Part III Benefits Analysis 912313182 914441361

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Introduction
The American College is a non-profit educational institution that specializes in professional development. In over 84 years, they have guided over 200,000 professionals in accelerating their careers in securities, banking, and insurance services. Surveys have shown that the Colleges sales training has helped boost production for individuals by 40%, while holders of financial planning designations have increased sales by 27-51% (www.theamericancollege.edu) The following analysis discusses the current employee health and welfare benefit plan that is offered. Our research for this study was conducted through interviews with Amy C. Dewey, Executive Director of Human Resources and Jeff Snyder, Human Resource Generalist for the American College.

Employee Benefit Objectives and Goals

The American College covers 154 lives on their health and welfare benefits plan with employees, spouses, and dependents included. Their two locations consist of the main campus in Bryn Mawr, PA, which has 73 covered employees, and their smaller Boca Raton, FL office, which has 13 covered employees. The Colleges Executive Director of Human Resources describes her objective for offering employee benefits to attract and retain employees, but more importantly to provide a comprehensive and affordable benefit package to enhance employees lives. She expressed that she sees the Colleges biggest competitors as the local colleges in the Main Line area, such as Haverford College and Rosemont College. Through providing competitively priced medical, dental, vision, prescription drug, and life insurance benefits, The American College drives to provide employees and their dependents all of the protection against personnel loss exposures that they need throughout their lives. At the end of the 2010 year, the
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College decided to change from their former Blue Cross HMO and PPO plans to three Aetna Medical Plans. Their reason for this was that Blue Cross was going to raise their healthcare premiums by 20% for the 2011 year. They have expressed that overall satisfaction with Aetna has been high for their first plan year and that they have experienced minimal, if any issues. Administration is very thorough, enrollment is high among employees, and costs are more than affordable to the organizations senior management. The College offers their three options of medical plans on a contributory employer pay 80%, employee pay 20% basis. This cost sharing helps to keep healthcare costs affordable for the College as well as for the employees as healthcare costs continue to skyrocket higher each year. Within the last five years, the College was financing their health and welfare benefits on a non-contributory basis but could not continue as healthcare costs continued to rise. Amy Dewey described how their new cost sharing approach with employees has helped to increase employee awareness and appreciation of the actual cost of their benefits package. When asked about the idea of self-funding, she responded that she does not think that the College could maintain as inclusive and competitive of a benefit package due to the companys size and lack of credibility. She discussed that the College has experienced some very high cost claims with two employees who had undergone cancer treatment and one employee who was out of work for years with very severe arthritis. If the company were to self-insure, these types of claims could be catastrophic especially because of a relatively low number of employees. Larger companies who self-insure are better able to retain their losses because they naturally have more funds in their loss reserves than do small companies. The risk pool for these large companies is better spread over the group and these companies have the ability to retain more costly claims. A small company such as the American College could experience severe financial difficulty with self-insurance. When we asked Amy

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Dewey about what she thinks of the changes that Health Reform will bring, she responded that her biggest fear was to be pushed into self-insurance. She does not feel that healthcare would be affordable for employees or for the College if future legislation pushes for self-insurance due to unaffordability.

Health Benefit Considerations

To avoid employee dissatisfaction and plan issues, the Colleges HR department does their best to steer employees into the health plans that will best fit their needs. When discussing this topic with Amy Dewey, she expressed that not every employee has the same medical needs nor wants the same things out of their benefit plan. Younger employees tend to plan much less for the future than do older employees and younger employees do not want to pay a high premium for their good standing health. For this reason the college attempts to get a feel for what the individual is seeking before recommending a plan to enroll into. A popular decision for younger employees at the College is the Aetna POS and Aetna High Deductible Health Plans. The implementation of a Health Savings Account or a limited Flexible Spending Account is a very favored option among middle-aged to older employees, but not so much for the younger employees. HSAs allow employees who utilize healthcare, dental, vision, or prescription drugs frequently or infrequently to pay low out-of-pocket costs, some of which with pre-tax dollars out of these accounts. Limited FSAs cannot be used for health related expenses until the employee has reached their deductible but can still help to cover preventative and dental expenses when needed. Middle-aged employees with children and families tend to be more interested in the Aetna POS and HNO options that the College offers, so the HR department needs to be able to

