American Heritage Federal Credit Union

Benefits Analysis

12/9/2011 RMI 3501 Christina Snyder Lisa Monica

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 the Coverage/ Benefits Provided Exposure Covered? Loss Of Income: Medical Expenses YES Keystone Health Plan East HMO Keystone POS HMO Flexible Spending Account United Concordia Dental Flexible Spending Account Included in Health Plan Flexible Spending Account UnitedHealthcare (Voluntary) Included in Health Plan Flexible Spending Account

Overall Medical Expenses

Dental Vision

YES YES

Prescription Long Term Care Retiree Health Care

YES

NO YES Medicare Loss Of Income: Death OASDI Group Life Insurance Group Life (Voluntary) 401(k) YES OASDI Group Life Insurance (includes AD&D) Group Life (Voluntary) 401(k) YES OASDI Group Life Insurance Workers Compensation 401(k) Loss of Income: Unemployment YES Unemployment Insurance Loss of Income: Disability YES OASDI Sick Leave 401(k) OASDI CUNA Mutual LTD 401(k)
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Non-Accidental and Non-Occupational

YES

Accidental Death

Occupational Death

Unemployment

Non-Occupational; Short Term

Non-Occupational; Long Term

YES

Benefits Analysis: American Heritage Federal Credit Union

Occupational; Short Term

Occupational; Long Term

OASDI Workers Compensation 401(k) YES OASDI CUNA Mutual LTD Workers Compensation 401(k) Loss Of Income: Retirement YES OASDI 401(k) Defined Contribution Plan

YES

Retirement

Other Exposures Educational Assistance Work/Life Exposures YES YES Tuition Reimbursement Tele-commuting Wellness Programs Employee Assistance Programs Flexible Spending Account Flexible Spending Account Nationwide Discount Dependent Care FSA
CUNA Mutual Group Life Insurance Dependent Coverage

Mass Transportation Parking Auto Insurance Dependent Care Property-Liability Legal Expenses

YES YES YES YES NO NO

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Benefits Summary
Benefit Plan Keystone Health Plan East HMO* Keystone POS Buy-up Plan United Concordia Dental Flex UnitedHealthCare Vision A.M. Best Rating NA Funding Fully insured Financing Contributory Eligibility Employees and Dependents Employees and Dependents Employees and Dependents Full-time Employees and Dependents Employees and Dependents

NA

Fully insured

Contributory

NA

Fully insured

Contributory

NA

Fully insured

Employee Pay All

CUNA Mutual Group Life Insurance (includes AD&D) CUNA Mutual Group Life Insurance Dependent Coverage CUNA Mutual Voluntary Life Insurance (includes AD&D) CUNA Mutual Group Long Term Disability CUNA Mutual Group Life Insurance Higher Education Benefit

A (Excellent)

Fully insured

Non-Contributory

A (Excellent)

Fully insured

Non-Contributory

Dependents

A (Excellent)

Fully insured

Employee Pay All

Employees

A (Excellent)

Fully insured

Non-Contributory

Employees

A (Excellent)

Fully insured

Non-Contributory

Employees

*Vision and Prescription included in Health Plan

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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 HMO Base Plan and Keystone POS Buy-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 outof-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 copayment. 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 Keystones Select 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 $10 for generic prescriptions $30 for brand-name prescriptions $50 for non-formulary prescriptions 90-Day Mail Order Prescriptions $20 for generic prescriptions $60 for brand-name prescriptions $100 for non-formulary prescriptions

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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.

Vesting Schedule Years of Service Less than 3 3 Percentage 0% 100%

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
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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 Employee Benefits

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 noncontributory, 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 of Health 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 noncontributory 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 of communication 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 23rd 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 structures http://eba.benefitnews.com/news/expansion-dependent-coverage-2711232-1.html 2. TAKING CONTROL: An Actuarial Perspective on Health Spending Growth http://www.actuary.org/pdf/health/spending_ib_08.pdf 3. EMPLOYERS ARE USING ACCOUNT-BASED PLAN DESIGNS TO ENGAGE EMPLOYEES IN HEALTH CARE http://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2006/200607/HW_Pl anDesign.pdf 4. The Advantages of Having "Grandfathered" Health Plan Status Under PPACA (And How to Lose That Status) http://www.palaborandemploymentblog.com/2010/06/articles/employee-benefits/theadvantages-of-having-grandfathered-health-plan-status-under-ppaca-and-how-to-losethat-status/ 5. Loaded statements: Web-based total compensation statements keep employees in the know http://ebn.benefitnews.com/news/loaded-statements-web-based-total-compensation-s tatements-239135-1.html

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