lisa m monica - american heritage federal credit union.fall2011

8/2/2019 LISA M MONICA - American Heritage Federal Credit Union.fall2011

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American Heritage FederalCredit UnionBenefits Analysis

12/9/2011RMI 3501Christina SnyderLisa Monica


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Benefits Analysis: American Heritage Federal Credit Union 1 | P a g e

Table of Contents

Part I and II

Benefits Matrix - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2

Summary of Benefits - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4

Inventory of Health Benefits - - - - - - - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - - 5

Medical Expenses

Keystone Health Plan East HMO - - - - - - - - - -- - - - - - - - - -- - - - - - - - - - - - - 5

Keystone Point-Of-Service HMO - - - - - - - - - -- - - - - - - - - -- - - - - - - - - - - - - 6

United Concordia Dental - - - - - - - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - - 7

UnitedHealthcare Vision - - - - - - - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - - 7

Prescription - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -8

Flexible Spending Account - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

Loss of Income Benefits

Life Insurance - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

Long Term Disability - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

Retirement - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

Other Exposures

Educational Assistance - - - - - - - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - - - - 12

Work/Life - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -12

Party III

Introduction- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 15

Design Considerations and Objectives in Employee Benefits- - - - - - - - - - - - - - -- - - - - - - -16

Objectives- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - --16

Considerations - - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - -17

Demographics- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - -17


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Problems, Issues, Concerns, and Considerations in the Design of Health Benefits- - - - - - - - - - -18

History of Benefits- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - -18

Funding and Financing Considerations- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - 18

Rising Cost of Healthcare- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - 19

CDHPs- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- -20

Problems, Issues, Concerns, and Considerations in the Design of Other Non-Retirement

Benefits- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - 20

Communication- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - -20

Long Term Care and Short Term Disability Issues- - - - - - - - - - - - - - -- - - - - - - - - - - - - 21

Wellness Programs- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - 21

Regulatory Compliance- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - -22

PPACA- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - -- - 23

COBRA, HIPAA, ERISA- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - 23

Suggestions for the Future- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - -25

Implementing a CDHP- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - -25

Preparing for PPACA- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - 26

Conclusion- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - 26


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Benefits Matrix

Loss Exposure Is theExposureCovered?

Coverage/ Benefits Provided

Loss Of Income: Medical Expenses

Overall Medical Expenses YES Keystone Health Plan East HMOKeystone POSHMOFlexible Spending Account

Dental YES United Concordia DentalFlexible Spending Account

Vision YES Included in Health PlanFlexible Spending Account

UnitedHealthcare (Voluntary)Prescription YES Included in Health PlanFlexible Spending Account

Long Term Care NO

Retiree Health Care YES Medicare

Loss Of Income: Death

Non-Accidental and Non-Occupational YES OASDIGroup Life InsuranceGroup Life (Voluntary)401(k)

Accidental Death YES OASDIGroup Life Insurance (includesAD&D)Group Life (Voluntary)401(k)

Occupational Death YES OASDIGroup Life InsuranceWorkers Compensation401(k)

Loss of Income: Unemployment

Unemployment YES Unemployment InsuranceLoss of Income: Disability

Non-Occupational; Short Term YES OASDISick Leave401(k)

Non-Occupational; Long Term YES OASDICUNA Mutual LTD401(k)


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Occupational; Short Term YES OASDIWorkers Compensation401(k)

Occupational; Long Term YES OASDICUNA Mutual LTD

Workers Compensation401(k)

Loss Of Income: Retirement

Retirement YES OASDI401(k)Defined Contribution Plan

Other Exposures

Educational Assistance YES Tuition Reimbursement

Work/Life Exposures YES Tele-commuting

Wellness ProgramsEmployee Assistance Programs

Mass Transportation YES Flexible Spending Account

Parking YES Flexible Spending Account

Auto Insurance YES Nationwide Discount

Dependent Care YES Dependent Care FSACUNA Mutual Group Life InsuranceDependent Coverage

Property-Liability NO

Legal Expenses NO


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Benefits Summary

*Vision and Prescription included in Health Plan

Benefit Plan A.M. BestRating

Funding Financing Eligibility

Keystone Health Plan EastHMO*

NA Fully insured Contributory Employees andDependents

Keystone POSBuy-upPlan


United Concordia DentalFlex


UnitedHealthCare Vision NA Fully insured Employee Pay All Full-timeEmployees andDependents

CUNA Mutual Group LifeInsurance (includesAD&D)

