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Priorities for Excellence: The Penn State Strategic Plan 2009-10 through 2013-14

Goal 7: Control Costs and Generate Additional Efficiencies
Strategy 7.3: Reduce the Rate of Increase of Health Care Costs

The rapidly rising cost of health care for Penn State employees is an area of great concern, lest these costs crowd out the available resources for competitive faculty and staff salaries and funds to pursue the University strategic academic pursuits. Numerous program improvements have been made over time, both in terms of the quality of health care available to employees as well as efforts to control better the cost of providing those services. The University’s recent long-term relationship with Highmark to cover all Penn State employees across the Commonwealth under one plan has been a substantial improvement.

The University must be creative in the design of its health care programs of the future. Integrating additional wellness education and incentives must be a strategic initiative in the University’s planning. Other options such as health reimbursement accounts (HRA) and changes to deductibles and co-pays should be considered, along with differential rates for employees who continue to engage in higher health-risk behaviors, and for those who utilize “in system” providers as opposed to other health care professionals. The University should also continue to support and promote faculty and staff wellness and health-related opportunities through efforts such as the Know Your Numbers program, Healthwise online, preventive screenings, flu shots, and related initiatives.

The University now provides health coverage for over 45,000 employees, retirees, and their dependents. Given that Penn State has about 26,000 covered lives in the State College region, it will be particularly important that the University devise ways to reduce the rate of increase in health care costs in this area of the Commonwealth. We believe that the creation of a regional medical campus of Penn State’s College of Medicine in State College/University Park can contribute significantly to reducing the rate of increase in medical costs for the University, increasing access to an even higher level of quality care in partnership with the Mount Nittany Medical Center, while better utilizing the University’s own resources for improving wellness and treating medical conditions of our Penn State community.

Penn State provides a generous retiree health benefit to its faculty and staff. It is a defined benefit plan for which the estimate of future expense has been growing rapidly in light of general health care cost trends. Actuarial estimates of this liability calculate its growth to over $3 billion in future years, consuming a larger and larger percentage of the University annual health insurance expense budget. The University must move to implement a defined contribution retiree health insurance plan for new employees within the next year, incorporating some form of health savings account. Current faculty and staff would be grandfathered under the existing plan or given the opportunity to switch to the new plan.

  • Senior Vice President for Finance and Business—Primary
  • Senior Vice President for Health Affairs and Dean of the College of Medicine—Primary
  • Executive Vice President and Provost
  • President
  • University Faculty Senate