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Part I: Benefit Matrix Part II: Inventory of Benefits Part III: Analysis of Benefits

Professor Robert Drennan


912130838 912151063 December 9, 2011

Exposure Analysis for the Please Touch Museum Loss Exposure Does the Benefit Plan Provide Coverage? Coverage/Benefit Provided

Hospital/Physician

Dental Vision Prescription Long Term Care Retiree Health Care

LOSS OF INCOME: MEDICAL EXPENSES Yes Independence Blue Cross HMO, Independence Blue Cross Direct POS Yes Guardian, FSA Yes All health plans*, FSA Yes No No All health plans*, FSA None None

Non-Accidental, NonOccupational Death Accidental Death Occupational Death

LOSS OF INCOME: DEATH Yes OASDI, Group Term Life Insurance, AD&D, 403(b) Yes OASDI, Group Term Life Insurance, AD&D, 403(b) Yes OASDI, Group Term, Life Insurance, WC, AD&D, 403(b) LOSS OF INCOME: UNEMPLOYMENT Yes Unemployment Insurance

Unemployment

LOSS OF INCOME: DISABILITY Short-term, Non-Occupational Yes OASDI, STD, 403(b), AD&D Disability Long-term, Non-Occupational Yes OASDI, LTD, 403(b), AD&D Disability Short-term, Occupational Yes OASDI, WC, 403(b), AD&D Disability Long-term, Occupational Yes OASDI, WC, 403(b), AD&D Disability LOSS OF INCOME: RETIREMENT Yes OASDI, 403(b) OTHER EXPOSURES No

Retirement

Educational Assistance

None

Dependent Care Yes Dependent FSA Work/Life Yes TransitChek Property/Liability No None Legal Expenses No None Auto Insurance No None * = Participants in any of the two medical plans (Independent Blue Cross HMO and Independence POS) are automatically enrolled in the Vision and Prescription Drug Plans.

Introduction The Please Touch Museum prides itself on its efforts to assess, design, and implement programs to meet the evolving needs of children and their family. The Museum is committed not only to educate children but to nurture their growth along with their parents, caregivers and teachers. It has an award winning youth program called Achievement through Community Service, Education and Skill-building (ACES). This award would not be possible without the dedication and effort that each employee put into the program. To support the staff, the Please Touch Museum offers various employee benefits to ensure the well-being of its staff. Medical Expenses Independent Blue Cross Health Maintenance Organization (HMO) Plan The Please Touch Museum offers a fully insured HMO through Independent Blue Cross to its employees. This plan is available to full-time employees and part-time employees, in a non-seasonal or non-temporary capacity on a contributory basis. Employees who work over 30 hours per week are considered full-time, while employees who work at a minimum of 25 hours per week are considered to be part time. Medical benefits are also available to eligible dependents. Eligible dependents are defined as spouses, domestic partners, unmarried children until they attain the age of 26, and unmarried disabled children after the age of 26.

Employees enrolled in this HMO plan must select a primary care physician (PCP) and any in-network services must be referred by their PCP. There is a $15 copayment for visits to their PCP and a $30 copayment for any specialist that is referred. The out of pocket maximum for an individual seeking providers and specialist in the network is $1,500 and $3,000 for families. Once the annual out of pocket limit has been reached for this plan, claims are then covered 100%. The copayment for a hospital stay is $100 a day, for a maximum of 5 days; the copayment for outpatient surgery is $50. The copayment for a maternal stay at the hospital is $100; the copayment for the first OB visit is $15. There is also a $30 copayment for outpatient therapy for speech and physical. Inpatient stays for mental health and substance abuse has a copayment of $100 a day, for a maximum of 5 days, while the copayment for outpatient is $30. Independence Blue Cross Point of Service (POS) Plan The Please Touch Museum also offers a fully insured Direct POS plan through Independence Blue Cross to its employees. This plan is available to full-time employees and part-time employees, in a non-seasonal or non-temporary capacity on a contributory basis. Employees who work over 30 hours per week are considered full-time, while employees who work at a minimum of 25 hours per week are considered to be part time. Medical benefits are also available to eligible dependents. Eligible dependents are defined as spouses, domestic partners, unmarried children until they attain age 26, and unmarried disabled children after the age of 26. Similar to HMOs, POS plans will cost more in comparison in regards to copayments and premiums. This is due to the fact that POS plans have out-of-network coverage. Like HMOs, the employee has to choose a PCP, but there are lower out of pocket expenses in a POS plan. One of the biggest difference between a HMO and POS plan is the employee may self-refer to an out-