A (Excellent) Fully insured Non-Contributory Employees andDependents

CUNA Mutual Group LifeInsuranceDependentCoverage

A (Excellent) Fully insured Non-Contributory Dependents

CUNA Mutual VoluntaryLife Insurance (includesAD&D)

A (Excellent) Fully insured Employee Pay All Employees

CUNA Mutual Group LongTerm Disability

A (Excellent) Fully insured Non-Contributory Employees

CUNA Mutual Group LifeInsuranceHigherEducation Benefit

A (Excellent) Fully insured Non-Contributory Employees


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Inventory of Existing Benefits

The American Heritage Federal Credit Union (AMHFCU) offers its employees a wide

variety of employee benefits and has been awarded by the Greater Philadelphia Media Job

Trends as one of the Best Places to Work. For the healthcare plan, AMHFCU offers employees

two options: Keystone HMOBase Plan and Keystone POSBuy-up Plan. An employee can

enroll in these plans during open enrollment and must have worked with AMHFCU for at least

90 days. Dependents are eligible for coverage as well, but if spouses are offered coverage

elsewhere they must take the other coverage. These benefits are offered on a calendar year basis,

which begins on January 1 and ends on December 31. The deductible and out-of-pocket

maximum resets to $0 at the start of the calendar year on January 1. If employees choose the

Keystone POS-Buy-up Plan, they will have the option of going out-of-network but at the cost of

a higher deductible and higher out-of-pocket costs. Any employees enrolled in either of these

plans are entitled to a routine eye exam once every two calendar years, with a co-pay of $40.

They are also entitled to a prescription drug plan called the Select Drug Program. If employees

choose to opt-out of the medical and dental plans, they will receive an annual reimbursement

amount of $1500.

Medical Expenses

Keystone Health Plan East HMO (Base Plan)

One of AMHFCUs health benefit plans includes Keystone Health Plan East, a subsidiary

of Independence Blue Cross, which offers a Health Maintenance Organization (HMO). Coverage

is available when employees care is provided or referred by a Keystone primary care physician

(PCP). Employees Keystone PCP may also refer you to other Keystone providers for care, if


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needed. This plan is fully insured, contributory and offered to all full-time employees and

dependents. Depending on which tier employees fall under, they pay a certain percentage of their

premiums. A single employee will pay 10% of the premium, an employee covering dependents

will pay 25%, and Members of Senior Management will pay 10% of the premium for single

coverage and 30% for family coverage. Employees in the HMO are not obligated to pay any

deductibles, but they are required to cover co-pays for office visits, outpatient surgery, and

emergency room care. For an office visit the co-pay is $20 for a primary care physician and $40

for a specialist. Outpatient surgery co-pay is $75 and an emergency room visit is $100. There is

an annual maximum co-payment of $300 for single coverage and $6000 for family coverage.

Keystone Point-of-Service HMO (Buy-up Plan)

AMHFCU also offers its employees a point-of-service type HMO, also through

Independence Blue Cross. This plan is fully insured, contributory and offered to all full-time

employees and dependents. Keystone Point-of-Service lets employees maintain freedom of

choice by allowing them to select their own doctors and hospitals. Employees can maximize

their coverage by having care provided or referred by their primary care physician (PCP). With

Keystone Point-of-Service, employees have the freedom to self-refer either to a Keystone

participating provider or to providers who do not participate in the network; however, higher out-

of-pocket costs apply. The program, however, may not cover all the employees health care

needs. The out-of-network provider may bill employees the difference between the plan

allowance, which is the amount paid by the plan, and the actual charge. Employees enrolled in

the plan that chose to stay in network are not required to pay any deductible, but once they go

out-of-network that $0 jumps to $1000 for single coverage and $3000 for family coverage. The

copayments for employees staying in network are $15 for a primary care physician and $30 for a


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specialist, and once they go out-of-network the plan will only cover 70% of the amount after the

deductible. If an employee goes out-of-network there is a maximum out-of-pocket cost of $3000

for single coverage and $9000 for family coverage. Although in the POS plan employees are

allowed to go out-of-network, they are encouraged to stay in network with the incentive of lower

out-of-pocket costs.

United Concordia Dental

AMHFCU offers their employees United Concordia Dental Flex. This plan is fully

insured, contributory and offered to full-time employees and dependents. Children are defined as

dependents up to the age of 23 if they are full-time students and 19 if they are not full-time

students. The employees are given a schedule of benefit which tells them what and how much is

covered. There are three classes of services. The plan pays 100% of Class I Services (preventive

care), 80% of Class II Services (basic dental services) and 50% of Class III Services (major

dental services) which includes Orthodontics. There is a $50 per calendar year deductible per

member which excludes Class I and Orthodontics, and a maximum $150 per calendar year per

family. There is a $1000 per calendar year maximum and $1500 maximum per member for

orthodontics. United Concordia Dental premiums vary based on these four categories: single,

employee/spouse, employee/child, and family.

