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| The Last Word |  |
A message from the director of Human Resources
Future directions for your group benefits
 |
| Gerard McDonald |
One of the more important elements of the university’s overall benefits program is the group insurance plan for employees and retirees. The core benefits program provides coverage to employees and their families in:
| - supplementary
health (includes drugs, hospital, and extended
health benefits) - basic life insurance - basic accidental death and dismemberment insurance - worldwide travel insurance - dental - long-term disability |
One of
the most significant issues we are facing is the rapid escalation in the
cost of providing these group benefits. The total cost has doubled over
the last 10 years; however, recent renewal increases have been escalating
even more quickly, and our total plan cost is expected to double again
within the next five years. The impact on the university and its employees
and retirees is potentially quite significant.
Several factors account for this dramatic upward trend. On the drug side,
for example, there are new breakthrough medications, alternative and extended
uses for existing drugs, direct-to-consumer marketing, the shift to preventative
treatments, and the absence of an incentive to reduce costs for private
plans; these are expected to contribute to a continuing escalation in
drug therapy costs of 15-20 per cent each year. This is particularly significant
when one considers that prescription drugs typically account for 70 per
cent of each health claim dollar. Other factors such the aging workforce,
reductions in government plan coverage, and less healthy lifestyles will
also contribute to higher levels of benefit plan use.
In the meantime,
this trend of continually increasing costs is not unique to Memorial University.
Many employers in the province and across the country have been experiencing
the same issue. Benefit cost increases in the range of 15 per cent each
year are presenting an obvious challenge to the ability of employers and
their employees to improve or even maintain existing benefit levels. This
will probably be an even greater challenge for employers in the public
sector.
The scale and sustained nature of these cost increases has been a subject
of concern for the university administration and the Board of Regents.
In October 2002 the board appointed the Ad Hoc Benefits Committee to help
identify, in consultation with plan stakeholders, any measures that may
be necessary to ensure the sustainability of our group benefits program.
The committee met with the Employee Benefits Committee in March to discuss
these concerns, and formal submissions were later received from MUNFA,
CUPE and MUNPA on the ideas and concerns highlighted in the committee’s
draft report.
In March of this year the Board of Regents approved a renewal of all elements
of the group benefits program on the basis proposed by our benefits plan
providers, with the exception of the supplementary health and dental components.
A renewal of those two plans with effect from April 1, 2003, with no change
in existing benefit levels, was later approved by the board at its meeting
on July 25.
Confirmation of government funding for the university’s additional
health plan costs in 2003-04 played an important role in enabling a renewal
of the group benefits program at existing levels. This will ensure a continuation
of our group benefits program without any change in benefit levels for
this fiscal year. However, it will also give the Ad Hoc Benefits Committee
additional time to examine the many issues and options related to the
challenge of containing benefit program costs on the one hand, while at
the same time ensuring a fair and responsive program of benefit coverage
for our employees, retirees and their families.