of-network provider or specialist in a POS plan. For out-of-network providers, there is a $500 deductible for individuals and $1,500 deductible f or families. The out-of-pocket maximum for an individual is $3,000 and $9,000 for a family. When out-of-pocket maximum is reached annually, 30% of claims thereafter are covered. Physician services, hospitalization, maternity, outpatient therapy and mental health and substance abuse have 30% coverage after deductibles. Because of the additional out-of-network coverages, copayments and premiums for this POS plan is more expensive. Dental The Please Touch Museum offers employees a fully insured PPO dental plan through Guardian. The eligibility requirements for the dental plan is the same as those for medical plan, where all full-time and part-time employees who work at least 25 hours a week will be eligible for dental benefits. The dental plan is available to employees on a contributory basis. The employer contributes 80% of the monthly premium for an individual plan, regardless whether the employee chooses an individual, employee children, employee spouse, or family dental plan and the employee pays the remaining difference. The PPO offers an in-network and an out-of-network provider. Employees are encouraged to use services of an in-network PPO provider to help reduce out of pocket costs because out-of-network services may balance bill employees. There is a $50 deductible for both in-network and out-of-network. There is a $1,500 calendar year maximum in the network and a $1,000 for out of the network. Preventative services are covered for in-network and also out-ofnetwork. Once the deductible has been satisfied in network providers for basic dental will be fully covered, while using out-of-network providers will be covered 80%. Furthermore, any

major services will be covered 60% in-network and 50% coverage for out-of-network after the deductible has been satisfied. In-network and out-of network has a 50% no deductible. Prescription Drugs Prescription drug benefits are automatically enrolled under both HMO and POS plans from Independence Blue Cross. The Independence Blue Cross HMO and POS offer similar coverage, where this coverage is for network providers only. The copayments for these drugs are shown in the following table: Copayments for Prescription Drugs Generic HMO/POS $15/$10 $30/$20 Brand-Name HMO/POS $35/$20 $70/$40 Non-Formulary HMO/POS $50/$35 $100/$70

Retail Mail Order

Retail drug copayments are based on a 30-day supply and mail order drug copayments are based on a 90-day supply. Vision Vision coverage is also offered under both HMO and POS through Independence Blue Cross called the $100 Vision Program. Like Prescription Drug Coverage, employees enrolled under any of the healthcare plans are automatically enrolled in the Vision coverage. The Independence Blue Cross $100 Vision Program, administered by Davis Vision, offers employees a routine eye care, frame and lenses every two calendar years. The copayment for participating providers is $0 and there is a reimbursement up to $35 to employees for non-participating providers. Paid-in full benefits for eyeglasses with standard lenses are possible when employees

choose from select grouping known as the Davis Collection of Frames, but there is also a reimbursement up to $100 for eyeglasses at non-participating providers. Flexible Spending Account (FSA): Medical Flexible Spending Account (MFSA) The Please Touch Museum also offers its employees a voluntary Flexible Spending Account (FSA) through HFS Benefits. The company offers two kinds of Flexible Spending Account; one is a Medical Flexible Spending Account (MFSA) and the other one is a Dependent Flexible Spending Account (DFSA). MFSA can be used to pay for eligible medical expenses for the employees and any other person the employee claim as a dependent for income tax purposes. This account allows employees to use a pre-tax deductions dollars to spend on eligible medical expenses. Pre-tax deductions for the medical FSA account cannot exceed $2,500 annually. Those who enroll in the MFSA will receive a debit card that can be used at certain locations to pay for qualified medical expenses. Dependent Flexible Spending Account (DFSA) The Please Touch Museum also offers a Dependent Flexible Spending Account (DFSA) for its employees eligible dependent. This account allows dependents to use pre-tax deduction dollars to pay for dependent daycare services for dependent. This enables the employee and their spouse (if applicable) to be able to work. Pre-tax deduction for the daycare services DFSA cannot exceed $5,000 annually. Loss of Income: Death Life Insurance The Please Touch Museum provides Basic Life insurance benefits for its full-time employees. The Please Touch Museum offers its employees an employer-paid Term Life

