Health Benefits Fight at Harvard

What does it mean when even faculty members at the world's wealthiest institution think they're getting cheated on health care benefits?

November 14, 2014

Lots of colleges and universities have recently made changes to employee health care benefits, and some have encountered strong opposition from the faculty -- most notoriously at Pennsylvania State University, which tried to fine employees for not completing annual screenings with personal questions about mental health and family planning. Most of the Penn State plan was abandoned amid faculty outcry, but key components remained; there, and in most cases, administrators have said at least some benefits changes are necessary, pointing to ballooning health care costs, concerns about complying with the Affordable Care Act, and budget woes. But what about the wealthiest institution in the world? Does it really have to overhaul the benefits it offers faculty? That’s what professors at Harvard University are asking – and protesting.

Last week, Harvard’s Faculty of Arts and Sciences – its most powerful faculty, according to the university’s governance structure – voted unanimously to ask President Draw Faust and the Harvard Corporation to halt planned changes to non-unionized employee benefits, including the introduction of coinsurance. Starting in January, faculty and non-unionized staff will have to shoulder annual deductibles of $250 per person, or $750 per family, and coinsurance for up to 10 percent of costs for hospital stays and other non-routine care. The annual out-of-pocket maximum is $1,500 for individuals and $4,500 for families.

The university has argued that in return for the changes, all employees’ monthly premiums will go down. For the first time, there is also an additional high-deductible plan linked to a health care savings account to give faculty members more flexibility. But faculty critics say the monthly premium decrease is nominal, and that the sudden introduction of coinsurance leaves the most vulnerable among them in a bind (currently, office visits cost $20 and emergency room visits cost $75). They say junior faculty members – especially those with children – and those with ongoing health concerns are especially at risk. And for everyone, they say, it’s a compensation – if not a pay – cut.

Mary D. Lewis, a professor of history who moved to ask the president and corporation to reverse the changes, described last week's meeting as “standing-room-only.” She said the gathering was extended an hour to give various faculty members a chance to voice their opinions, and to hear counter-arguments from the administration. In the end, though, the simple motion – “that for 2015 the President and Fellows be asked to replace the currently proposed health care benefit plan with an appropriately adjusted version of the 2014 health benefit package, maintaining the 2014 plan design” – carried without a dissenting vote.

In her remarks at the meeting, Lewis said it was now open enrollment for the new plans, and encouraged faculty members to look at their options in detail. She said that although monthly premiums were going down – by $10 per month, in Lewis’s case – out-of-pocket costs were going to go up by as much as $1,500 per individual or $4,500 per family, for those making $95,000 per year or more (rates are adjusted somewhat for those making less).

But either way, Lewis said, “in all but the healthiest years, you are likely to experience a pay cut of some sort, and one that is determined solely by your medical luck.”

Lewis also criticized various university arguments for the changes, such as that health care costs might continue to rise going forward, and that a 3.6 percent increase in monthly premiums would have been necessary to avoid them. But the professor said such a premium increase would have cost her $15 extra dollars per month, and about $37 more for Harvard if contribution ratios remained the same.

“Since insurance is about managing risk, I would have willingly spent more per month in premiums in exchange for some peace of mind,” she said.

Alison F. Johnson, a professor of history, has also been vocally opposed to the new plan. In an interview, she said that if the new plans had been in place last month, when her son became suddenly ill with a serious respiratory virus and had to be hospitalized, the expensive bill likely would have landed on her credit card. She said that although Harvard faculty members are relatively well-compensated compared to peers elsewhere, she's got little to any extra money lying around at the end of the month, due to the high cost of living in Boston and the fact that she has several other children.

"He’s fine now, but it was awful and very scary,” Johnson said of her son’s illness, adding that she had to scramble to find help with other family and professional obligations during his hospital stay. “What I don’t have time to do is find $1,500 in my back pocket. I don’t have time to figure out which of my bills I’m not going to pay. And I don’t have the option to say that I can’t afford for him to stay here overnight -- but this is what our new policy pretends that people could say.”

Lots of colleagues are in the same position, she said.

Faculty members also have raised concerns about the process by which the changes came about. They did go through the university benefits committee, but some professors say it’s unclear what the committee’s charge was, or how much control they had over the end result. Daniel Carpenter, a professor of government who was the only tenured Faculty of Arts and Sciences professor to sit on the committee, declined to comment. The university says it was working on the new plans for several years. Opposed Arts and Sciences faculty members say they only found out details in September. 

Still, there may be more sympathy for the plans outside of Arts and Sciences. In a recent opinion piece for the student newspaper, The Harvard Crimson, several professors from Harvard Medical School who sat on the benefits committee explained the rationale for the changes, saying the new plans are "competitive, progressive and maintain a commitment to prevention and choice in providers."

