Benefits Analysis Parts I & II

913083291 912344574 RMI 3501 Dr. Drennan Fall 2011

LOSS EXPOSURE MATRIX 2-3 SUMMARY OF BENEFITS. 3-4

Table of Contents

INVENTORY OF EXISTING BENEFITS:

MEDICAL BENEFITS... . 5 IBC PERSONAL CHOICE 5-6 KEYSTONE POS-HMO 6 FLEXIBLE SPENDING ACCOUNT 6-7 CIGNA DENTAL 7-8 EYEMED VISION 8 MEDCO PRESCRIPTION ....... 8-9 JOHN HANCOCK LTC 9 LOSS OF INCOME: UNEMPLOYMENT UNEMPLOYMENT INSURANCE 10 LOSS OF INCOME: DEATH HARTFORD (GROUP TERM LIFE & SUPPLEMENTARY) 9-10 HARTFORD (AD&D) 10

LOSS OF INCOME: DISABILITY HARTFORD (LTD) 11 HARTFORD (STD) 11

OTHER BENEFITS: EDUCATIONAL ASSITANCE. 12 WORK/LIFE EXPOSURES . 12-13 DEPENDENT CARE . . 13 PROPERTY/LIABILITY .. 13 LEGAL EXPENSES . 13

LOSS OF INCOME: RETIREMENT 403(B) PLAN .. 12

Drexel University: Parts I & II

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Loss Exposure Matrix

LOSS EXPOSURE IS THE EXPOSURE COVERED? COVERAGE PROVIDED

Medical Expenses Yes PPO: IBC Personal High Hospital / Physician PPO: IBC Personal Basic POS-HMO: Keystone Flexible Spending Account Dental Yes PPO: Cigna Dental Preferred PPO: Cigna Dental Basic Vision Yes EyeMed Prescription Yes MedCo Long Term Care (LTC) Yes John Hancock Retiree Health Care Yes Under 65 - Same as a full-time EE OASDI COBRA Loss of Income: Death Non-accidental, Yes Group Term Life (Hartford) Non-occupational death Supplementary (Hartford) OASDI Accidental death Yes AD&D (Hartford) OASDI Occupational death Yes Group Term Life (Hartford) Workers Compensation OASDI Loss of Income: Unemployment Unemployment Yes Unemployment Insurance Loss of Income: Disability Non-occupational Long Term Yes Hartford OASDI Non-occupational Short Term Yes Hartford OASDI Occupational Long Term Yes Hartford OASDI Occupational Short Term Yes Hartford OASDI Loss of Income: Retirement Retirement Yes 403(b) plan OASDI Other Benefits Educational assistance Yes Tuition Remission Tuition Exchange Work/life exposures Yes Parking Mass Transit Employee Assistance Program Drexel University: Parts I & II

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Dependent care Property-Liability Legal Expenses

Yes Yes Yes

Flexible Spending Account Liberty Mutual (home/auto) Hyatt (group legal)

Summary of Benefits
Benefit Plan A.M Best Rating Personal Choice (B+) High Very (Independence Good Blue Cross) Personal Choice Basic (Independence Blue Cross) Keystone POSHMO (B+) Very Good Funding Self-Insured Self-Insured Self-Insured Fully Insured Fully Insured Self-Insured Financing Contributory Contributory Contributory Contributory Contributory Contributory Voluntary Eligibility Full-time & part-time employees + dependents, retirees under 65 Full-time & part-time employees + dependents, retirees under 65 Full-time & part-time employees + dependents, retirees under 65 Full-time & part-time employees + dependents Full-time & part-time employees Full-time & part-time employees + dependents, retirees under 65 Full-time & part-time employees + dependents Full-time employees

(A) Excellent (A) Excellent (A-) Excellent (A-) Excellent (A+) Superior

Cigna Dental (Base + Preferred Plan) EyeMed vision plan MedCo prescription

John Hancock (LTC)

The Hartford (group term life insurance)

Drexel University: Parts I & II

(A) Excellent

Fully Insured Fully Insured

NonContributory

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Hartford (supplementary life insurance) Hartford (AD&D) Hartford (Nonoccupational and occupational Long Term) Hartford (Nonoccupational and occupational short term) Liberty Mutual (home/auto)