UnitedHealthcare Vision

AMHFCU offers their employees basic vision insurance through their medical plan HMO

which they are allowed a routine eye exam once every two calendar years with a $40 co-

payment. However, AMHFCU also offers a voluntary plan with United HealthCare, with

Spectera Inc. as its third party administrator. This plan is fully insured, on an employee pay all

basis, and offered to all full-time employees and dependents. This plan features a wide range of


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benefits including routine vision examination, eyeglass frames, eyeglass lenses and contact

lenses. They are allowed each benefit once per eligibility period, which is 12 months. Employees

are allowed to go out-of-network for their vision but are subject to maximums for each benefit.

Employees are able to select either eyeglasses or contact lenses, but not both, during the

eligibility period.

Prescription

Employees are automatically enrolled in KeystonesSelect Drug Program when they

enroll in either health plan. This program provides coverage for drugs prescribed by a licensed,

practicing physician. It is based on a formulary that includes all generic drugs and a defined list

of brand name drugs. The plan encourages the use of generic drugs; therefore, if a generic

equivalent is available, you must use the generic form. If you choose a brand-name drug when a

generic is available, you must pay the preferred-brand co-payment in addition to the retail cost

difference between the brand-name and generic form of the drug. The employee can get

prescriptions from either a retail pharmacy or a mail-order pharmacy, depending on the type of

drug. Co-payments vary based on generic, brand name, or non-formulary prescriptions.

Prescription Drug Card 90-Day Mail Order Prescriptions

$10 for generic prescriptions $20 for generic prescriptions

$30 for brand-name prescriptions $60 for brand-name prescriptions

$50 for non-formulary prescriptions $100 for non-formulary prescriptions


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Benefits Analysis: American Heritage Federal Credit Union 10 |P a g e

Flexible Spending Account

AMHFCU offers its employees the opportunity to participate in a Flexible Spending

Account (FSA) administered by AmeriHealth. A Flexible Spending Account is a possible

application of Section 125 of the Internal Revenue Code. Employees voluntarily take a pre-tax

salary reduction in order to pay for qualified healthcare, dependent care, and transportation

expenses. AMHFCU provides the employees with the option to choose how they would like to

be reimbursed. They may either fax receipts or use a flexible spending debit card. The core

benefits for this FSA are benefit premiums, dependent care, and out-of-pocket medical expenses,

but employees may also use their FSA dollars on parking and transportation.

Healthcare FSA- The maximum contribution amount per year for the medical expense account is

$3000. Under Health Care Reform, regulations mandated that out-of-pocket medical expenses

are no longer eligible for flexible spending reimbursement without a doctors prescription.

Dependent Care FSA- The maximum contribution amount per year for the dependent care is

$5000 if filing joint and $2500 if filing separately.

Parking and Transportation- This benefit program allows employees to use a prepaid debit

MasterCard on a tax-free basis. You may use this card to purchase SEPTA tickets, tokens, and

weekly/monthly passes. A separate debit card is used towards qualified, parking expenses.

Loss of Income Benefits

Life Insurance

AMHFCU offers life insurance which is fully insured, non-contributory and available to

all full-time employees. The group life benefits schedule is 1.5 x salary with a maximum benefit

of $400,000. The accelerated benefit is up to 50% of the life benefit with a $250,000 maximum.


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Dependent coverage is also available for spouses and children, each receiving $2000. This

benefit helps cover loss of income due to death. AD&D insurance is also covered under the

group life benefit with the same schedule as life insurance (1.5 x salary). AD&D coverage is

provided to cover losses due to accidental death and dismemberment. Employees are also offered

voluntary life insurance on an employee pay all basis. They have the option to add on to their

group term life insurance that AMHFCU provides to them. Employees take their voluntary life/

AD&D coverage with them when/ if they terminate employment with AMHFCU. Employees

can purchase additional life insurance in increments of $10,000 with a maximum of 5 x salary or

$500,000, whichever is less.

