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Retiree Medical Study

Board of Curators MeetingJune 25-26, 2015

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June 25-26, 2015

Ensure retirees and university are getting the most for their dollar Retiree medical benefits have changed considerably Medicare Advantage plans are available with similar value at lower cost

Ensure university can continue retiree medical benefits over time By 2019, university estimates an unfunded liability of $1 billion for retiree

medical benefits Could impact university’s financial statements and credit rating—same as

for all employers—unless there is progress/plan

Total Rewards Task Force Recommendations

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June 25-26, 2015

Current Liability Projection (in millions)

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June 25-26, 2015

Retiree-related goalsPreserve benefit and UM subsidy for current retirees

and employees close to retirementReward long service

Financial goalsStop growth of long-term liabilityReduce short-term liability to the extent possibleEnsure stability of medical plan for retirees

Goals and Assumptions

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June 25-26, 2015

Progress to Date

Jan 2015 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2017

UM Retiree Medical Study Timeline

Announce Study

Launch Dedicated Website

Review Current Plan

Conduct Benchmarking and Marketplace Review

Conduct Listening Tour

Develop Potential Designs

Conduct Focus Group Testing

Develop Implementation/ Communication Strategy

Finalize New Plan

Announce

Direction

Guiding Coalition Meetings Website Updates Educational Resources

New plan implemented

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June 25-26, 2015

Peer institutions:*• Indiana University• Iowa State University• Michigan State University• Ohio State University• Pennsylvania State University• Purdue University• University of Alabama• University of Florida

Benchmarking Process: Peer Universities

* Comparator list was used for other comparative studies such as the Benefit Index.

• University of Georgia• University of Illinois• University of Kentucky• University of Michigan• University of Minnesota• University of Texas• University of Wisconsin

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Reviewed comparative results between UM’s retiree medical program and that of peer institutions

Survey information was supplemented by website searches and review of annual financial reports, as available

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June 25-26, 2015

UM’s eligibility (age and service) for subsidized benefits is generous compared to peers

Some peer institutions have moved toward Medicare Advantage arrangements for Medicare-eligible retirees

Pre-Medicare retirees still have limited viable options in the market

Benchmarking Findings

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June 25-26, 2015

Only 6 million of 45 million Medicare retirees have coverage through an employer plan

Market plans for Medicare-eligible are robust and offer universal access

Significant federal subsidies are available to complement or replace Medicare

Enhanced Medicare pharmacy benefit by 2020 (provided through Affordable Care Act) will greatly reduce need for employer pharmacy benefits

Other Market Considerations

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June 25-26, 2015

Retiree Listening Tour331 UM retirees out of 4,500 retiree medical

participants attended sessions throughout the stateEmployee Survey (age 60 and 10+ yrs of service)

690 out of 2,591 recipients (27%) responded to email survey

Focus Groups51 attended sessions

Listening Opportunities

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June 25-26, 2015

Don’t take away my benefits Why now? Make sure it’s affordable The current plan is a motivator for staying long term I don’t understand how medical coverage works Give me a few clear options What happens to people who move or travel a lot? It’s fair to give a higher subsidy to long-service employees,

but not to give them better benefits Medicare Advantage is fair as a choice but don’t force me

Common Feedback Themes

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June 25-26, 2015

Eligibility and/or vesting (who gets benefits?)Who receives the benefit (and for how long)?How much of a benefit do they receive?Are spouses covered; what about widow(er)s?

Plan design (what do they get?)Cost sharing for medical expenses

Coinsurance, Copays, DeductibleEmployer funding (how much does UM pay?)

The “Levers” for Retiree Medical Program

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June 25-26, 2015

Eligibility:Preserve plans for current retirees and employees

closest to retirementConsider increasing service/age requirementsClose retiree plan to new hires and those not vested

Plan Design:Evaluate market-based plans for Medicare eligible

retireesExplore pre-Medicare plan options

Potential Solutions

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June 25-26, 2015

Impact of Closing Plan: New and Non-vested

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June 25-26, 2015

Next stepsConsider all data and feedbackDetermine recommendationsVet potential recommendations with constituency

groups in August and SeptemberBring recommendations to Board of Curators at

October 2015 meetingAnnounce changes and begin education Fall 2015Changes effective January 2017

Next Steps