President Bounds on 2016 Health Premium Holidays

A Note from University of Nebraska President Hank Bounds:

The University of Nebraska is proud to provide a competitive, cost-effective health insurance plan to our employees and their families. We have worked hard to manage our plan in a way that meets employees’ needs while also protecting us against an uncertain future for the health insurance industry.

Our plan has performed well in recent years, a result of a number of factors including your efforts to maintain your health and stay educated about your options for care. The past year was no exception, with health claims in line with our projections. I’m pleased to inform you that we will take advantage of this positive outcome by implementing a three-month, university-wide “premium holiday,” beginning in April and concluding at the end of June. During those three months, employees will not pay medical or dental insurance premiums, nor will the university make its regular employer contributions to the plan.

The premium holiday applies to all employees enrolled in the university’s medical and/or dental plans. Action is not required on your part; the medical and/or dental premiums that would normally be deducted from your paychecks will automatically be retained in April, May and June.

Your total savings will depend on which plan(s) you are enrolled in. For example, an employee enrolled in our basic employee-only medical plan and dental plans will realize gross savings of about $430 before taxes. An employee who receives basic family medical and dental coverage will realize gross savings of about $920 before taxes.

For the university, the premium holiday gives us an opportunity to direct limited resources toward critical building renovation projects across the campuses. As you might recall, one of our legislative priorities this year was a proposal to continue our partnership with the state on university building renewal. The state budget package recently approved by the Legislature and Governor includes partial funding for our proposal, and we are grateful to policymakers for their support, which will help us keep classrooms, labs and offices in good condition. The premium holiday will supplement these resources and allow us to immediately begin work on this initiative. In addition, the holiday allows us to prudently lower the plan’s one-time reserve balances to our targeted levels.

While we are pleased to be in a position to provide this one-time benefit to you, the health plan is facing a number of future challenges. Our focus will continue to be on prudent management of the plan so that it remains competitive, financially sound, and well-positioned to react to these challenges. We’ll work closely with the Board of Regents, chancellors and our independent actuaries in the months ahead to determine 2017 premiums. However, based on our most recent projections, it is highly likely a premium increase will be required next year.

A Q&A with more detailed information on the premium holiday follows. Please contact your campus benefits office if you have further questions. I’d like to conclude by thanking you for continuing to make your health a priority. If you don’t already, I encourage you to take simple steps like taking advantage of preventive health services such as regular check-ups and vaccinations, using generic drugs when possible, and eating healthfully and exercising. These are among the key reasons why we have been able to keep health claims in check, and we hope you will help us keep the trend going – because few things are as important as the health and well-being of our employees and their families.

Thank you for all you do for the University of Nebraska.

Q&A Regarding 2016 Premium Holiday

Who is eligible for the premium holiday?

All active employees who are enrolled in the university’s medical and/or dental insurance plans.

When is the premium holiday?

Employees will not pay medical or dental insurance premiums in April, May or June of 2016.

Do I need to do anything to participate in the premium holiday?

No. You will not be charged for medical and/or dental premiums in your April, May and June paycheck(s).

What is the impact on my taxable income?

The health insurance premiums you pay are a reduction to your taxable gross income. Given that you will not pay premiums in the months of April, May and June, your taxable gross income will go up by an amount that is equal to the premium holiday savings. Per IRS regulations, this is taxable income. The university payroll system will automatically calculate and withhold tax withholdings, so no action will be required on your part.

Does the premium holiday apply to vision insurance premiums?

No. The holiday only applies to medical and dental premiums. Employees enrolled in vision care insurance will continue to pay that premium.

You indicated future health care premiums are likely to rise. Rather than provide a premium holiday, why do you not use the health plan’s savings to offset those increases?
We realize it may seem counter intuitive to provide a premium holiday now, while also indicating premiums will likely go up in the future. Let us explain.

The premiums you and the university pay toward your health insurance are the recurring, or ongoing, funding for the health plan, somewhat like the plan’s monthly paycheck. The plan’s reserves, which have accumulated over a number of years, are one-time resources, somewhat similar to a savings account. The plan’s expenses, primarily medical claims, are a recurring expense that continue to increase year after year. Using the plan’s one-time savings to pay for these recurring expenses would be an ill-advised short-term solution, as it would create a future “fiscal cliff” once the savings are exhausted. If reserves were depleted, the plan would be required to implement double-digit premium increases to get it back to sustainability. It would not be prudent to knowingly expose you or the university’s budget to this risk. Our intent is to keep your future premium increases as moderate and predictable as we can.

Will the university offer another premium holiday in the future?

No. After the 2016 premium holiday has been implemented, the plan’s reserves will be near our targeted levels.

Whom should I contact for more information?

Please call your Campus Benefits Office:

UNO: (402) 554-3660