Salary-Based Health Care Premiums at University of California

By SHRM Online saff Oct 9, 2008
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University of California (UC) President Mark G. Yudof announced in October 2008 that UC is employing a multipronged approach to its 2009 health insurance programs designed to help shield employees from escalating health care costs. In addition to a one-time special 2009 subsidy, UC will continue its salary-based approach to health insurance whereby lower-paid employees pay lower monthly premiums than other UC employees, and employee out-of-pocket costs (e.g., co-pays, deductibles) will not increase.

"We recognize how important good health benefits are for our employees and their families, especially our lower-paid employees who are hit hardest by escalating health care costs, and we continue to work very hard to ensure they have access to quality health benefits," said Yudof. "In addition to continuing to pay the majority of employee health insurance premium costs, as further protection for our employees we are also defraying a portion of employees' increased share, which cuts in half the percentage increases our lower-paid employees would otherwise see for Health Net, our largest medical plan."

Like employers nationwide, UC continues to see its medical insurance costs rise substantially. Total premium costs for UC in 2009 will increase 8.9 percent ($91 million) over 2008 costs. UC pays nearly $1 billion in employee health benefits annually. In addition to continuing to pay 87.5 percent of employee premium costs, Yudof said UC will also be contributing a special one-time subsidy of $5.2 million for 2009, which will further offset employee rate increases.

With the additional one-time subsidy, approximately 36,000 of UC's 110,000 employees covered by UC medical plans, including roughly 21,000 lower-paid staff, will see a decrease in their 2009 net monthly rates as compared to 2008. For example, employees earning less than $46,000 in the UC Kaiser plan will see a 6.8 percent (44 cents per month) reduction for single coverage, and a 17.9 percent ($3.38 per month) decrease for family coverage. Examples of how the special subsidy mitigates net increases for other employees:

Employee Earning $46,000 or Less

Single Health Net

Family Health Net

2008 employee share of monthly premium



2009 total gross monthly premium



2009 UC share of monthly premium



2009 employee gross monthly premium



2009 employee net monthly premium with UC subsidy



2009 % employee increase without UC subsidy



2009 % employee increase with UC subsidy



2009 $ employee net increase



(Additional details about UC's 2009 health insurance rates are available here.)

UC officials also noted that while many employers are attempting to control costs by cutting benefits, UC's 2009 benefits remain unchanged from 2008, including programs for employee wellness, behavioral health and preventive care that were expanded in 2008. Additionally, employee dental and vision benefits will continue to be fully paid by UC.

Key facts about UC's 2009 health insurance costs:

  • UC's average gross rate increase of 8.9 percent for 2009 is consistent with the range of expected increases nationwide as projected by national studies.
  • UC will continue to pay the vast majority of employee monthly premium costs - 87.5 percent on average.
  • With the additional one-time subsidy, approximately 36,000 UC employees, including 21,000 lower-paid employees (those earning $46,000 or less), will see a reduction in their 2009 net monthly rates as compared to 2008.
  • UC will continue to cover 93-96 percent of the total monthly medical premiums for the roughly 42,000 UC employees earning $46,000 or less.
  • Employee medical plan co-pays and deductibles will not increase in 2009.
  • UC will continue salary-based rate structure whereby lower-paid employees pay lower monthly premiums than other UC employees.
  • UC expects to pay approximately $967 million toward employee health benefits for 2009. The additional one-time subsidy for 2009 will cost UC an additional $5 million.
  • Employee health insurance rates will be subject to collective bargaining where applicable.

According to several national studies, employee monthly premiums nationwide are expected to increase between 8 and 10 percent for most medical plans. Studies also project employee costs (contributions and out-of-pocket costs such as deductibles and co-pays) will increase 8.9 percent in 2009.

Related Articles—External:

Salary-Based Contribution Systems for Health Insurance Premiums, Medical Health Today, November 2005

Benefits Now Tied to Salary, Central Penn Business Journal, January 2004

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