Anticipating Cost Hikes

Unsure about how insurance costs will fare when Affordable Care Act is fully in place, institutions are passing on anticipated cost increases to employees, CUPA-HR survey suggests.

August 25, 2014

Institutions say complying with the Affordable Care Act has caused them to pass on some costs to employees, according to a new survey from the College and University Professional Association for Human Resources.

Since the act began to take effect, some 20 percent of institutions have made changes to benefits in an effort to control associated costs, the survey says. About the same percentage of colleges are considering making changes, or making further changes, in the year ahead. Of those institutions that have made changes so far, 41 percent have increased employees’ share of premium costs. Some 27 percent have increased out-of-pocket limits, while about one-quarter increased in-network deductibles or dependent coverage costs, or both.  Some 20 percent increased employees’ share of prescription drug costs.  

Here's a full breakdown of the changes those 20 percent of responding institutions have made:

Changes to Benefits


Percentage of Institutions Reporting This Change

Increased employee share of premium costs


Adopted or expanded wellness programs/initiatives



Increased out-of-pocket limits


Increased in-network deductibles


Increased employee share of dependent coverage costs


Adopted or expanded use of financial incentives to encourage healthy behaviors


Increased employee share of prescription drug costs


CUPA-HR’s survey didn’t ask human resources professionals if the changes they made since the new healthcare law took effect were related to it alone. But the act “absolutely” was part of institutions’ decision-making processes, said Andy Brantley, the organization’s president and chief executive.

“No one is really sure what the short-term or long-term [Affordable Care Act] implications will be," he said, "so every institution must carefully make decisions each year with the understanding that there are few, in any, reliable predictions regarding future costs."

Such passing-on of costs could be considered a kind of “second wave” of human resources changes related to the act. The new health care law as it relates to higher education made headlines last year, when scores of colleges and universities began to limit adjuncts’ hours so as to minimize their number of full-time employees. Under the act, large employers must offer health care coverage to employees working 30 hours or more per week.

The adjunct issue is one reason colleges aren’t yet sure how their benefits bottom line will be impacted by the law. Another is that it’s unclear how many employees will opt for the public insurance exchanges opening under the act. There’s uncertainty, too, about whether the rates for those exchanges and other plans will hold once the system is up and running.

Perhaps because the act expands rewards and incentives for workplace wellness programs -- and certainly because institutions have for years been struggling to control ballooning health care costs – such programs are on the rise. Of the 20 percent of institutions that have made changes since the act took effect, some 36 percent adopted or expanded wellness initiatives. Twenty-one percent used new or enhanced financial incentives to encourage healthy behaviors.

CUPA-HR's survey didn’t ask what kinds of incentives colleges and universities were offering -- carrot or stick. But that topic has been a hot one in human resources circles during the last year, following Pennsylvania State University’s much-criticized plan to fine employees for not complying with certain wellness initiatives. Most of the plan was subsequently tabled; a tobacco use surcharge stayed in effect, however.

Frank Casagrande, an independent consultant to colleges and universities on health care, said many of his clients were thinking about wellness plans, too. While moves such as increasing prescription costs and out-of-pocket limits for employees were essentially “moving pennies around,” he said, wellness programs seek to decrease health care costs over all – not just change who’s paying them.

“The only meaningful way to change health-care costs is to change behavior," Casagrande said, adding that such programs -- when presented in an appealing way to employees -- can be good for all involved. “It's not a bad thing to think about what is in your own best self-interest, and in the long-term interest of the college."

Brantley said he expects the use of wellness programs to grow going forward, “as both institutions and insurance companies acknowledge that prevention and early intervention are much cheaper -- in both dollars and lost productivity -- than treatment of health challenges that could been prevented or identified and treated much sooner.”

The CUPA-HR findings also are line with an Inside Higher Ed survey on health care last year. Some 60 percent of human resources chief officers who responded to that survey said they would consider a plan such as a Penn State’s – despite the negative attention it was receiving at the time.  Experts attributed the finding to a desire among human resources executives to control costs to the point that they would consider even unpopular options.

CUPA-HR’s study included responses from 370 institutions, with 29 systems reporting in aggregate (601 campuses total). About two-thirds were private; the rest were public. Respondents included associate degree- to doctorate-granting institutions. Respondents reported a median full-time employee roster of 255 full time employees and 3,611 students.

Other significant findings of the survey include that preferred provider organizations, or PPOs, remain the most popular plans offered by respondents – some 82 percent. The second-most popular plan type is  a high-deductible health plan, with 44 percent of institutions offering this kind of plan. (This option is on the rise; five years ago, only 17 percent of respondents offered such a plan).

Sixty percent of institutions offer health-care benefits to same-sex domestic partners or spouses. That’s up from 57 percent this year, and 46 percent in 2009. Brantley said he was “very pleased” by that upward trend.

No institution not offering healthcare benefits for part-time employees provides financial support for enrollment in a public exchange. Only 2 percent of those institutions are considering doing so next year.

Almost all institutions provide basic life insurance, long-term disability, paid time off, tuition assistance and retirement benefits to full-time employees, but short-term disability is offered by just two-thirds of institutions.

Regarding retirement benefits, less than half (45 percent) still offer traditional retirement plans. Nearly all offer 403(b) plans, or tax-sheltered annuities, but far fewer offer 401(k)s or other kinds of plans.

Paul Yakoboski, a senior economist at the TIAA-CREF Institute, said retirement plans tend to vary by institution type. The “norm” among private colleges and universities is a primary defined contribution plan with no defined benefit. Among publics, he said, defined benefit plans are most popular. He agreed with the CUPA-HR finding that 403(b) plans are the “norm” for higher education, when it comes to defined contributions.

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