Insurance benefit in the amount of one times the individuals annual salary to a maximum of $150,000. This benefit will be reduced at the age of 65 by 65% and 50% at the age of 70. Accidental Death and Dismemberment (AD&D) The Please Touch Museum also offers AD&D to their employers for additional protection in case the individual is injured or die as a result of an accident. An injury has to be independent of sickness and all other causes. This plan is available to employees who work 30 hours per week. The eligible waiting period is 30 days; and an employee will become insured on the first day of the policy month, which coincides with or follows the day the employee becomes eligible. Voluntary Term Life Insurance Employees may purchase additional life insurance for themselves or for his or her family at group rates through Mutual of Omaha. The AM Best Rating for Mutual of Omaha is A. This voluntary life benefit is only available to the employees dependents, if the employee chooses to select this coverage for themselves. The Please Touch Museum allows employees to purchase Optional Life insurance on a employee-pay-all basis. This coverage can be converted and taken with the employee if he or she terminates employment with the Please Touch Museum. Optional Life insurance is available for employees in $10,000 increments to a maximum benefit of the lesser of $250,000 or five times the employees earnings and a guaranteed issue amount of $50,000. Optional Life insurance is available for the employees spouse in $5,000 increments to a maximum benefit of the lesser of $50,000 or 50% of the employees Optional Life amount; the guaranteed issue amount is $25,000; and coverage for the employees spouse will terminate at the age of 70. Optional Life insurance is also available for the employees children. It is available

for coverage of $2,000 - $10,000, in $1,000 increment for children between the age of 6 months to age 21, or 25, if the child is a full-time student and is also issued on a guaranteed issue basis. The guaranteed issues stated above are only available if an employee enrolls when he or she was initially eligible for the benefit. Loss of Income: Disability Short-Term Disability To protect an employees income in case of an non-occupational injury, the Please Touch Museum also offers its full-time employees a 50% employer-paid Short-Term Disability benefit through Mutual of Omaha. This plan is a fully insured plan. The waiting period for eligibility is 30 days, where the employee will become insured on the first day of the policy month. This benefit protects an employees income in event that they are unable to perform his or her own occupation for a non-occupational disability. The benefit will pay up to 60% of the employees weekly earnings to a maximum of $1,000. The employee must be disabled for a period of 13 days for an injury or illness (including pregnancy) prior to receiving a benefit. Benefits may be paid for a maximum of 11 weeks. Enrollment for this benefit is mandatory and automatic for all for all full-time employees. Long-Term Disability The Please Touch Museum also offers all its full-time employees an employer paid LongTerm Disability Insurance through Mutual of Omaha. The waiting period for eligibility is 12 months, where the employee will become insured on the first day of the policy month. This benefit protects an employees income in the event that he or she is unable to perform at work for a non-occupational disability. The benefit will pay up to 60% of the employees monthly earnings to a maximum of $6,000. The employee must be disabled for a period of 90 days prior

to receiving a benefit. Retirement Benefits 403(b) Retirement The Please Touch Museum offers its employees a 403(b) Retirement and Savings Plan through TIAA-CRED. The AM Best rating for TIAA-CREF Equitable is A++. This plan is offered to employees through two types of contracts: Retirement Annuity (RA) and Group Supplemental Retirement Annuity (GSRA). RA plan is available to full-time and part-time employees (who works a minimum of 20 hours a week), after one year of service, and must be 21 years of age or older. The Please Touch Museum will match employee contributions at 3.5% for the first 1.5% of salary deferred. GSRA plan is also available to full-time and part time employees, who must work a minimum of 20 hours a week. GSRA plan is funded with voluntary, pre-tax dollars through salary reduction. Employees must enroll in the plan at the time of hire or any time thereafter. The difference between RA and GSRA plan is the company does not offer a matching contribution for GSRA plan; however, this plan offers greater flexibility. The maximum amount an employee can contribute to his or her 403(b) account each year by the IRS is $16,500 in 2011. However, an additional $5,500 is allowed in 2011 for employees 50 years of age and older; so these employees can contribute up to $22,000 in 2011. Other Benefits Transit Check The Please Touch Museum also offers its employees a benefit to pay for transportation with tax-free dollars under the TransitChek Program. The maximum deduction limit is $105 per month. This benefit is offered for employees who commute to work by train, bus, subway, or van pool. Employees may use TransitChek vouchers for the purchase of mass transit fare, such

as tickets, tokens, and passes. The participating Transit Operators include: SEPTA, CAT, DART, NJ Transit, PATCO, Amtrak, VPSI Commuter Vanpool, and Vanpool off New Jersey. Introduction The Please Touch Museum is a hands-on childrens museum located in Center City Philadelphia, Pennsylvania. The museum is known for its commitment in designing and implementing educational programs for children and those who are involved in the childrens development, such as parents, teachers, and caretakers. The Please Touch Museum has won several awards for its extended commitment, which includes the Institute of Museum and Library Services' National Award for Museum Service in 2002, the Coming Up Taller Award from the President's Committee on the Arts and Humanities in 2003, and the Promising Practice Award from the Association of Children's Museums and the MetLife Foundation honored the ACES program in 2004. The museum currently has a total of 179 employees, with 77 employees who are eligible to receive benefits, but only 52 employees choose to receive the benefits offered. Judy Meyers, Director of Human Resources was our main contact. She has been with the company for the five years and is the Director of Human Resources at the Please Touch Museum. Meyers is responsible for the employees benefits plan design for the museum. Meyers explained that her responsibility as the benefits plan designer was important because it was important to offer benefits that its employees want. She also stated that the most important employees benefit was medical insurance because its employees work with children and it is important to stay healthy when working with them.