Long Term Disability

Long Term Disability is fully insured, non-contributory and offered to all full-time

employees. The benefit percentage is 66.67% of salary with a minimum of $100 and a maximum

of $12,500 per month. The benefit begins on the 31st consecutive day of the disability and

continues until recovery or employees normal retirement age, whichever is earlier. There are

plan limitations which include subjective disorders, chemical dependency, mental/ nervous

disorders and pre-existing conditions. The benefit pays up to age 65 with a reduction benefit

according to a schedule. There is a survivor benefit included which pays the spouse or children

(under the age of 25) a lump sum benefit equal to 3 times the monthly LTD benefit if the

employee dies after being disabled for a minimum of 12 months.

Retirement

AMHFCU offers a 401(k) Plan which provides employees with the opportunity to save

for retirement on a tax-advantage basis. Employees elect to contribute to the plan on their behalf.

Eligible employees include a completion of one year of service with at least 1000 hours of


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service and who are at least 21 years old. There are different types of contributions that may be

made under the plan which include employee salary deferrals, employee rollover contributions,

employer matching contributions and employer profit sharing contributions.

Employee salary deferrals: Employees may elect to reduce their contributions by a certain

percentage amount and have that contribute to the 401(k) plan on a pre-tax basis. This allows

employees taxable income to be reduced. However federal income taxes on the deferred

contributions are only postponed until a later time. Employees may only defer up to $16,500

unless they are over 50 years old and may elect to defer an additional amount called catch-up

contributions with a maximum amount of $5500. Employees may also set up automatic deferral

which takes out 2% of employees payroll automatically.

Employee rollover contributions: Employees may contribute rollover contributions to their

401(k) plan if they have received retirement plans from a different employer. Employees may

withdraw from their rollover account at any time.

Employer matching contributions: AMHFCU makes contributions to their employees 401(k)

equal to a certain percentage of their salary. However any catch-up contributions are not

matched.

Employer profit sharing contributions: AMHFCU may also make discretionary profit sharing

contributions to employees plan. The profit sharing is divided among eligible employees in the

contribution for the year.

Profit Sharing Contribution X Employees Compensation

Total Compensation of ALL

Participants Eligible to Share


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Employees are 100% vested in their account but are subject to a vesting schedule for the

employer matching contributions and employer profit sharing contributions. In order to gain a

year of service an employee must be credited with at least 1000 hours of service.

Employees may receive a distribution of the vested portion of their plan for termination

of employment, early retirement, normal retirement, disability or death. Employees are entitled

to their benefits for early retirement at the age of 55 and completion of 5 years of service. If

employees die while they are still employed, 100% of their account will be provided to their

beneficiary who could be their surviving spouse, children, parents, or their estate.

Other Exposures

Educational Assistance

AMHFCU offers all full-time employees with at least one year of continuous service the

benefit of tuition reimbursement. AMHFCU will pay up to $1000 per semester for continuing

education plus the cost of books. Employees must obtain a B average to receive the $1000, but

they may still get $500 a semester if their average drops to a C.

Work/Life

AMHFCU offers an Employee Assistance Program to part time and full-time employees

who have completed 90 days of service. The Carebridge Organization delivers a wide-ranging

Vesting Schedule

Years of Service Percentage

Less than 3 0%

3 100%


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employee assistance program that offers assessment, counseling and referral service for various

personal, family and work-related issues. The program provides employees and their families

opportunities to solve problems such as depression, alcohol and drug abuse, stress, and marital

issues. The Carebridge Organization provides its clients with access through a free hotline 24

hours a day, 7 days a week. This program helps employees to gain access to help that they may

be seeking for troubles at home. With the resolution of these troubles, employees may be happier

and more productive at their workplace.


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Introduction

American Heritage Federal Credit Union (AMHFCU) was founded in 1948, providing

memberships to the employees of Budd Manufacturing. In 1985 it transitioned into American

Heritage Federal Credit Union and extended its membership to several other companies. Its

headquarters are in Northeast Philadelphia. Its members now consist of select employers groups

(SEG.) In order to be eligible for a membership at AMHFCU, you must live, work, or worship in

the Philadelphia area. Some would say Philadelphia is an underserved area, so AMHFCU is

here to provide all residents of Philadelphia with exceptional banking services. It is one of the

top six credit unions in Pennsylvania, serving about 700 companies with over 100,000 members.

AMHFCU employs approximately 400 full-time employees with about 300 plus dependents

using their health and welfare benefits plan. For the past 5 years The Philadelphia Business

Journal has named AMHFCU as a winner for the Best Places to Work in the Philadelphia region.

This award recognizes AMHFCUs achievements in creating a positive work environment where

employees are rewarded with great benefits, working conditions, and an exceptional company

culture. Our benefits analysis and interview was conducted with Flora Caranci, Vice President of

Human Resources for the American Heritage Federal Credit Union, headquartered in

Philadelphia, PA. Ms. Caranci works directly with a broker to choose the best benefit plan for

the employees.