"There has been much discussion of the rise in health care costs across the country in recent years," wrote Michael E. Chernew, professor of health care policy; Barbara J. McNeil, Ridley Watts Professor; and Joseph Newhouse, John D. MacArthur Professor of Health Policy and Management. "Our work and recommendations are about the future, and we have taken that charge seriously. Yes, we anticipate that health care costs will continue to rise for Harvard — but these changes ultimately are designed to slow the rate that those costs will grow in coming years, ensuring fewer resources are diverted away from Harvard’s research and teaching mission, and offering a benefit that offers value to members of our community."

Another outside faculty member, Katherine Swartz, professor of health policy and management at the Harvard School of Pubic Health, told Harvard Magazine before details of the new plans were announced that, like many academic institutions, “We have a very generous health-insurance plan, but even more so." Harvard, she added, “is not doing anything radical at all.”

So far, Harvard hasn’t responded to the Arts and Sciences faculty’s resolution. But it seems students are on their professors' side. The Crimson this week ran an editorial saying that the university should heed the call of a unified faculty.

“When our professors speak in one voice, we should take notice,” the editorial says. “They have raised serious concerns among professors, who worry about how the policy will affect them, their families, and other staff. The University is more than a corporation, and it should not behave otherwise. Though the open enrollment period for next year’s health plans has already begun, the administration should scrap the changes and respond substantively to [faculty] concerns."

Lewis, Johnson, and nine other faculty members published their own Crimson op-ed this week, shredding the university's argument that the changes would put Harvard in line with its peers: "We contend that the only peer pressure Harvard should heed is that which makes us a better research university. Increasing salaries and benefits might do this if it allowed Harvard to recruit and retain the brightest minds in our fields of research and teaching, as well as the post-doctoral fellows and staff needed to support these research and teaching endeavors."

Jeff Neal, a university spokesman, referred most questions about the plan to an official university announcement. But he said that Harvard's endowment -- currently some $36 billion -- is "tied up" in many other obligations. Even an institution known as the "wealthiest in the world" doesn't have unlimited resources, he said.

“It’s important to understand that most of the features of our health plans are not changing,” reads official information on the plans. “The costs to you and your family for the most common types of medical care – preventive care, office visits and prescriptions – are not changing. Preventive care remains fully covered, and office visits and prescriptions remain subject to only a copayment. You will have access to the same broad network of doctors and hospitals from the same health care plans.”

As for why the changes are happening, Harvard says that it, “like all employers, continues to grapple with health care costs that have increased at a pace well over the rate of inflation for many years. More generally, benefits have grown to consume 12 percent of the university’s budget (from 8 percent) over the past decade.”

Harvard says the changes are the product of two years of analysis and review by experts, and that the process was “guided by important principles, including continued access to high quality care, choice of plans, affordability, fairness in cost-sharing, and greater transparency in health care costs and cost differences between providers.”

While many Harvard faculty members aren’t buying that explanation, outside experts say that plans without high deductibles or coinsurance are becoming obsolete, and that more and more institutions – even ones with large endowments – are seeking ways to manage their growing health care burdens through cost-sharing.

“This is not just about Harvard or higher education,” said Frank Casagrande, an independent consultant to colleges and universities on health care and other matters. “It’s a point of cost containment.”

Casagrande, who has never advised Harvard, said benefits changes often arise when there’s a growing difference between what employees are paying for their health care and what the employer is paying. Adjusting plans is often a way of a bringing back into balance the cost-sharing. Still, he said, “It’s not like Harvard’s making money on this. It’s about keeping the balance between what the employee pays and what the employer pays in check, and this is a mechanism for doing it.” 

Casagrande said he wouldn't be surprised if similar measures found their way into even unionized staff contract negotiations.

Beyond changing plans, Casagrande said it’s important that Harvard helps educate employees on behavioral changes to keep costs down, such as not going to the emergency room when other, less expensive options are available. Of course, he said, sometimes there are no other options.

Andy Brantley, president and chief executive of the College and University Professional Association for Human Resources, said that as "health care costs continue to escalate, colleges and universities across the country have had to make changes to their healthcare plan design." The number of colleges and universities moving to health savings accounts in particular has steadily increased for the past several years, he added.

But Johnson said that it would be unfortunate if administrators elsewhere “pointed to somebody else who made the cut” to justify even less generous benefits on their own campuses.

Lewis said the “first order of business” was to see what the planned changes mean for Harvard.

“My belief, and this was underscored by what a number of other faculty members said publicly at the meeting,” she said via email, “is that recruitment, retention and performance of faculty and staff are bound to be better in an institution that reduces the risk and anxiety faced by its employees so that they can focus on the business of teaching bright minds and producing new knowledge.”


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