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Some projections show increases from 20 to 30 percent or more, although the exact amounts of the increases are not yet known.

Once the Office of Human Resources is informed about the specific premium rates, they will be communicated to benefits-eligible faculty and staff prior to and during the Annual Enrollment period in July. Although the state has authorized a 4.64 percent increase in premium sharing for the next plan year, this increase will not significantly offset premium increases.

The employees least affected are those who have employee-only coverage, since they have no out-of-pocket costs for medical insurance premiums. Those with employee-only coverage represent approximately 63 percent of our benefits eligible employees. All employees with employee-spouse, employee-children or employee-family coverage will see increases in their out-of-pocket costs for medical insurance.

In addition, because all available premium-sharing dollars are needed to pay for medical insurance, effective Sept. 1, 2000, dental insurance will be optional. Therefore, all employees who select dental insurance coverage will have additional out-of-pocket costs.

The UT Austin Budget Council and the Ad HocPresidential Committee on Staff Compensation have been seeking ways to reduce the impact of the medical insurance premium increases, especially for those employees with salaries at or below $30,000 per year.

A decision has been made to use a portion of the previously announced salary increase pool to provide an across-the-board increase of $50 per month to the salary rates of all employees in full-time Classified or Administrative and Professional (Code 1000) positions whose salaries as of Aug. 31, 2000, are at or below $30,000.

Employees with annual full-time rates of $30,000 or less who are appointed less than full-time will receive salary increases proportionate to the percent time appointed. This increase will be effective Sept. 1, 2000. All classified employees remain eligible for merit increases, whether or not they receive the across-the-board increase described above.

Complete guidelines on distribution of the available Classified salary increase pool will be available to departments in early summer. Included in those guidelines will be information on merit increases.

Information regarding the factors that have led to the increase in medical insurance premiums for UT employees is outlined below.

It is important to understand that this situation is not unique to the University. Medical costs are increasing significantly throughout the United States. The Texas A&M University System and the Employees Retirement System, two other organizations that provide state employee group health insurance benefits, also have been experiencing difficulty with this issue.

The increases have resulted from several factors:

• Hospital fees have been set low for several years as a result of managed care and the balanced budget act for Medicare, but hospitals are adjusting these fees to reflect realistic operational costs.
• Fees charged by physicians are increasing and must now be adjusted to maintain networks for plans.
• Annual increases in the cost of prescription drugs.

The U T System has attempted to minimize the cost impact to UT employees in a number of ways.

• Health insurance plan reserves have been used to stabilize health insurance premiums over the past several years.
• The UT Select health plan was introduced in 1998.
• In 1998 and 1999, premium sharing was no longer used for the Standard dental plan, but rather was used only for the new Prevent dental plan. The premium sharing diverted from the dental plan was applied to the health plans to reduce the amount of premium increase that was passed to employees.
• Co-payments were increased for prescription drugs for UT self-funded health plans to offset drastic cost increases.
• In 1999, a Pharmacy Benefit Plan Advisory Group was formed to review prescription drug costs and to make recommendations for managing cost increases. The complete report of the Advisory Group can be reviewed at www.utsystem.edu/egi

The UT System has identified several strategies to address the current situation.

• Ensure that health plan carriers are managing costs effectively without compromising the quality of care.
• Change existing dental plans to optional, employee-paid dental plans. This means that employees who elect dental will pay the full premium.
• Implement the recommendations of the Pharmacy Advisory Committee as feasible.

Employees should take the following action to ensure they make the proper decisions regarding their insurance coverage.

• Review all Annual Enrollment materials that will be sent in July.
• Make your insurance selections during the Annual Enrollment period in July. Because we pay our insurance premiums with pre-tax dollars, federal law stipulates that we can only make insurance selections during the Annual Enrollment period.
• Be fully informed of your insurance options and insurance costs by attending the Benefits Fairs and orientation sessions conducted in June and July.
• Visit the UT System Employee Group Insurance Web page at www.utsystem.edu/egi and the Insurance and Retirement Group Web page at www.utexas.edu/admin/ohr/irg

The University regrets that this information could not have been more positive. However, it is important that employees understand what is taking place and why, with as much advance notice as possible.