(A) Excellent (A) Excellent (A) Excellent (A) Excellent (A) Excellent

Fully Insured Fully Insured Fully Insured Self Funded (Hartford administrated only) Fully Insured

Voluntary Voluntary

Noncontributory Voluntary Voluntary

Full-time & part-time employees + dependents Full-time & part-time employees + dependents Full-time employees Full-time & part-time employees

Full-time & part-time employees Hyatt (group (A+) Fully Insured Voluntary Full-time & legal) Superior* part-time employees *Rating is for MetLife since Hyatt is their wholly owned subsidiary. General Notes:

A.M Best Ratings are from A.M Best Rating Center via www.ambest.com Drexel University: Parts I & II

These benefits are for professional administrative staff only. New employees can start with all Drexel University plans at the beginning of the month after they are employed. Enrollment periods last for the first three days of every month Full-time employees are defined as: employees working a minimum of 40 hours per week Part-time employees are defined as: employees working a minimum of 20 hours and less than 40 hours per week Dependents include: spouse, same-sex domestic partners, and dependent children. o Dependent children are defined as: children up to 19 years old, or 23 if they are full-time students for dental and vision care only. For medical and prescription coverage, children who are full-time students receive benefits until they are 26 years old. o Page 4 of 13

Inventory of Existing Benefits

Medical Expenses:
Independence Blue Cross Personal Choice PPO health plans through Independence Blue Cross. Eligible participants for both plans include full-time and part-time employees, including dependents, and retirees under the age of 65. Both Personal Choice plans are financed on a these plans are community rated, Drexel University full-time and part-time basis. Both plans participants will pay more out of pocket expenses if they contributory basis and are self-insured but administered by IBC. Even though Drexel University offers their employees two types of Personal Choice

employees pay 8% lower if they contribute on a bi-weekly, rather than monthly, deductibles, copayments, and coinsurance limits. Personal Choice Plans do not require a primary care physician or referrals for services. However, out-of-

network services in these plans may require the participant to pay the expenses of services rendered and then file a claim for reimbursement. The two plans are Personal Choice High and Personal Choice Basic, and they differ mainly in deductibles and coinsurance limits. network usage of benefits with a maximum $25 copayment for certain services. a maximum of $3000 for out of pocket expenses. The deductible and maximum days for in-network care. Personal Choice Basic plans are subject to 90% coinsurance after the Choice High include an unlimited lifetime maximum and 365 inpatient hospital

choose to go to an out-of-network provider. These expenses can be in the form of

Out-of-network usage is subject to 80% coinsurance after a $500 deductible with for out of pocket expenses are doubled for family plans. Key features of Personal $300 deductible is paid for in-network usage. In addition, in-network usage has after a $750 deductible. The maximum for out of pocket expenses is raised to Drexel University: Parts I & II

Personal Choice High offers $0 deductibles and 100% coinsurance for in-

maximum of $1000 for out of pocket expenses. However, the 90% coinsurance changes to 100% for preventive care and pregnancy related services if utilized

in-network. Out-of-network usage is subject to 70% coinsurance for all services

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are doubled for family plans.

$3000 if a participant chooses to go out-of-network. The deductibles and

maximums for out of pocket expenses of in-network and out-of-network services Drexel University offers their full-time and part-time employees including

Keystone Point-Of-Service HMO

dependents, and retirees under the age of 65 a POS-HMO plan through Keystone on contributory basis. This plan is 60% cheaper than Personal Choice Basic and 80% cheaper than Personal Choice High because of its smaller network of allowing this plan to be low in cost since the physician must approve a providers and usage of a primary care physician (PCP). The PCP is the key in a PCP reduces the risks of moral hazard or unnecessary utilization of health services. In addition, the PCP can elect only one designated site to send all

participant for referral to certain services such as physical therapy. The usage of

