. The Affordable Care Act could continue to drive up costs because it taxes insurers, medical device companies and drug manufacturers, which Katz said he predicts will cause health care providers to raise rates.

Several committee members did not return requests for comment. Michael Castleberry, the former executive committee chair of the Faculty Senate, added that the committee will not know the finalized rates for the next year for several months.

The University offered three plans to its faculty this year, whose out-of-pocket payments ranged from $2,500 to $5,000 for individuals and $5,000 to $10,000 for families – below the median costs for university employees nationwide.

While insurance premiums for campus employees have steadily increased nationwide, they have seen a relative slowdown in costs in the past year, only rising 6.7 percent for employee-only plans, according to a survey conducted by the College and University Professional Association for Human Resources last fall.

Linda Blumberg, an economist and senior fellow at the Urban Institute’s Health Policy Center, said GW’s substantial increase in costs likely comes from more faculty getting sick and needing health services this year.

Blumberg also cautioned that the rising costs from the Affordable Care Act would be small compared to GW’s total increase this year, predicting at most a 3 percent increase. She added that the University would likely choose slow the growth of employee salaries to compensate for rising health care costs.

“Economic research has shown us over the years very consistently that the contributions to health insurance made by employers are explicitly taken out of the wages paid to the workers,” she said. “Instead of faculty salaries growing at a normal rate, they grow slower as a consequence of the fast increase in medical costs.”

About 4,700 faculty and staff members, or about two-thirds of GW’s employees, are on the University’s health plan. Additionally, about 2,700 dependants like spouses and children are on the plan.

Katz said the University wanted its benefits package to be competitive with peer institutions to continue drawing top faculty. GW’s increase in faculty health care services is significant when compared to peer institutions like University of Southern California and Duke University, which saw a 2 percent to 4 percent bump in employee benefits spending, respectively.

The rates are on par with peer institutions like Boston University, which offered two plans. BU employees saw out-of-pocket payments ranging from $2,000 to $6,000 for individuals and $4,000 to $12,000 for families this year. New York University offered five plans, with three provided by UnitedHealthCare. Employees on the plan were charged between $2,000 to $8,000 for individuals and $4,000 to $15,000 for families.

– Chloe Sorvino contributed to this report.

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