BENEFITS ANALYSIS

PART I: BENEFITS MATRIX PART II: INVENTORY OF BENEFITS

RMI 3501 DR. DRENNAN FALL 2011

Benefits Analysis: Post and Schell 1

TABLE OF CONTENTS
BENEFITS MATRIX.......3-4 SUMMARY OF BENEFITS..5 INVENTORY OF BENEFITS...6 INTRODUCTION TO THE HEALTHCARE PLAN........6 KEYSTONE DIRECT POINT-OF-SERVICE PLAN6-7 PERSONAL CHOICE HIGH DEDUCTIBLE HEALTH PLAN.7 HEALTH SAVINGS ACCOUNT..8 DENTAL...8-9 VISION..9-10 PRESCRIPTION DRUG....10 LOSS OF INCOME DUE TO DEATH..10-11 LOSS OF INCOME DUE TO DISABILITY..12-13 LOSS OF INCOME DUE TO RETIREMENT..13-15 OTHER TYPES OF LOSS EXPOSURES..15-17

Benefits Analysis: Post and Schell 2

BENEFITS MATRIX
Loss Exposure Exposure Analysis for Post and Schell P.C. Provided Coverage/Benefits Provided Loss of Income: Medical Expenses Yes Personal Choice: HDHP with HSA Keystone Direct Buy-Up POS Flexible Spending Account Yes United Concordia High Option United Concordia Base Option Flexible Spending Account Yes Keystone Direct POS Flexible Spending Account Yes Personal Choice: HDHP Keystone Direct POS Flexible Spending Account No Yes OASDI, COBRA 401 (k) plan

Overall Medical Expenses

Dental

Vision Prescription Drug

Long Term Care Retiree Health Care

Loss of Income: Death Non-accidental, non-occupational Yes OASDI Prudential: Group Term Life Prudential: Optional Life Prudential: AD & D Insurance 401(k) plan Accident death Yes OASDI Prudential: Group Term Life Prudential: Optional Life Prudential: AD & D Insurance 401 (k) plan Occupational Death Yes OASDI Prudential: Group Term Life Prudential: Optional Life Workers Compensation Prudential: AD & D Insurance 401 (k) plan Loss of Income: Unemployment Yes Unemployment Insurance through state of PA Loss of Income: Disability
Benefits Analysis: Post and Schell 3

Unemployment

Non-occupational; Short-term

Yes

Non-occupational; Long-term

Yes

Occupational; Short-term

Yes

Occupational; Long-term

Yes

OASDI Sick Leave Prudential: AD & D Insurance OASDI Prudential: AD & D Insurance Unum: Long Term Disability OASDI Sick Leave Prudential: AD & D Insurance Workers Compensation OASDI Prudential: AD & D Insurance Unum: Long Term Disability Workers Compensation

Retirement

Loss of Income: Retirement Yes OASDI 401 (k) profit sharing plan

Other Exposures Yes To further law education Yes Paid Time Off Unum: Work-Life Balance Assistance Program Dependent Care Yes Dependent Care FSA Prudential: Optional Dependent Life Property-Liability Yes Voluntary Auto Group Insurance Legal Expenses Yes Malpractice Insurance *- The Personal Choice HDHP has a limited purpose FSA that can only be used for dental and vision expenses, however the Keystone Direct POS plan has a regular FSA Educational Assistance Work/life Exposures

Benefits Analysis: Post and Schell 4

Summary of Benefits
Benefit Plan Personal Choice HDHP Keystone Direct POS plan AM Best Rating n/a Financing Contributory Funding Fully Insured Eligibility Full-time active employees and dependents Full-time active employees and dependents Full-time active employees and dependents Full-time active employees

n/a

Contributory

Fully Insured

United A- (excellent) Contributory Concordia Dental Plan Prudential A+ (excellent) NonInsurance Contributory Company of America Unum Insurance B+ (good) NonCompany Contributory Malpractice n/a NonInsurance Contributory * Source of AM Best rating was www.ambest.com/ratings

Fully Insured

Fully Insured

Fully Insured Self-Insured

Full-time active employees Full-time active employees

Benefits Analysis: Post and Schell 5

Part II: Inventory of Benefits

Introduction to the Healthcare Plan Post and Schell provides a reasonable employee benefits plan to its employees. Under the medical plan eligible employees are those that work thirty hours or more per week. Eligible dependents are spouses and those that are still claimed on an employees tax return. Post and Schell offers its employees a choice of two medical plans, Keystone Direct Point-of-Service plan and Personal Choice High Deductible Health Plan. Any employee may choose to opt out of medical coverage and be covered by their spouses plan. If an employee chooses to enroll in the Keystone Direct Plan they are automatically enrolled in vision coverage, which is not offered under the Personal Choice Plan. Each plan does however offer prescription drug coverage. Employees are automatically enrolled in dental coverage and can pay more for a more comprehensive plan. Overall Medical Expenses Keystone Direct Point-of-Service (POS) Plan Post and Schell offers its employees a POS medical benefits plan to deal with loss of income due to medical expenses. The plan is offered through Keystone Direct which is a member of Independence Blue Cross AM best does not offer a rating for this plan. All full time employees and their dependents are eligible to enroll in this plan; dependents are defined as those that are still written off on employees taxes. If an employee enrolls in the Keystone Direct POS plan, each member on the plan must choose a primary care physician (PCP). The Keystone Direct POS plan uses the Keystone POS network of providers and features both in-network and out-of-network benefit coverage. When a covered person receives in-network care there is no deductible, however there is copays for most in-network care. The copays are $30 per visit to
Benefits Analysis: Post and Schell 6