Keystone members for each specific service. By limiting PCPs choices to only one provider per service, Keystone is able to negotiate a bigger discount, which leads to the low cost premium. Under the Keystone POS-HMO plan, in-network usage payments, which have a maximum of $2000. Self-referred care, or out-ofhas a $0 deductible and 100% coinsurance. To further reduce the chances of moral hazard and contain costs, in-network services are subject to many co-

network usage, is subject to a $500 deductible and 70% coinsurance. Since selfdeductible is tripled for family plans. Keystone can also bill participants the were performed out-of-network. Flexible Spending Account difference between their plan allowance and actual physician charge if services Drexel University offers full-time and part-time employees including referred care has deductibles, there arent any co-payments. However, the

dependents, and retirees under the age of 65 Flexible Spending Accounts (FSAs) prescription drugs, office visits, laser eye surgery, and contact lenses. Payments Drexel University: Parts I & II for health care. FSAs are based on voluntary contributions, made by eligible employees, which are deducted on a pre-tax basis from their payroll. These pretax dollars can be used for medical expenses such as deductibles, co-payments,

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from these accounts can be made towards the expenses of employees and their income of an employee. There is, however, a maximum $5000 limit for FSA to the Use It or Lose It provision that Drexel University applies. Cigna Dental

dependents for un-reimbursed health care expenses. The main benefit of FSAs is that contributions are made on a pre-tax basis, which lowers the overall taxable of the plan year or else the money will be forfeited away from the employee due Drexel University offers their full-time employees, part-time employees,

contributions per year. In addition, all claims must be incurred by December 31st

and their dependents two Cigna Dental PPO plans on a contributory basis. These plans are fully insured and community rated. However, children that can receive benefits must not exceed 19 years old or 23 years old if they are full-time Preferred, and they mainly differ in terms of coinsurance: Cigna Dental Base Plan In-Network Out-of-Network 100% 100% 50% 50% 50% NA $50 $150 50% NA $50 $150 60% 50% students. PPACA has no effect on the dependent age limit of full-time students in Services Preventive Basic Restorative Major Restorative Orthodontia Deductible: -Individual -Family Annual Maximum Benefit (per person) terms of dental insurance. The two plans are Cigna Dental Base and Cigna Dental Cigna Dental Preferred Plan In-Network Out-of-Network 100% 100% 90% 80% $50 $150 50% 50% $50 $150

means that the dentist has agreed to receive payment in full and cannot balance bill the participant. The participant is, however, subject to co-payments and deductibles that are stated in the above matrix. Drexel University: Parts I & II Page 7 of 13

preferred dentist provider whether it is in-network or out-of-network. This

Cigna Dental Base pays the above coinsurance as agreed upon by the

$1,000

$1,000

$1,500

$1,500

incur the same way the Cigna Dental Base plan does. However, for out-ofmore than in-network dentists. EyeMed Vision network use, Cigna Dental Preferred pays the dentist the reasonable and

customary charges, which could be the dentists actual or usual charge. This is the benefit of the Preferred plan since out-of-network dentists usually charge

Cigna Dental Preferred plan pays for in-network services that participants

care through EyeMed. This benefit is contributory, community rated, and fully insured. EyeMed operates as a PPO since it offers extensive benefits for in-

network usage and increases out of pocket expenses for participants that incur network since they will get allowances, $0 co-payments, and discounts if limits have any discounts and will only see a portion of the cost paid by EyeMed. In offers 15% discounts on the full retail price of LASIK operations. Medco prescription addition to the coverage of contact lenses, frames, and exams, EyeMed vision have been exhausted. If participants choose to go out-of-network, they will not

Drexel University offers their full-time and part-time employees vision

out-of-network expenses. Participants may enhance their benefits by staying in-

dependents, and retirees under the age of 65, Medco prescription drug coverage. prescription drug coverage is from a different vendor than the medical coverage, Drexel University bundles the two plans together. If a Drexel University prescription drug plan. In addition, an employee cannot enroll for the prescription drug plan alone; it only becomes available with the enrollment of a health plan. All Drexel University employees, even those with different health plans, have the same Medco prescription drug plan. This chart shows the and method of purchase. Drexel University: Parts I & II different copayments in the plan with respect to the type of drug being ordered This plan is contributory, community rated, and self-insured. Even though the

Drexel University offers their full-time and part-time employees including

employee chooses to participate in a medical plan, he must also participate in the

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since they save an average of 33%. By giving an incentive for participants to purchase through the mail, Medco can get better discounts and get steerage towards their own preferred vendors. John Hancock LTC Drexel University offers their full-time and part-time employees,

