A provision of the Affordable Care Act may end up costing OU employees more in the future.
Ohio University employees might see their health care deductibles double and premiums rise because of a provision of the Affordable Care Act that taxes so-called “Cadillac” health plans, officials have said.
OU hasn’t ruled out raising tuition to help offset the cost of the tax, which university officials estimate could cost OU as much as $9.6 million by 2025 if proactive measures aren’t taken. But increasing tuition isn’t a formal recommendation currently up for consideration.
However, the university’s budget is put into one pool of funds.
“We want to keep tuition rates low, but that’s the primary revenue source, and health care is going up, and compensation is going up,” said Ben Stuart, co-chair of an OU council investigating the tax, and a civil engineering professor.
But OU officials have said it appears the brunt of the tax would be passed onto employees by way of having them pay more for their health care. The university currently pays 85 percent of health care premium costs while employees pay the remaining 15. Employees, depending on their health coverage, would pay as much as 17 percent of their plans if a set of proposals currently being discussed were to be approved.
The recommended changes apply to all faculty members, administrators and classified staff enrolled in the Faculty and Staff PPO Plan, said Greg Fialko, OU’s senior human resources director.
The recommendations come from the Benefits Advisory Council, which was tasked by another committee that reports to OU President Roderick McDavis’ direction to find a feasible solution.
The “Cadillac Tax” is a 40 percent tax to employers that provide high-quality health benefits to employees. The tax is applied to the dollar amount over $10,200 for single plans and $27,500 for family plans.
As co-chair of the Benefits Advisory Council, Stuart works with other OU employees to find a way to shift costs away from OU.
The council estimates that the university is set to face a $2.8 million tax in 2018, based on the number of plans that would be subject to the tax. That’s $9.6 million by 2025 if changes are not made, according to university documents.
The council recently made recommendations — chiefly passing more costs on to employees as ways to offset the tax — to OU’s budget planners.
“It is going to be a significant cost increase for employees if we go forward with this,” Mitchell said.
Recommendations for FY2016, which will potentially start in July 2015, include:
• Doubling annual deductible costs from the current rate of $200 to $400 for individuals, and from $400 to $800 for families
• Capping university contribution to inflationary cost increases to health care at 5 percent
• Increasing office visit copays from $20 to $25
• Increasing the co-insurance maximum from the current rate of $1,000 to $1,500 for individuals and from $2,000 to $3,000 for families
• For married employees without kids, premiums could rise from 15 percent to 16 percent of their plan’s cost. Employees under a family plan could see their monthly premiums increase to 17 percent from the current 15 percent rate.
But several OU faculty members have said the high-quality health care plans at OU are what drew them to their jobs.
“Most of us here, myself included, took this job not for the salary but for the benefits,” Stuart said.
Outlets for employee feedback included an October 2014 survey that asked employees what changes they preferred the university make to their health care plan if it were necessary.
“I have had some emails from faculty suggesting other costs that the university should look at cutting first, and some pointing out the very real ways that this is going to reduce not only compensation in general but after-tax income,” Beth Quitslund, Faculty Senate chair and associate professor of English, said in an email. “While we are very unhappy about the changes, they seemed like the best of the bad options available.”
Quitslund added: “To be honest, I am personally anxious about the effects on my family’s budget.”
But an increase in tuition and funding from the state — OU’s largest sources of revenue — might not be enough to completely compensate for the tax, Stuart said.
“The university is taking a proactive approach,” Fialko said in an email. “The BAC wanted to make sure employees are aware of the issue and provide an opportunity for employees to provide feedback regarding potential actions.”
OU’s agreement to keep faculty compensation competitive could also make balancing benefits and employee salaries difficult.
“I would say employees expect to receive raises on an annual basis,” Mitchell said, adding that while salaries may not be cut to offset the tax, it’s possible that raises may not be distributed as a result of the recommendations.
Under the Faculty Compensation Plan, implemented in early 2014, the university intends to increase OU faculty salaries to be the third highest for state universities in Ohio.
“If the university ends up paying an extra $2.8 million, that's $2.8 million (it) can't use for something else,” Stuart said.
The Budget Planning Council will vote on the recommended 5 percent university cap to inflationary cost increases at the next budget meeting Friday, Quitslund said.
@Dinaivey
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