the PCP and $50 per visit to a specialist. There is also a $250 per day copay, with a maximum of 5 copays per admission, for inpatient hospital services, and a $100 copay, if it is not waived, for emergency room visits. A covered person does not need referrals for most in-network care (referrals are still needed for routine x-ray, podiatry, spinal manipulation, and physical therapy). The POS plan generally pays for about 70% of eligible out-of-network care. The plan also pays for 100% of preventative care. The annual copayment maximum that an employee would have

to pay annually is $3,000 for a single employee and $9,000 for a family. Personal Choice High Deductible Health Plan (HDHP)- Health Savings Account (HSA) Post and Schell offers its employees a HDHP to cope with loss of income due to medical expenses. The plan is fully insured through Personal choice which is a member of Independence Blue Cross on a contributory basis, AM best does not offer a rating on this plan. The HDHP is a preferred provider organization that uses IBCs personal choice and blue card networks. All full time employees and their dependents are eligible for this plan; dependents are defined as those that are still written off on employees taxes. The employee is responsible for paying the deductible before the plan begins to pay for any eligible expenses (other than preventive care). Once the deductible is paid the plan pays for 100% of most in-network care, and pays for 50% of out-of-network care. The deductible is $2,000 for a single employee that stays in the network and $5,000 for that same employee if they choose to go out-of-network. For a family there is $4,000 deductible for in-network utilization and a $10,000 if they go out-of-network. The maximum out-of-pocket maximum amount that an employee would have to pay annually is $5,600 for a single employee and $11,200 for a family.

Benefits Analysis: Post and Schell 7

Health Savings Account (HSA) If an employee chooses to enroll in the HDHP as their only medical coverage, they may also use a Health Savings Account to pay for eligible health care expenses on a tax-free basis. The HSA is held with Bancorp Bank HSA. If an employee enrolls in the HDHP, Post and Schell will make a contribution to your HAS of $500 for single coverage and $1,000 for a family. An employee may also contribute to their HSA, through a pre-tax payroll deduction. The most an employee may contribute to an HSA is $3,100 for single coverage and $6,250 for family coverage because of IRS regulation. The HSA can be used to pay for, or be reimbursed for, eligible health care expenses, including deductibles, coinsurance, and copayments. Also, any balance in an employees HSA remaining at the end of the year rolls over to the next year and the balance is fully portable between employers. Dental Plan Similar to how their health plan is set up, Post and Schells dental plan provides employees two coverage options to choose from. The plan provides employees with the ability to choose between a high option A and a base option B, both of which are offered through United Concordia, which is a subsidy of Highmark Inc. Highmark Inc. has an AM Best rating of A-. United Concordia provides access to the national Advantage Plus network of preferred, participating dentists. Dentists in this plan have agreed to accept and be reimbursed by negotiated rates. In addition, dentists in this network will not balance bill, which occurs when the actual charges are more than the amount the insurance company pays the dentists. In addition, if employees use in-network dentists, the dentist will take care of the paper-work and therefore employees need not file a claim form. If employees choose to use non-participating
Benefits Analysis: Post and Schell 8

dentists, the plan will pay the same percentage of an eligible expense, but the percentage is based on the usual, customary, and reasonable charge (UCR). Typically, when employees go out of network they must pay dentists in full when they receive care and file a claim form for reimbursement; however, under Post and Schells dental plan, this does not occur. It should be noted: Under this dental plan, eligible children are dependent children who are up to age 19 or up to age 23 if they are full-time students. The eligibility for adult children up to age 26 that applies to medical coverage, does not apply to dental coverage. High Option A Monthly Contribution Deductible Diagnostic/Preventive Care Basic Care Major Care Orthodontia (children up to 19 only) Orthodontia Lifetime Maximum Annual Maximum Benefit Single: $9 Family: $55 Single: $25 Family: $50 Plan pays 100%, deductible waived After deductible, plan plays 80% After deductible, plan pays 50% After deductible, plan pays 50% $1,500 per person $1,500 per person Base Option B Single: $0 Family: $26 Single: $50 Family: $100 Plan pays 80%, deductible waived After deductible plan pays 80% After deductible plan pays 50% Not Covered N/A $1,000 per person