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Design Considerations and Objectives in Offering EmployeeBenefits

Objectives

Every employer will tell you that they provide employee benefits to attract and retain

good, productive employees. Ms. Caranci told us that there is much more behind the objectives

of a benefit plan. At AMHFCU they have developed a company culture that goes far beyond an

employee benefit plan. They not only offer their employees great benefits, but they have

developed a work-place that is team-oriented, friendly, and concerned about the environment.

With such a culture, people enjoy coming to work each day; therefore, they retain many

productive employees. Ms. Caranci told us that they provide employees with exit interviews

when leaving the company. The exit interviews ask for employee feedback about the company

and why they are leaving. She says employees only have good things to say about the benefits

provided at AMHFCU. This feedback is important for her when designing the plan each year.

Considerations

When designing a benefit plan, Ms. Caranci works closely with a broker and a benefits

manager. The summer before open-enrollment begins, her broker puts together a pre-renewal

binder full of information regarding the possible benefits, and she decides what plans she wants

based on cost containment and benefit enhancement. When deciding which benefits to offer, she

looks at cost sharing arrangements such as deductibles, co-payments, and coinsurance. One of

her main priorities is maintaining a rich plan within a budget, considering AMHFCU pays 90%

of the medical premium for all employees and 75% for family coverage. AMHFCU wants

employees to have the lowest out-of-pocket expenses possible; therefore, it contributes such a

high percentage of premiums. For these contributory benefits, premium contributions made by an


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employee can be taken out on a pre-tax basis through a salary reduction plan. It also provides

life/AD&D benefits on a non-contributory basis. When asked why some benefits are non-

contributory, Ms. Caranci told us that the non-contributory benefits are able to be offered in such

a way due to the consistency of the claims made. With medical benefits, claims each year can

vary significantly. With life/AD&D she has not seen any major spikes in premiums. Therefore, it

is easier to determine and predict an affordable premium. Also, with life/AD&D, they are offered

through CUNA mutual. Ms. Caranci has negotiated a discount with them and entered into a

contract which allows AMHFCU to offer the benefits at no cost to employees. With such low

employee contributions and out-of-pocket expenses, AMHFCU has an advantage over its

competitors who offer similar benefits at higher costs. Not only are the benefits at low cost to an

employee, but AMHFCU gives the employees the option to obtain voluntary insurance if

necessary.

Demographics

When designing a benefit plan, AMHFCU takes into consideration the demographic

diversity that each employee faces. Its plan consists of four tiers: single, employee/child(ren),

employee/spouse, and family. This four tiered plan is a contribution strategy designed to control

increasing costs to employers. It is a way to shift the cost to employees based on how many

dependents are being covered. (Expansion of dependent coverage Christy Yaccarino)One key

issue in AMHFCUs demographics considerations is that under the employee and spouse tier,

spouses may only receive healthcare coverage if they cannot obtain it elsewhere. If employees

spouses have the opportunity to obtain coverage through their own employer, they must take that

coverage. This mechanism saved AMHFCU $90,000 this year. If an employee is eligible for

coverage under their spouses plan, they may opt-out of AMHFCUs plan and receive an annual


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reimbursement amount of $1500. Opt-out participants will be reimbursed $125 per month in two

lump sums- once in January and again in July.

Problems, Issues, Concerns, Considerations in the Design ofHealth Benefits

History of Benefits

AMHFCUs benefit/health plan started in 1948 as a traditional indemnity plan covering

all employees. As any indemnity plan would work, the role of the insurer was to completely

indemnify the insured, returning them to their financial position before their loss. With the rise of

healthcare cost and an increase in utilization, this indemnity plan became unaffordable.

AMHFCU tried implementing a PPO for a few years. PPOs have advantages such as: access to a

larger number of facilities and doctors, freedom of choice, no referrals for specialists, and

negotiated fees. They also come with some burdensome disadvantages such as higher

deductibles, co-insurance, and co-payments. Since AMHFCUs biggest priority is low cost for

employees, PPOs were not the best option. AMHFCU then decided to implement an HMO with

a POS option, which is still offered today.

Funding and Financing Considerations

AMHFCU currently fully insurers all their health and welfare benefits because of

affordability. Ms. Caranci stated the main reason for using an insurer is because it is less risky.

AMHFCU is not large enough to self-insure, and one catastrophic loss would hurt the company

financially. In fully insured plans, premiums usually vary depending on employer size,

demographics and health care use. Premiums can vary each year for an employer based on


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changing demographics. AMHFCU only saw a 2% increase from 20102011 which allows them

to continue to meet their objective of employee satisfaction and pay for 90% of employees

coverage.

