Maintaining a Healthy Balance

UC has maintained a kind of cautionary balance for its health plans meant to smooth out sudden bumps in health care premiums. Since the state budget has squeezed the UC budget – including using UC as a loan department – the Regents approved various actions at their July meeting to try and deal with the cash crunch. Among these was tapping the health reserve.

As the letter below (a public document I have been assured) indicates, the systemwide University Committee on Faculty Welfare has expressed concern about completely depleting the fund.

Apparently, that is not the intention at this time, but the Regents action would allow it. Were the fund completely depleted, upward bumps in premiums would immediately have to be covered, potentially raising participant contributions suddenly and without the possibility of smoothing.

Below is the text of the letter:

July 25, 2011

NATHAN BROSTROM, EXECUTIVE VICE PRESIDENT BUSINESS OPERATIONS

RE: Regents Plan to Draw Down Health and Welfare Reserves

Dear Nathan,

The University Committee on Faculty Welfare (UCFW) received a presentation at its June 10, 2011,meeting by Provost Pitts and CFO Taylor on the subject “Revenue Bridging Strategies”. As background, a white paper on this subject dated June 2011 was shared with the committee members. One strategy listed was “Draw Down $50 million From Health & Welfare Reserves”. We further note that adoption of Regent Action Item F11 at the July 14, 2011, Regents meeting included an endorsement of the President’s plan to draw down “as needed” (emphasis added) from the University’s employee/retiree health and welfare reserves. The discussion associated with this action mentions that as much as $97 million could be drawn down from this fund source. We are concerned that a complete depletion of the employee/retiree health and welfare reserve may have significant negative impacts on employees and retirees if health care costs experience an unexpected and sudden increase. On July 22, 2011, Provost Pitts reassured members of UCFW’s Task Force on Investment and Retirement (TFIR) that the intent of the Office of the President is not to draw down more than $50 million from this fund source.

We strongly recommend that any action withdrawing more than the originally suggested amount of $50 million first be discussed with UCFW and other Senate committees involved in health and welfare benefits and budget planning. Thank you for your attention to our concern.

Sincerely,

Joel E. Dimsdale, UCFW Chair

Copy: UCFW
Larry Pitts, Provost
Peter Taylor, Chief Financial Officer
Dwaine Duckett, Vice President, Human Resources
Martha Winnacker, Executive Director, Academic Senate