Co-Payment Matrix Generic Drug Formulary Drug Non-Formulary Drug

Medco is providing participants an incentive to buy through the mail

Retail 30 day supply $5 $15 $30

Mail 90 day supply $10 $30 $60

including their spouses, Long Term Coverage through John Hancock. This plan is a voluntary benefit and the employee bears the cost of financing. Drexel University employees are individually rated for the plan and they are fully insured if they participate. John Hancocks LTC plan provides skilled and therapy, eating, bathing, and dressing. Depending on the chosen plan, a days before the policy begins to pay; this acts as a form of deductible. needs, premiums for John Hancocks LTC vary widely. custodial care services to participants that need help for an extended period of time with daily activities. Some of these services include nursing care, physical

participant employee could have to pay for his own care for a certain amount of

Participants can choose to receive their benefits on a daily or monthly basis, and the length of the benefit period. Since each plan is tailored to fit each employees

Loss of Income: Death

Hartford (Group Term Life and Supplementary Life)

insurance through The Hartford on a non-contributory basis. Under this benefit, employees eligible recipients can receive two times the annual salary with a maximum of $500,000 if an occupational or non-accidental non-occupational Drexel University: Parts I & II

Drexel University offers their full-time employees group term life

death occurs. Eligible recipients include an employees spouse or children, and in the event the employee does not have a spouse or children then the Hartford will

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limit their maximum benefit at $50,000 to avoid imputed income in the event they die. Drexel University fully insures their employees with this policy, but accidental events or to increase the standard benefit to more than twice the the spouse or children of full-time employees Hartford (AD&D)

additional supplementary insurance can be bought at the employees expense for annual salary. In addition, the supplementary insurance could extend to cover Drexel University offers their full-time and part-time employees,

not pay anything in the event of a participants death. The employee can elect to

including dependents, accidental death and dismemberment insurance through The Hartford. This benefit is financed on a voluntary basis and is fully insured. Participants in this benefit cover the exposure of accidental death and will in the event of death.

receive benefits just as they would in the life insurance provided by The Hartford

Loss of Income: Unemployment

Unemployment Insurance unemployment insurance. This plan is self-funded by Drexel University but Drexel University offers their full-time and part-time employees

employees must contribute towards it. In the event of involuntary

unemployment, an employee can receive severance benefits for up to five an employee has been working at Drexel University, with each year

months of salary. The number of months in these benefits depends on how long corresponding to a month. Part-time employees receive benefits on a pro rata basis rather than one year equals one month of benefits. Drexel Universitys University uses a General Asset Plan as the funding vehicle. on the way funding is constructed in this plan it is safe to assume that Drexel policy does not allow them to state what their funding vehicle is, however based

Drexel University: Parts I & II

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Loss of Income: Disability

Hartford LTD insurance through The Hartford on a non-contributory basis. This plan fully Drexel University offers their full-time employees Long Term Disability

insures employees in the event they become disabled, occupationally or non-

after the disability occurs to receive the benefits. Benefits of LTD include 60% of an employees salary until they reach the normal retirement age. This benefit also covers mental illnesses and their treatment. If a participant becomes they become better or to a maximum of 24 months after being discharged. Hartford STD Drexel University offers their full-time and part-time employees, hospitalized in a mental institution, benefits for rehabilitation will be paid until

occupationally, for a long period of time. To mitigate the risk of moral hazard,

employees that are eligible to receive LTD benefits must wait a 90-day period

including dependents, Short Term Disability insurance through The Hartford on through The Hartford and covers STD from occupational or non-occupational which are put into a 501(c)(9) trust account. Even though Drexel University events. Funding is based purely on Drexel University employees contributions, the 31st consecutive day of disability and end on the 90th day or whenever the participant is not disabled any more. Under this STD plan, benefits will be the lesser of 60% of an employees monthly salary or $2700 per month. If an employee is disabled for more than 90 days, The Hartfords LTD plan is responsible for the payment of benefits.

a voluntary basis. This plan is self-funded by Drexel University but administered refused to verify the funding source, the way the funding plan is constructed lead us to conclude that it is a 501(c)(9) trust account. Benefits for STD commence on

Drexel University: Parts I & II

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Loss of Income: Retirement

403(b) plan to secure their income at retirement. Drexel Universitys 403(b) is broken down Age Minimum EE contribution 35-39 2% 40-49 2% 50 and over 2% Voluntary: (percentages based on salary) Minimum EE contribution 2% 3% 4% 5% into two parts: mandatory and voluntary. Mandatory: (percentages based on salary) Drexel University Contribution 7% 9% 11% Drexel University offers their full-time and part-time employees a 403(b)

after one year of employment. This requirement is waived if the employee was already contributing to a 403(b) in prior careers.