AMHFCU decided to finance the health care benefits on a contributory basis. However,

they offer a voluntary vision plan as well as voluntary life insurance, which both are offered on a

fully contributory basis. There is a possibility of adverse selection when offering a plan on a

contributory basis which is evident with a low participation rate. Ms. Caranci believes that

enough employees participate in both the health care and voluntary plans that there is no

evidence of adverse selection. AMHFCU finances their CUNA Mutual life insurance on a non-

contributory basis. Originally AMHFCU used Assurant for their life insurance coverage but they

were able to negotiate a better price for the same benefits with CUNA.

Rising Cost of Healthcare

According to Ms. Caranci, one of the major problems is the continuously rising cost of

healthcare. New technologies that are more expensive, comprehensive benefit packages that

lower the out-of-pocket cost for the consumers and less healthy life style choices that result in

the increase of medical services to treat chronic diseases are some of the reasons for rising

healthcare. (site) There are attempts to mitigate these rising costs such as managed care and

consumer driven plans, but they are still rising each year along with inflation. In the past,

AMHFCU offered a traditional indemnity plan on a non-contributory basis. This plan cost the

company a lot of money and valuable time, due to the high costs and hassle in providing full

indemnification for each claim made by an employee. This pushed AMHFCU towards a more

managed plan, such as their current HMO and HMO-POS plans. Wellness programs are a great

way to successfully lower cost and AMHFCU offers many programs which are described below.


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Consumer Driven Health Plans

A consumer drive health plan changes the role of an employee from passive beneficiary

to an active, informed consumer. They give the employees the choice to spend or save and more

options of providers in the network. Most CDHPs offer either a health savings account or health

reimbursement account in accordance. Employers are using these plans to engage employees in

their healthcare and reduce the costs for themselves and the employees. (ENGAGE

EMPLOYEES IN HEALTH CARE Towers Perrin) When asked if she was considering a

CDHP, Ms. Caranci admitted that she had put some thought into a CDHP, but does not see it

happening in the near future. She said, It would take many years of communication to the

employees in order for it to be successful. Ms. Caranci believes that the plans they have now are

not causing any significant cost increases or problems so she chooses not to change them. She

acknowledges the benefits of a CDHP, but is not ready to offer one.

Problems, Issues, Concerns, Considerations in the Design of

Other Types of Non-Retirement Benefits

Communication

Communication is an important aspect of Ms. Carancis job. It is important not only to

address enrollment and facts in a companys communication, but it is also important to provide

helpful tips and make sure the message is clear. Her office works hard to ensure that all the

employees are aware of their benefits, especially what doctors are considered to be in-network.

AMHFCU sends out weekly employee newsletters about what is going on in the company and

also about health and welfare benefits. When open-enrollment is approaching, they send out

emails and notices to remind them of the benefits offered. According to Kathryn Yates, global


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director ofcommunication consulting for Watson Wyatt The portal where you go to get

electronic total rewards statements is becoming a hub of benefits understanding. (Web-based

total compensation Jill Elswick)AMHFCU has implemented an online benefit enrollment tool

called SmartBen that provides employees with step-by-step directions on how to enroll in their

benefit plans. Employees can log in to their account and review the benefits that are offered and

also access all the Summary Plan Descriptions of each plan. They can check their FSA account,

make payments for health, dental and life insurance and also add dependents. This tool has

increased the participation rate and accessibility for AMHFCUs plan. In addition to an online

tool, employees receive written Benefit Plan Summaries, explaining all the benefits that are

offered. Ms. Caranci believes she does an excellent job at communicating benefits and she can

see this in her high participation rate and excellent reviews from employees.

Long Term Care and Short Term Disability Issues

AMHFCU does not currently offer short term disability coverage. Ms. Carancis

reasoning behind this is the fact that their elimination period for long term disability is only 30

days; therefore employees are ineligible for short term disability. Instead, they may use

sick/vacation days for a short term disability. AMHFCU does not directly offer long term care to

employees, but it offers LTC to all of its members. Upon employment, employees are offered a

membership to the credit union, so they have access to LTC in that respect. Although it is not

provided in the employee benefits package, employees may still access LTC coverage through

their memberships.

