At the College over the past few weeks, we have focused on health care and the benefits and costs of our health insurance. These are subjects all of us have been discussing during the past year or two during the ongoing national debate about health care and coverage for those without insurance. Personally, I find health care and health care insurance conversations mind numbing, and I have struggled to understand the intricacies of the law and policy debate. Quite candidly, when a group of us meet annually to set Bowdoin’s health care benefits for the year and our premiums, I struggle to remember what I learned the year before.
Bowdoin is self-insured for health care. We engage Anthem to administer our plan and we do buy reinsurance for catastrophic losses. But we are fundamentally a self-insured plan. We work carefully each year with our actuaries to understand our risks and to budget conservatively. In the ten years I have been at Bowdoin, we have only exceeded our budget expectation twice, and in both cases, the numbers were quite modest.
The College health benefit packages are very extensive and viewed by our employees and in the marketplace as quite generous. Health care benefits in the nonprofit and academic world are generally much more expansive than those currently offered by many for-profit businesses. And largely because we are self-insured, the cost of the insurance to our employees has not risen at anywhere near the rates you read about in the insured world. For example, this year we read about rate increases for insurance elsewhere in excess of 10%. At Bowdoin, based on our recent experience, we increased our premiums to employees by about 3.5%.
That said, the complexity of all this has increased exponentially with the new health care law recently enacted, and our costs are going to go up. For example, before the law was adopted, Bowdoin offered coverage for preventative care. The new law mandates these preventative care benefits and requires plans to eliminate within the next few years all associated co-payments. We have imposed modest co-payments for some of these tests and procedures and could have maintained the co-payments for a couple of years under the new law. However, we deemed it prudent to comply with the new law this year and to account for the costs. We estimate that the elimination of the co-payments will increase our overall health care costs by about 1.5% a year.
There are more changes to come as regulations are being written and the impact of the new law and the new regulations are adopted into in the system. The fact is that wherever you come out on the policy of health care reform, Bowdoin’s costs for health care are going up because we are taking on greater expense. This will obviously affect the College because we will have to pay for these increased costs with existing revenues, reallocating funds from some other priority to health care.
No one knows for sure whether the new law will actually result in lower health care costs by reducing the underlying cost of health care in this country. Many are skeptical that costs will moderate based on the current law, and I am among the skeptics. We at Bowdoin are in discussions with local providers to achieve cost savings in cases where we are able to encourage our employees to use the services of these providers. We would only do this if we are convinced that the providers are of the highest quality in the area, because first and foremost we are concerned about the quality of care for our employees.
We are optimistic that the preventative care provisions of the new law—which Bowdoin already supported—will result in lower health care costs because problems will be detected earlier. And we are also optimistic that the health and wellness programs we have adopted will help make our employees healthier over the long term.
The irony of my focus on health care and the costs is not lost on me as Karen and I spend time in Massachusetts General Hospital with our son, Will. He is seriously ill with complications from the treatment of his brain cancer over the past couple of years. Many on campus know of his situation and we are very grateful for the support, good wishes, and prayers that come his way. Will and we remain optimistic for his recovery, although what has already been a long road appears to be even longer.
We take our health for granted until we don’t. So, my advice for this weekend is to remember what is important in life. Hug the family, take care of yourself and them, exercise, eat right, stop smoking, and enjoy life.
In the coming weeks, I will continue to offer my thoughts on subjects interesting to me or of importance to the College, but I want to hear your ideas too. If there is a subject you’d like me to address, send me an e-mail at email@example.com