Newly hired employees may start contributing towards their 403(b) plan

Drexel University Contribution 3% 4% 5% 7%

Other Benefits:

Educational Assistance

two types of educational assistance programs on a non-contributory basis. One programs is called Tuition Remission, which allows full-time employees and universities. their dependents to pursuit most of Drexel Universitys programs for free. The other program is Tuition Exchange. Under this program, eight children of fulltime employees are awarded scholarships to attend more than 600 different Work/Life exposures

Temple University offers their full-time employees, including dependents,

their full-time and part-time employees. One of these programs is called Health Drexel University: Parts I & II

Drexel University offers many types of work and life programs to assist

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Advocate. Health Advocate provides 24-hour assistance to employees to better

understand their health benefits, handle medical bills, and find a doctor. Another program, called Employee Assistance program, provides counseling for personal and professional issues that employees and dependents face. Drexel also offers parking and mass transit benefits in the form of FSAs to allow employees to pay Dependent Care for these services on a pre-tax basis; this includes the purchase of SEPTA passes. dependent care costs. These contributions, made on a voluntary basis, can be used to pay for employees children under the age of 13 for pre-school or day paid for by the employees FSAs. Property/Liability Drexel University offers their full-time and part-time employees FSAs for

care facilities. Even though Drexel University does not have their own on-site day care, they have several day care centers with arranged discounts that could be Drexel University offers their full-time and part-time employees,

including their dependents, discounted home, renter, and auto insurance. Even though each policy is individually underwritten for each employee, Drexel basis and choose their own plans individually. Legal Expenses University has arranged a discount with Liberty Mutual for these property and

liability insurance policies. Employees can purchase these policies on a voluntary Drexel University offers their full-time and part-time employees a legal

consultation plan through Hyatt Group on a voluntary basis. Employees that pay preparation and legal document review.

the low monthly rate can consult Hyatt Group for basic legal services such as will

Drexel University: Parts I & II

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Part III: Analysis

RMI 3501 / Fall 2011 Dr. Drennan 913083291 912344574

INTRODUCTION... 2

TABLE OF CONTENTS

DESIGN CONSIDERATIONS AND OBJECTIVES IN OFFERING EMPLOYEE BENEFITS ..................................................................................................................................... 3 OBJECTIVES OF THE EMPLOYEE BENEFITS PLAN. 3-4 DECISION-MAKING CRITERIA IN WHAT TYPES OF BENEFITS TO OFFER 4 FUNDING DECISIONS.............. 5 DESIGN OF HEALTH BENEFITS. 6 ISSUES OF CURRENT HEALTH PLANS.... 6-7 EMPLOYER SUBSIDY DECISIONS ... 7 FUNDING ISSUES AND COST CONTAINMENT 8 CONSIDERATIONS FOR HEALTH CARE.. 8-9

DESIGN OF OTHER TYPES OF NON-RETIREMENT BENEFITS 9 DEFINITION OF DISABILITY.. 9-10 GOALS AND ISSUES OF FSAS... 10 GOALS OF WORK/LIFE BENEFITS ... 10-11 REGULATORY COMPLIANCE ... 11 COBRA ... 11 HIPAA 11 PLAN COMMUNICATION 11-12

COPY OF THANK YOU E-MAIL . 13

Drexel University: Part III

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providing educational opportunities for all men and women in practical arts and sciences. As a non-profit organization, Drexel University offers more than 170close to 1800 employees. Drexel Universitys human resource department is comprised of 40 employees that care for the well being of other fellow degree programs. There are approximately 4750 employees in total. Our

Drexel University was established in 1891 in Philadelphia with the aim of

Introduction

employee benefits research was based on professional staff only, which amounts employees. Our research was performed in cooperation with Kristin McCarthy, one of Drexel Universitys four benefits consultants. Kristin has direct contact benefits to all employees. She also works closely with her team to design and update their benefits plan as demands and laws change. Although Drexel

with Drexel Universitys vendors and is heavily involved in the communication of University has other competitors, their employee benefits are mainly designed to compete with The University of Pennsylvania and our own Temple University.