Wellness Programs

One cost containment technique is the control of demand for health care goods and

services through wellness programs. Wellness programs can help reduce health care costs and


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increase employee productivity, but poorly implemented programs can drain company

funds.(article) AMHFCU properly implements its plans by forming a wellness committee who is

responsible for creating ideas that will contribute to the well-being of the employees. AMHFCU

has many programs such as a maintain dont gain program, which is a weight competition that

runs from Thanksgiving till after the New Year. This program rewards all those employees who

chose to participate by offering points based on things such as taking the stairs, walking

around the building property on break, and parking farther away. This program gets people

moving more by providing them with rewards and incentives based on a point system. Another

program they implement is smoking cessation. Employees attend a class once a week during

their lunch break which is designed to help them quit smoking, and also are offered a discount on

nicotine products. Ms. Caranci told us that starting June 2nd the entire campus will be a tobacco

free workplace. She knows that some employees will complain, but she believes it is beneficial

for not only other employees but also the members of the credit union. A few other programs

include take the stair day, weight watchers, summer fun Friday, yoga, and employee softball.

During the open-enrollment period, AMHFCU provides a wellness van that provides

employees with the opportunity to measure their glucose level, cholesterol, and blood pressure.

During this period there is also a masseuse and chiropractor on site to accommodate employees

needs. These wellness programs help contain AMHFCUs healthcare costs, but at the same time

help to boost employee morale.

Regulatory Compliance

AMHFCU puts an excessive amount of time and effort into complying with regulations

such as COBRA, ERISA, HIPPA, and PPACA. Ms. Caranci is a part of the Society for Human

Resource Management (SHRM), thus she receives newsletters and updates about any changes in


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the law or regulations. This helps keep her updated and ready to change and comply when

necessary.

PPACA

The Patient Protection and Affordable Care Act (PPACA) went into effect on March 23 ,

2010. PPACA is a federal regulation governing employee benefits and sets certain provisions

that are phased in until 2018. However plans that are grandfathered, like AMHFCUs, are

exempt from certain requirements. AMHFCU was able to keep their existing benefits and didnt

have to make any changes. A grandfathered plan is a health plan that existed before March 23 rd

and the plan must have continuously covered someone since March 23, 2010. There are many

benefits for an employer to offer a grandfathered health plan. Employers are exempt from the

mandate to offer free preventive health services, certain cost sharing restrictions and extension of

rules prohibiting discrimination in favor of highly compensated employees. AMHFCU is

compliant with PPACAs regulations regarding grandfathered plans and plans to stay

grandfathered as long as they can. However, they will eventually lose their grandfathered plan

status.

COBRA, ERISA, HIPAA

When asked about COBRA, ERISA, and HIPAA, Ms. Caranci said that she does her best

to keep plans up to date with the ever-changing regulations. The Consolidated Omnibus Budget

Reconciliation Act of 1986 (COBRA) is essential for any benefit plan design because it is

designed to provide coverage to people who lose their employer-sponsored coverage. Under

COBRA, qualified beneficiaries have the right to elect continuous coverage for certain


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qualifying events. There may be coverage gaps for employees who face factors such as:

termination of employment for reasons other than gross misconduct, retirement, and reduction

of hours. A qualifying event differs for a dependent. An event can include: loss of full-time

student status, death of covered spouse, and divorce/separation. AMHFCU has not had any

significant problems with determining and keeping employees up to date on their COBRA status.

AMHFCU uses Infinisource, a third party company, to assist with its COBRA coverage. When

an employee becomes eligible for benefits, their information is entered on the Infinisource

website. When an employee leaves the credit union, AMHFCU notifies Infinisource of their

benefits termination date. It also sends a letter to the employee informing them that their benefits

will terminate on a certain date and they will have the option to elect COBRA. From there,

Infinisource communicates with the employee in regards to their eligibility to elect COBRA

benefits, as well as the date and costs associated with these elections.

AMHFCU complies with ERISA in areas such as fiduciary responsibility, plan

communication, and minimum standards of operation. AMHFCU offers plans based on the

affordability of its employees. It has changed the plan from a PPO to an HMO in order to cut

costs, but still provide rich benefits. They also offer a POS which gives the employees freedom

of choice regarding their benefits. They communicate plans efficiently by providing access to

their online portal SmartBen which allows employees to view their benefits and SPDs at any

time. AMHFCU complies with federal laws, and passes discrimination testing. They do not

discriminate against any non-highly compensated employees, but they do discriminate against

top management by charging them higher premium percentages. This practice is allowed under

discrimination testing rules because members of top management make more money, therefore

are able to afford the higher premium. The higher rate for management gives AMHFCU the


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ability to continue providing low cost rates to non-highly compensated employees, which make

up a larger amount of the workforce.

