University’s Defense of Changes to Student Health Insurance Based on False Claims and Manufactured Deficit
Amherst, MA – Information recently received by the UMass Graduate Employee Organization (GEO), a unit of UAW Local 2322, demonstrates that the University of Massachusetts Amherst has based its defense of massive changes to the Student Health Insurance plan on false claims and manufactured deficits.
On August 1, 2011, the University of Massachusetts Amherst instituted major adjustments to its Student Health Insurance Plan, including the institution of a 15% “coinsurance” payment for all procedures not performed by University Health Services (UHS). This change could cost affected students as much as $5,000 per year. In an interview with the Daily Hampshire Gazette, published on July 16, 2011, University spokesperson Daniel Fitzgibbons claimed that the changes were necessary for two reasons:
- “Given that the health center ran a half-million dollar deficit last year, university officials said the center couldn’t continue to subsidize full coverage for the 5,800 students on SHIP. ‘This is about high quality care for students and continuing to maintain financial stability at UHS’ said Fitzgibbons. ‘Being $500,000 in the hole last year is a considerable hurdle to continue to provide this.’”
- “The move is also being made to keep premiums affordable, he said. If UMass had retained its 100 percent coverage, premiums would have gone up by about 30 percent, said Fitzgibbons. The new plan keeps the premium hike to 17 percent.”
Information received by the GEO, as part of the fulfillment of an information request filed on June 9, 2011, demonstrates the claimed deficit is merely the product of accounting tricks, and the claim about premium increases is simply not true.
According to the UHS budget (Attachment 1), it is technically true that the facility ran a $460,333 deficit in FY2011. However, the primary cause for this deficit is a $1,102,350 expense labeled “R&R Contribution.” According to UHS Director Bernie Daly in an email dated August 12, 2011 (Attachment 2), this line represents expenditures for “large capital purchases such as repairs to the building or large equipment purchases such as electronic health records, radiology equipment etc.”
UHS made no expenditures on this line in either FY2009 or FY2010, making it clear that they had deferred these expenses until FY2011, at which point they made three years worth of “R&R Contribution” expenditures. As such, it is much more appropriate to average this expense, along with revenues, across the three year period of FY2009-FY2011. When this averaging is done (using the attached UHS budget document) it becomes clear that UHS has actually made a profit of $1,004,152 over this period, or an average profit of over $330,000 per year. There is, in short, no evidence that UHS is experiencing structural deficits, and in fact it appears to be quite profitable.
Additionally, the University made the claim that in order to maintain the same coverage as last year (which did not include the 15% “coinsurance”), students would have had to absorb a premium increase of “about 30 percent.” However, according to documents related to the bid process for the Student Health Insurance Plan (Attachment 3, page 5, line 4), students would have been required to pay only a .4% premium increase in order to renew the plan from FY2010. This would have meant that annual premiums for individual students would have risen from about $2,350/year to $2,361/year, or an increase of about $11/year.
The 30.7% increase mentioned by the University (Attachment 3, page 5, line 5) applies not to a simple renewal, but rather to a substantial change in the Student Health Insurance Plan which has the effect of transferring much of the cost for procedures conducted at UHS from the University to AETNA (the provider of the Plan). This might make sense as a way to compensate for the claimed deficit, but given that this deficit is the product of deferred expenses, there is no clear justification for gutting Student Health Insurance in order to increase revenue (or decrease expenses) at UHS.
“This deception is unacceptable under any circumstances,” said GEO President Derek Doughty, “but it is an even bigger problem when students’ health and wellbeing is at stake. The University has put aside its responsibility to provide the best possible coverage for students in favor of maximizing its own revenue. These documents make it clear that this is not a case of ‘can’t,’ but simply a case of ‘won’t.’”
GEO has filed a grievance against the University claiming that these changes violate the union’s contract. The organization is in the process of filing a grievance with the Commonwealth as well, claiming that this new plan does not meet the minimum requirements set by Massachusetts for a student health insurance plan.
GEO represents more than 2500 graduate student employees at UMass/Amherst and is a proud member of the United Auto Workers (UAW), Local 2322, which represents 3600 workers in Western Massachusetts in the fields of higher education, early childhood education, and health and human services.