Drexel University: Part III

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Design Considerations and Objectives in Offering Employee Benefits Objectives of the Employee Benefits Plan Drexel Universitys main objective for offering benefits is to attract and

retain employees. Drexel Universitys philosophy is to offer a very reasonable these benefits, current employees will be satisfied with their working place. life to their workplace. Since Drexel offers a substantial amount of diverse benefits, employees that might think of quitting Drexel for another job will

amount of benefits that are essential to todays employees. If Drexel is offering how grateful we are to our employees whom dedicate a major portion of their

During the interview, Kristin McCarthy stated: We provide our benefits to show

probably think twice after they compare benefits with the other company. What Drexel is trying to do is minimize the chance that an employee will quit because of a poor benefits program. Drexel is also focusing on attracting prospective employees through their benefits program. During the interview, Kristin explained that Drexel does not want a job offer to be revoked just because they what employees need, the benefits consultants at Drexel manage to attract are unique to themselves.

offer one type of health plan or no long-term disability coverage. By thinking of

employees with benefits that are common with competitors, but also some that productivity, commitment, and attendance. Employees are better committed to employees these benefits to make their work life easier and more comfortable. By making sure all employees are satisfied in their workplace, Drexel has an efficient productivity rate and employees are very committed to their jobs. Drexel University: Part III Drexel Universitys employee benefits plan is also designed to increase

their jobs if they feel their work environment supports them. Drexel offers their

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Drexel shows their employees their appreciation through the benefits they provide.

Decision-making Criteria in What Types of Benefits to Offer

The costs of benefits are rising because of the increasing premiums and the move towards experience rating by many companies. For example, Drexel had many too high; however, this benefit is still offered but on a voluntary basis to before they consider other factors. eliminate any cost to Drexel. Even though Drexel wants to be a leader in the Another factor that determines what benefits Drexel offers their attempts to offer short-term disability on a non-contributory basis but the cost is amount and diversity of benefits offered to employees, they often look at cost employees is benchmarking. Even though cost can constrain offering benefits that competitors do not offer, Drexel makes sure that they arent one step behind. Drexel researches the different types of benefits that universities in Philadelphia offer to their employees to make sure they arent at a disadvantage when they want to attract a key employee. Drexel also extends their research into benefits of other universities nationwide to get a sense of how elaborate their benefits program is compared to others. what type of benefits they should offer. A recent attempt to contribute to the new benefit will cater to all their employees needs. Drexel University: Part III

Drexel Universitys main decision in what type of benefits to offer is cost.

satisfaction of employees with families, Drexel is constructing an on-campus day care center. Drexel also uses their employees demographics to determine if a Page 4 of 13

Drexel University also considers employees demographics to determine

Funding Decisions

are fully insured. When we asked Kristin what determines the funding method for each benefit? her response was the ability to contain costs. It is always cheaper to self-fund a benefit if the employer has thousands of employees that can contribute towards the benefit. However, Drexel also considers the long-

Drexel University has some benefits that are self-insured and others that

at the potential income of self-funding to lower costs of benefit plans. When a

insure their LTD benefit simply because the losses could be paid out for a period of 10+ years. In addition to the long-term obligations with benefits, Drexel looks

term costs that are attached to each benefit. For example, Drexel chooses to fully

plan is self-funded, the contribution rate made by employees could be lowered funds available in the trust.

since the premium cost does not include risk charge. In addition, contributions Drexel also bases their decisions of funding a certain benefit on the

made by employees could be invested by Drexel to increase the total amount of potential of catastrophic losses involved. If a benefit is considered a high-risk

benefit towards Drexel, then the consultants will try to fully insure the benefit of catastrophic losses to contain costs and define a point where maximum payouts will stop.

instead of constructing a self-funded plan for that benefit. Kristin also elaborated on the use of stop-loss insurance in some self-funded benefits with the potential