AMHFCU complies with HIPAA by respecting employees privacy of medical records

and by protecting coverage for employees when they change or lose their jobs.

Suggestions for the Future

Implementing a CDHP

As of now, AMHFCU offers managed care plans, also known as low deductible

health plans (LDHP). These plans tend to be expensive because the employee is only required

to pay a small amount of out-of-pocket costs, thus leaving the rest of the claims to the insurer.

Another reason an LDHP is not the best cost containing technique is because it enables the

employee to be covered for low frequency, low severity losses. A way to contain these costs is

by enabling the employee to take on these low dollar losses by offering a high deductible health

plan, or sometimes called a consumer driven health plan. These plans cut employer costs, and

employers pass the savings on to employees by offering them tax-free funds in a health savings

account, or health reimbursement account. These plans will give employees the incentive to act

as traditional consumers, therefore controlling the rise in health care costs. A CDHP will save

employers money, but also give employees some of those savings as well as the incentive to

spend their money more carefully. We think Ms. Caranci should slowly implement a consumer

driven health plan in order to cut costs. Her reasoning was that it would take a long time to

communicate to employees, but we believe she should inform all employees about the details of

a CDHP at a committee meeting and continue to provide brochures, packets, and websites with

information so that they can fully understand the benefits of this type of plan. Once employees


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understand that a CDHP will be effective in cutting costs for both employer and employee in the

long run, they may want to participate in such a plan.

Preparing for PPACA

AMHFCUs health plan is currently grandfathered which means they do not have to

comply with all of PPACA provisions. However, they will not be able to keep their status forever

and will eventually have to change their plan. A plan loses grandfather status if a percentage of

cost-sharing is increased, fixed copayments are increased or the employer decreases its

contribution rate. As health care rises AMHFCU will not be able to continue to pay 90% of the

employees plan and have to make changes. This will cause AMHFCU to lose its grandfather

status. ("Grandfathered Health Plan Kelley Kaufman) It will then have to comply with PPACA.

We think AMHFCU should start complying with all of PPACAs provisions so when they have

to make changes to their plan such as switching to a CDHP they will have an easier time

adjusting.

Conclusion

Overall, AMHFCU has developed a strong benefit plan that contains costs while still

striving to obtain a workplace that keeps employees happy. This is evident in the number of

awards it has received pertaining to its wellness programs and workplace environment. By

switching from a PPO to an HMO they were able to cut costs but still provide rich benefits to

employees. Our main suggestions to AMHFCU are to look ahead and prepare for PPACA

regulations, and also implement a CDHP to save more money.


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Dear Ms. Caranci

Vice President of Human Resources

2060 Red Lion Rd Philadelphia PA

PO box 52458

We wanted to take the time to thank you for taking time out of your busy schedule to help

us with our group project. Without your accommodation and help we would not have been able

to successfully analyze the details of your benefit plans. We now have a greater knowledge of

AMHFCU's benefit plan, and health care benefits, in general. We appreciate the time you took to

complete two interviews with us. Without those detailed interviews, our project would not have

been the same. It was a pleasure meeting you and we look forward to seeing you again.

Thanks again and have a great holiday!

Sincerely,

Christina Snyder and Lisa Monica


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Works Cited

1. Expansion of dependent coverage has employers re-thinking contribution structureshttp://eba.benefitnews.com/news/expansion-dependent-coverage-2711232-1.html

2. TAKING CONTROL: An Actuarial Perspective on Health Spending Growthhttp://www.actuary.org/pdf/health/spending_ib_08.pdf

3. EMPLOYERS ARE USING ACCOUNT-BASED PLAN DESIGNS TO ENGAGEEMPLOYEES IN HEALTH CAREhttp://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_PlanDesign.pdf

4. The Advantages of Having "Grandfathered" Health Plan Status Under PPACA (AndHow to Lose That Status)http://www.palaborandemploymentblog.com/2010/06/articles/employee-benefits/the-

advantages-of-having-grandfathered-health-plan-status-under-ppaca-and-how-to-lose-

that-status/

5. Loaded statements: Web-based total compensation statements keep employees in theknow

http://ebn.benefitnews.com/news/loaded-statements-web-based-total-compensation-s

tatements-239135-1.html
http://www.actuary.org/pdf/health/spending_ib_08.pdfhttp://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_PlanDesign.pdfhttp://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_PlanDesign.pdfhttp://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_PlanDesign.pdfhttp://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_PlanDesign.pdfhttp://www.actuary.org/pdf/health/spending_ib_08.pdf

lisa m monica - american heritage federal credit union.fall2011

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