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By the Numbers: What MSU Spends on Health Care

In her February 2009 letter to MSU faculty, staff and retirees, President Simon stated, “…health care for employees and retirees is the University’s fastest growing expense, far outpacing inflation or funding increases at a time when belt tightening is critical.”

Rising health care costs impact employers everywhere, making health care increasingly less affordable and posing a significant financial burden on employers and employees alike. Some key facts include:

Costs continue to rise at the national level – representing a significant portion of the overall U.S. economy:

In 2008, health care spending in the United States was projected to reach $2.4 trillion, an average of $7,868 per person. ¹ Spending is projected to reach $4.3 trillion in 2016. ²
In 2008, health care spending accounted for close to 17% of all spending within the U.S. economy (GDP). ³

Employers providing health care benefits to their employees are feeling significant cost pressure; employees are feeling the pain as well:

The annual premium that a health insurance company charges an employer for medical plan coverage increased by 5% in 2008. ³ While this is lower than the rate of increase in previous years, health care premium cost increases continue to significantly outpace the average rate of inflation (CPI-U – 3.85% in 2008). ⁴
Employers and employees typically share in the cost of medical plan premiums. In 2008, on average, U.S. employers paid 73% of the share of family coverage and 84% of the cost of single employee coverage. The average U.S. premium cost for family medical plan coverage was $12,680 in 2008; for single employees the premium was $4,704. ³
Since 1999, the average premium cost for family coverage in the U.S. has increased by 119%; the cost for single coverage has increased by 117%. Compare these premium cost increases with cumulative increase of inflation (44%) and cumulative wage growth (29%) during this same period. ³
The numbers mean that employers and employees alike are spending a disproportionate share of their budgets on health care-related cost increases. And that means less money available for other critical needs.

MSU faces significant health care cost pressure as well:

In 1970, health care costs represented less than 1 percent of MSU’s general fund budget. Today, they absorb more than 7.5 percent of our general fund dollars.
MSU’s health care costs are expected to increase at an average rate of 8.5% annually.
If the growth we’re experiencing in our health care costs is not reduced, we can expect these costs to consume 10% of our budget by 2019.
MSU currently spends more than $110 million on health care benefits every year. To put that number in perspective, we spend more than $2 million dollars every week, or more than $300,000 every single day.
The average cost per active employee during the 2007/08 plan year was $10,060; there are close to 10,000 employees covered under our plans.
MSU paid 86% of this cost.

MSU’s health care challenges are real and formidable, and we are working now—collectively—to devise a sustainable, affordable and high-quality benefits model that strikes the right balance between health care spending and the ability to continue carrying out our mission-critical education, research and outreach functions.

¹Source: The Henry J. Kaiser Family Foundation, Health Care and the 2008 Elections, October 2008.
²Source: Keehan, S. et al, Health Spending Projections Through 2017, Health Affairs Web Exclusive W146: 21, February 2008.
³Source: The Henry J. Kaiser Family Foundation, Employee Health Benefits: 2008 Annual Survey, September 2008.
⁴Source: Bureau of Labor Statistics

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