Drexel University: Part III

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Design of Health Benefits Issues of Current Health Plans Drexel University offers different health plans to, hopefully, appeal to all

of their employees needs. There is, however, a problem with communicating the right plan to the right person. Even though Drexel cannot force people into one health plan, they try to communicate how each plan fits each employee employees. Drexel employees usually think that the Personal Choice High PPO option is the Cadillac plan that will cover them for all costs. Even though some not understand is that the difference in premiums is so high that they will pay instead of a POS plan. Kristins team forms comparison charts between the different types of separately. These attempts of communication are often not absorbed by Drexels employees dont need that plan or cannot afford it, they sometimes commit to it more towards premiums than out-of-pocket expenses if they choose a PPO plan health benefits to make employees decisions easier towards which plan suits

anyways just because they dont want to pay high deductibles. But what they do

them most. However, most employees dont take into account the frequency and severity of their medical usage when they decide what plan they need. Kristin get married or add their dependents into their health plan. This usually leads employees to pay for more than what they will use. Drexel cannot force health plans so the employees make their own decisions. However, a major problem Drexel is facing is that some employees are not making the right Drexel University: Part III also stated that family health plans cost employees almost five times more than individual health plans, and employees rarely take that into account when they

employees to choose a certain health plan because in essence they offer multiple Page 6 of 13

decisions and that leads to more people leaning towards one plan which will probably raise their contribution rate. Employer Subsidy Decisions

though they would like to offer health care on a non-contributory basis, they leave employees with a portion of the cost to help with minimizing

Drexel University offers their health plans on a subsidized basis. Even

overutilization. When employees bear a portion of the health costs, they will not take their health care for granted and will use it only when necessary. Drexel each plan: 90% of POS plan, 80% of PPO Basic, and 70% of PPO High. These subsidizes their employees individual plans by paying the following towards

decisions reflect Drexels aim to steer employees towards the POS where high

deductibles and copays are enforced for out of network use. Drexel University facilities, Drexel is able to contain costs and make sure that none of their employees are using unneeded health care goods and services.

owns Hahnemann Hospital and the POS plan steers employees towards Drexels own hospital for health care benefits. By making employees use Drexels health Drexel University also bases their subsidy decisions on the number of

claims submitted by each health plan. When Drexel decides how much they independently and adjust the premium paid by each employee to lower the chances of funds in the trust becoming insufficient for the plan year. Drexel University: Part III

should charge employees, and essentially subsidize part of that cost, they look at

past claims to determine a rough sketch for future claims. They look at each plan

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Funding Issues and Cost Containment

plan, specifically of whether or not to self-insure their plans. Prior to 2011, all of Drexels health plans were fully insured. However, Drexels benefits consultants the best way to contain costs, there were issues of handling the risks that came with it. It took Drexels benefits consultants a long time to assess these risks, in cooperation with their actuaries, to make sure they were charging the right task that raised some challenges in keeping premiums low. However, by knew that contributions made by Drexel towards these plans were lost in the event that employees do not incur claims. Even though self-funding seemed like

Drexel University has had some funding issues with its health benefits

premiums to cover the costs of claims. Drexel also had to incorporate the cost of

stop-loss insurance and administrative costs in their premiums, which was a new implementing self-funding for their health and prescription drug plans, Drexel is better able to contain costs because they can now invest and keep the unused they passed on their savings by reducing the contribution amount made by employees. funds in the trust to aid in future claims. Since Drexel implemented self-funding,

Considerations for Health Care

University could further lower their costs by implementing Consumer Driven Health Plans (CDHPs). These plans lead employees to consider the cost of treatment since most of their health care costs will be paid out of their own Health Savings Account. Even though Drexel offers HSAs, they dont have a Drexel University: Part III

Even though health care is costs are contained by self-funding, Drexel

current strategy to implement CDHPs with High Deductible Plans. When we

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asked Kristin about the possibility of implementing CDHPs she replied its a growing trend and we are monitoring it closely, but we also look at our not offer such plans. We think that Drexel could further contain costs by their choices.

competition closely to determine which benefits to offer, and they currently do implementing CDHPs because people become more responsible towards who they visit and what type of treatment they receive, keeping in mind the costs of