Overall Design Considerations in Employee Benefit Goals

Considerations and Objectives With an employee population of 179, Meyers explained that it was an advantage for the company because it allowed her to easily identify the needs of its employees. Meyers explained that they did a lot of employee surveys and research on its employees needs. When asked about the design considerations for their health and welfare plan, Meyers explained that What we focused on during the benefits design was the cost and network. With the recession, prices for healthcare are increasing, which makes it more difficult to find an affordable coverage with a good network. Meyers stated that most of the museums employees are Pennsylvania and New Jersey residents, it was important for her to find a good healthcare plan that provided coverages in both Pennsylvania and New Jersey. Demographics The Please Touch Museum has considered many factors, while designing its benefits plan. They have taken the demographics of its employees into consideration, such as age, gender, occupation, marital and family status. The average employee age is 34 years old, with a 64% f its employees being females. In addition, the majority of its employees are single. With this information, it allowed Meyers to identify the type of benefits that its employees needed. Knowing that most of its employees are young and single, they would not utilize some of its benefits and decided to offer a HMO and POS plan, which allows employees the option to choose what they want. Eligibility Attracting and retaining excellent employees is important for a company because they are a necessity, since they are the most important asset for a company. The Please Touch Museum

offer benefits to all eligible employees as a motivating factor to continue to work hard. To be an eligible employee for healthcare, employees must work at least 25 hours a week. Employees must work at least 30 or more hours a week to be eligible for other benefits, such as short-term disability, long-term disability, dental, accidental death and death dismemberment, and life insurance. The Please Touch Museum also offers benefits to eligible dependents; eligible dependents include spouse, domestic partners, and children. Retirement Although the Please Touch Museum has a large young employee group, the museum still believes it is important to offer retirement benefits to them. The Please Touch Museum offers its employees a 403(b) to employees with a matching distribution of 3.5% for the first 1.5% of salary deferred. Meyers explained that it was important to offer retirement benefits because it is never too early to start saving. Employees may receive this benefit after a year of service at the Please Touch Museum. Funding Considerations Meyers explained that the funding considerations were easy to make because they had such a small employee population, which meant that it would cost too much to self-fund. She explains that they have looked into self-funding, but it was just too expensive. In addition to the price, Meyers stated that it was just too risky as well. She explained that being fully-insured was more effective for the museum.

Problems, Issues, Concerns, and Considerations in the Design of Health Benefits

Meyers explained that there were little issues and concerns during the design of the health benefits. As explained above, Meyers knows her employees needs and have developed a wellliked health benefits plan for its employees. She also stated that the museum does not face an adverse selection problem because the majority of its employees are younger, which means that the majority of the participants are not high risk individuals seeking for low cost healthcare. However, there were price considerations and cost containment issues, while designing the benefits plan. Price Considerations Meyers stated that the biggest concern while designing the benefits plan was price. Meyers explained that the recession has caused an increase in premiums, which has made finding an affordable plan difficult. She stated that her job was to find a good price for both the employer and employees because the benefit was financed on a contributory basis. The price is very important when designing a benefits plan because the museum did not want to offer benefits that employees could not afford. Although price was a concern, Meyers stated that they were not seeking to impoverish its plan to cut price. Meyers also explained that it was hard to negotiate prices with carriers because of its small group size. In the past, the museum has switched carriers many times due to price. However, the Please Touch Museum is happy with their current carrier, Independence Blue Cross, and has decided to stay with them the following year. Furthermore, the Please Touch Museum rebids yearly, to seek a more affordable plan that offers better benefits for its employees. Cost Containment