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really guide each employee according to their needs. Another consideration expressed by our interviewees is that young people rarely ever purchase life insurance or any of the voluntary gap health products for extra medical coverage. They are often also much more unwilling to pay money into the Colleges 403(b) retirement account. The Plan Coordinator and decision maker must always consider the demographic trends of each age group to design the best possible employee benefits plan. Mrs. Dewey really emphasized this importance as the key to minimizing future dissatisfaction and employee opt-outs. A way for the College to strengthen this diversity is by educating young people on the importance of investing and putting money away while they are young. If the administrators were to have beneficial mathematical information on 403(b) investment as well as information on the savings of an FSA or HSA, I believe that they could certainly improve on their younger generations lack of interest for several benefits that they offer.

Dental, Vision, and Prescription Drug Considerations

Employees that enroll in one of the Colleges Aetna health plans are automatically enrolled into one of their two MetLife dental PPO plans. These dental plans have an average cost savings of 15-45% when compared to what local dentists in the area charge without coverage. This is a big advantage for employees since they do not need to go out and look for an individual or voluntary dental plan which could be more costly for themselves and their families. Vision and Prescription drug coverage are included in the Colleges medical plans, which is another benefit since employee contributions to health plans are relatively low. When asked about the Colleges vision plan, Amy Dewey expressed that she was not satisfied with how limited the plan is for the employees. She included that employees do not seem to be satisfied having only one covered eye exam every two years. The College could improve this benefit by
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changing the plan to include one eye exam per year rather than per every two years. The increased cost for employees if this change were administered would be very low and employees would be more satisfied with this access. A large benefit that employees have through the use of FSAs and HSAs is that these accounts cover many dental and vision expenses that a limited plan would not cover for employees. Depending on an employees needs, they can contribute a small amount of their annual pre-tax income into these accounts just so that many dental or vision expenses can be covered for themselves or for their dependents. In recent years prescription drug costs have continued to rise. The Colleges employees have reasonable copays for generic and non-formulary drugs, and pay a bit more out of pocket for brand name, nonformulary drugs with a copayment of $70.

Issues and Considerations with LTD and STD

The American College offers non-contributory Short and Long-Term Disability Insurance through MetLife for active, full-time employees. The Colleges Human Resource Generalist, Jeff Snyder, touched on some potential issues with these Disability Insurance programs during our interview. Much of the Disability claims that are filed by the Colleges employees do not involve the administration of the HR department or any members of senior management. MetLife Insurance handles claims processing, rehabilitation arrangements, physician visits to certify a legitimate disability, and communicating the duration of time that employees will be unable to perform job duties. The reality is that MetLife handles every aspect of these insurance programs. The fact that the American College offers these Disability benefits on a non-contributory basis does not create incentives for employees to be cost conscious and can create moral hazard. The organization has had some very costly long-tail claims, as mentioned above, which could be more effectively minimized through greater employee
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communication. One example of how this employee communication could help with future claims is through further encouragement and education about company-offered wellness programs. Amy Dewey mentioned that if Disability claims continue to be as costly as they have been in the last few years, the College will no longer be able to offer them on a non-contributory basis and will need to move toward cost sharing.

Non-Retirement Considerations
The Executive Director of Human Resources stressed in detail during our interview that work-life benefits are very loosely implemented into the Colleges benefit plan. The reason for this is that offered benefits such as Four-Day Work Week, Employee Assistance Programs, and ID Theft Assist are seldom utilized by employees. This causes plan decisions to be focused more on health benefits, both contributory and voluntary, for employees.