Design of Other Types of Non-Retirement Benefits Definition of Disability During the course of benefit design, Drexel had to determine what

disability benefits. Drexel University and Hartford Insurance Co. both define one or more of the following: bodily injury, mental illness, substance abuse, sickness, or pregnancy. With this definition of disability, every filed case of in disability is assessing if a person is disabled in accordance with their job

disability as: the prevention of an employee from performing one or more of the essential duties of their occupation. In addition, the disability must result from

constitutes a person as disabled in order to receive long-term or short-term

disability differs in terms of eligibility. Kristen claimed that the most difficult task position. For example, one of Drexels employees had his leg amputated due to medical decisions to help contain his sickness; since his job required manual labor, he received full benefits of long-term disability. On the other hand, an office clerk also faced a similar dilemma but was not eligible for long term Drexel University: Part III

disability since, in his case, he was declared disabled but working. These choices as to whether a person is disabled are declared by Hartford, and their choices

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could cause a dilemma to how employees perceive Drexel as a good or bad employer.

Goals and Issues of FSAs

mass-transit needs is to help employees make the most out of their money.

However, Drexel also acknowledges that their FSAs make it easier for employees to pay for their needed services, which is highly regarded and appreciated. But there are issues that arise from offering FSAs to employees. The main issue is that employees pay directly from their FSA to the service they need, which means that they are not submitting claims for reimbursement. If claims are services directly, the transaction goes through instantly. To eliminate the administrative hassle and control moral hazard, Drexel out-sourced the

Drexel Universitys main goal in offering FSAs for dependent care and

submitted, each claim is independently assessed to see if its a qualifying expense under the terms of the FSAs. However, when employees use their FSAs to pay for administrative duties of FSAs to Aon-Hewitt. Kristin noted that paying Aon-

Hewitt to administer their FSAs is an unwanted expense, but it has to be done to monitor their employees usage and make sure their expenses are legitimate. Goals of Work/Life benefits

useful non-medical benefits for life improvement. By offering Tuition Remission and Tuition Exchange, Drexel can give their employees a chance to pursue a Drexel University: Part III higher degree to achieve a skilled workforce with maximum productivity. In addition, Drexels health prevention and wellness programs guide employees to

Drexel Universitys work and life benefits are provided to give employees

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make the best decisions about their current health plans. These benefits seem small, but Drexel acknowledges that it is a way to control employee turnover. Regulatory Compliance COBRA Drexel University is fully compliant with COBRA. It offers its terminated

employees life and medical coverage, and the number of months varies

depending on each employees years of service. Drexel COBRA compliance is administered by Conexis to ensure that they do not violate any provisions. HIPAA

issues with any of the laws. All Drexel employees have direct access to their their full compliance with HIPAA, Aon-Hewitt audits Drexel University on a regular basis and administers any needed changes. Plan Communication

medical records via IBC, Keystone, or Aon-Hewitt if an HSA was used. To ensure

Drexel University is also fully compliant with HIPPA and do not have any

The different ways of communication used by Drexel include: phone calls,

voicemail, online publications, e-mail, mail, benefit fairs, and benefit buzzes. and plan communication. Even though many different methods are used to Drexel University: Part III

Drexel University communicates their employee benefits plan extensively.

Drexel does not have any problem in terms of regulatory compliance with ERISA communicate their benefits, Drexel has an issue with employees not absorbing

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the information. Kristen noted that they try their best to communicate their benefits to employees without seeming annoying.

Drexel University: Part III

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Copy of the Thank You E-Mail Kristin McCarthy Consultant Human Resources Drexel University 3201 Arch Street, Suite 430 Philadelphia, PA 19104 Dear Kristin,

Our project started out as merely an idea, but thanks to your time and effort, it became a reality. We would like to thank you for dedicating portions of your busy schedule to accommodate the two interviews we had. We would also like to thank you for answering specific questions that were deemed too confidential to answer. We have gained a better understanding of the goals and decisions regarding employee benefits because of your detailed explanations. It was a real pleasure meeting you and we hope we meet again in the future. We are truly grateful for all your time and effort that coined our project. Please accept our deepest gratitude for your help. Kind Regards, Mohammad Ahmad Saad AlZamel

Drexel University: Part III

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