Meyers explained that by offering a HMO plan that did not provide an out-of-network coverage, it was important to also provide its employees a POS plan. And as a result, they also offer its employees a POS plan; by offering a POS plan, it allows employees to have an option of choosing a plan that allowed them to see a specialist by self referring. Although the POS plan offers out-of-service coverage, it meant that employees had to pay higher out of pocket costs. While the HMO does not provide out-of-network coverage, it is affordable. As a result of offering two plans with different coverages, the employees have the freedom to choose a plan that is better for them. Problems, Issues, Concerns, and Considerations in the Design of Other Types of NonRetirement Benefits Flexible Spending The Please Touch Museum offers a Flexible Spending Account (FSA) to employees to allow employees to save money and pay for medical expenses that are not paid by their health insurance. The museum also offers a Dependent Flexible Spending Account (DFSA) to pay for dependent daycare services. Meyers stated that it was important to offer these benefits because they understand that there are medical expenses, such as deductibles, copayments, and coinsurance that are not paid by the employees health insurances. Although there are many benefits in having an FSA and DFSA, not many employees utilize it. Meyers explains that its employees understand the purpose of a FSA, but just simply do not utilize it. Communication The Please Touch Museum uses several methods to communicate to its employees about their benefits. One method of communication is having open enrollment meetings, especially

when they change carriers or benefits. Meyers explain that Guardian also attends the meetings and does a presentation to employees about life, short-term disability, and long-term disability insurance to allow employees to better understanding of the coverages that are offered to them. A booklet is passed out to employees during open enrollment, which provides the overview and recap of the benefits that are offered to them. Another way of communicating with employees is having one-on-one meetings with new hires. One-on-one meetings are important for new hires because it allows better understanding of the benefits that the museum offers to its employees and allows the new hires to ask questions and regarding the benefits. Meyers explained that the size of its employee group has been an advantage for them by allowing easy communication. Meyers also states that Communication is important when it comes to employee benefits because we want employees to know what we offer. Regulatory Compliance When asked about how much effort goes into complying with regulations, Meyers states that her broker deals with the regulatory compliances. She explains that her broker deals especially with COBRA and HIPAA; the only thing Meyers deals with in regards to COBRA is contacting her broker and letting the broker know that someone has left the organization and needs COBRA information. When asked about the health reform, Meyers stated that they are in compliance with everything, and has prepared for it the year before. She states that she is currently not concerned with the health reform because it will not come into effect for another two years and there will be many changes until then. PPACA

As stated above, Meyers expressed little concern with the impending changes of the health reform. She explained that they were already in compliance with everything. The Please Touch Museum already offered coverage for dependents for age 26. In addition, the museum has eliminated pre-existing conditions and provides preventive health services with no cost sharing through Independence Blue Cross. They are also in compliance with nondiscrimination rules for its fully-insured plans. The museum also complies with offering insurance for uninsured individuals and dependents with pre-existing conditions, where they offer health insurance for all employees that work more than 25 hours a week. ERISA The Please Touch Museum has a fiduciary responsibility under ERISA to act in the best interests of its employees by providing them with a plan that is good and affordable. As mentioned before, the museum is most concerned about the price of the healthcare plan, but will not impoverish a plan for a cheaper price. In order to comply with fiduciary responsibility, the museum is offering two health plans, a HMO and POS plan. By providing two different types of plans for its employees, it gives the employees the freedom to decide which plan is best for them. Also, the Please Touch Museum is in compliance with providing required communication activities to plan participants, where the museum has open enrollment meetings every year. Summary description plans and other information about employee benefits are passed out during these meetings. Recommendations After interviewing Meyers, we learned that the employees are very satisfied with their benefits. Due to the understanding of its employees needs, it allowed the museum to devise a

well-planned design that its employees was satisfied with. One suggestion that we have for the museum is to look into joining a (Multiple Employer Welfare Arrangement (MEWA). By joining a MEWA, the museum can possibly be able to offer its employees, a more affordable healthcare plan that they cannot offer now because of its group size. Another suggestion we have for the Please Touch Museum is to increase communication to its employees about FSAs. Due to low participation among its employees in FSAs, it is fair to say that many employees do not fully understand the benefits of a FSA. We advise that the museum offer individual FSA seminars to increase awareness of the benefits of FSAs.

December 9, 2011 Judy Meyers The Please Touch Museum Director of Human Resources Memorial Hall in Fairmount Park 4231 Avenue of the Republic Philadelphia, PA 19131 Dear Ms. Meyers, We really want to thank you for taking your time to help us with our group project. Without your help, we would not have been able to complete it. We really appreciate the fact that you allowed us to do an interview with you with such short notice. We understand that you have a very busy schedule, especially the fact that it is enrollment period. We also want to thank you for answering our additional questions that we had after the interview. It was a pleasure meeting you. Our meeting has definitely allowed us to better understand the types of issues and considerations associated in benefits plan design. We would like to extend our deepest gratitude for all your help. As mentioned during our meeting, we will be sending you a copy of the project to you. Please provide us any questions or feedback that you may have. Once again, thank you for helping us!

Sincerely, Winnie Mark James Leung