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Impact of Regulatory Compliance

The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 30th, 2010. There are reforms that need to be implemented now, reforms that need to be implemented before 2014, and distant reforms that will be addressed after 2014. The first issue for The American College is whether or not their benefit plans will be grandfathered. Since the college has changed its carrier to Aetna Insurance for the 2011 plan year, The American College lost its grandfathered status. The American College must comply with all of the insurance market reforms as they become effective. The University does not need to worry about Temporary Reinsurance Program because it does not offer health insurance coverage to retirees at any age. Effective in 2011, the tax treatment of reimbursements for over-the-counter (OTC) drugs has changed. In addition, coverage for non-medical purposes under HSAs and form W-2 reporting for health benefits has changed. Beginning in 2011, OTC drugs have been excluded as qualified medical expenses for HSAs, FSAs, and HRAs. These exclusions do not apply to prescribed drugs or insulin. Fortunately, The American College does not impose lifetime or annual limits on its essential health benefits, so this is not an issue that the College will have to worry about phasing out. Also under PPACA, no insured group health plan may rescind coverage of any individual once the individual has become a covered participant, unless there was fraud or an intentional misrepresentation by the enrollee. Since The American College has strict definitions of being a full-time employee, 30 or 37.5 hours per week, mistakenly classifying an employee as full-time when they under full-time qualifications can be costly. If the employee, who was erroneously classified as full-time, began receiving benefits, their health coverage could not be rescinded for remainder of the plan year. Another regulation under the health reform act restricts group health plans from dropping coverage for adult children,
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regardless of their student or marital status, until the adult child turns 26 years old. This is not a major concern for The American College because it already defines dependents as adult children up to the age of 26 and regardless of student status. The College should review its dependent auditing techniques to ensure that adult children are not being denied coverage because of their marital status. The American College must also be aware that pre-existing condition exclusions can no longer be imposed on enrollees under the age of 19. Not only is this a compliance issue with the health reform act, but it could cause a major employer-employee relationship issue because it concerns the employee and their child or dependent. Currently, employees of The American College can contribute a maximum of $6,500 into their health care FSAs. Beginning in 2013, employee salary reduction contributions to health FSAs will be limited to $2,500 per year. Beginning in 2014, an individual mandate will be imposed that will force employer sponsored plans to have minimum essential coverage. Because of the comprehensive coverage currently offered to employees of The American College, the minimum and adequate coverage requirements will not be too much of a burden to the employer and employees premium contributions when the mandates are implemented. The American College will want to ensure that its broker at Kisler-Tiffany Benefits remains proactive in making sure it does not violate the implemented provisions as well as future provisions of the health reform act.

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Works Cited
The American College. 1 Jan. 2011. Web. 27 Nov. 2011. <http://www.theamericancollege.edu/why-us>.

Jones, Mark C. "Health Care Reform Update: Changes Plan Sponsors Should Make This Year." Client Alert. Pillsbury, 8 Sept. 2010. Web. 5 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content _id=_2421381_1&displayName=Health+Care+Reform+Update%3A+Changes+Plan&co urse_id=_4310_1&navItem=content&href=http%3A%2F%2Fwww.pillsburylaw.com%2 FsiteFiles%2FPublications%2FECB_LifeSciences_HealthCare_Alert_FINAL_09-082010.pdf>.

Tinnes, Christy. "Preparing for Health Care Reform A Chronological Guide for Employers." Practical Law Company. 15 Oct. 2010. Web. 2 Dec. 2011. <https://blackboard.temple.edu/bbcswebdav/courses/Drennan_RMI205/gbaupdateoct10.p df>.

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Thanks You Letter

From: tud08049@temple.edu To: Amy.Dewey@theamericancollege.edu

Amy and Jeff, I wanted to take the time to thank you guys again for providing such helpful information and insight into your employee benefits program. My partner and I learned a great deal from being able to speak with you regarding so many of the topics that we have been learning about throughout the semester. We will be submitting our paper today and are confident that we were able to discuss a very in-depth look at the benefits offered by the College. Thank you for making yourselves available to us on more than one occasion by phone and in person and for gathering documentation and information for us when necessary. The discussion that we had regarding 403(b) retirement plans was very beneficial to us and really helped to have a more detailed understanding of how these plans work. We will keep you posted with the results of our paper and will stay in contact in the future. Thank you for all of your time and efforts, Nick Anastasi and Kevin Henry

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