Vision Plan While Post and Schell offers its employees a vision benefit, it is a very limited one. The vision benefit is not available through the HDHP but rather only through the Keystone Direct POS Plan. The plan is administered by Davis Vision. If employees are enrolled in the HDHP,

Benefits Analysis: Post and Schell 9

they can either pay out of pocket for vision care or with their limited purpose FSA as previously stated. Prescription Drug Post and Schell employees that participate in either of the health care options are covered for most prescription drugs. The two plans have negotiated discounts for prescription drugs. For pharmacy prescription drugs (up to a 30-day supply) under the HDHP, after the deductible has been paid, there is a $5 copay for generic drugs, a $20 copay for brand formulary, and a $45 copay for non-formulary brand. For mail-order prescription drugs (up to a 90-day supply) under the HDHP, after the deductible has been paid there is a $10 copay for generic drugs, a $40 copay for brand formulary, and a $90 copay for non-formulary brand. For pharmacy prescription drugs (up to a 30-day supply) there is a $15 copay for generic drugs, a $35 copay for brand formulary, and a $50 copay for non-formulary brand. For mail-order prescription drugs (up to a 90-day supply) there is a $30 copay for generic drugs, a $70 copay for brand formulary, and a $100 copay for non-formulary brand. Loss of Income Due to Death Life Insurance and Accidental Death & Dismemberment Life Insurance and Accidental Death & Dismemberment (AD & D) policies are offered by Post and Schell to all of its full time, active employees to help cover losses of income due to death. Both of these policies are offered through Prudential Insurance Company of America, which has an AM best rating of A+. Post and Schell provides this coverage to its employees on a non-contributory basis. Post and Schell employees can purchase Optional Life and Optional
Benefits Analysis: Post and Schell 10

Dependent Life Insurance on a contributory basis if they wish. If an employee does not elect coverage when they are first eligible (within 31 days of your date of hire), or if they want to increase coverage during a later enrollment period, they must complete a health questionnaire to apply for additional coverage. Optional life insurance requires proof of good health, and coverage must be approved by Prudential before it becomes effective. The provided group term life insurance pays $50,000 for staff and associates and pays $350,000, $300,000 of which is imputed income, for equity principle attorneys. The AD & D coverage pays half of those amounts. Optional Life Insurance coverage can be purchased in $10,000 increments, up to a maximum benefit of five times of an employees salary not to exceed $500,000. If an employee chooses to purchase Optional Life Insurance, they are eligible to buy Optional Dependent Life Insurance. This coverage can be purchased in $5,000 increments for an employees spouse up to the $250,000. Another restriction is the maximum benefit for an employees spouse may not exceed 50% of the Optional Life Insurance amount. Optional Dependent Coverage is also available for children from ages of 14 days to 19 years (or up to age 25 if an unmarried, dependent, full-time student). If an employee purchases life insurance coverage for children, one premium amount covers all eligible children. The cost of this optional coverage for an employee and their spouse is based on age and amount of coverage. The coverage will be reduced as an employee or spouse ages, by 35% at age 65 and 50% at age 70.

Benefits Analysis: Post and Schell 11

Loss of Income Due to Disability Short-time Disability Post and Schell self-insures STD coverage for its employees for the first 90 days. They administer this self-insured portion of the STD coverage themselves. They offer it on three different levels: Staff 6 weeks 2/3 of salary Associates -8 weeks - 2/3 of salary Principles- 12 weeks 100% of salary

One important thing to note is that for the principles, it is as close to an Own-Occ (own occupation) policy as it can get. This means that if someone becomes disabled and cannot perform the essential duties of their job, they are labeled disabled. For example, if a trial lawyer is injured and cannot appear in court, they are labeled disabled under this policy. Long-Term Disability Post and Schell offers its employees Group Term Disability Insurance on a noncontributory basis to provide for the loss of income due to disability. This coverage is fully insured and provided through Unum Life Insurance Company of America, which has an AM Best rating of A. All full time employees, those working at least 30 hours per week, are eligible to receive this coverage. There is no waiting period for those employees who were in an eligible group on or before the policy date. For employees who entered an eligible group after the policy date the waiting period is the first day of the month after 30 days of employment. A disability under the plan is when an employee is limited from performing the material and substantial
Benefits Analysis: Post and Schell 12

duties of his/her regular occupation due to sickness or injury. Employees receive 60% of monthly earnings to a maximum benefit of $7,500 per month. An employees payment may be reduced by deductible sources of income and disability earnings. A disabled employee also receives dependent care expenses amounting to $350 per month, per dependent up to a maximum of $1,000 per month. An employee will never be paid more than 100% of monthly earnings. In order to receive benefits an employee must be continuously disabled through their elimination period, which is 90 days. The maximum period of payment is as follows: Age at Disability Less than age 60 Age 60 Age 61 Age 62 Age 63 Age 64 Age 65 Age 66 Age 67 Age 68 Age 69 and over Maximum Period of Payment To age 65, but not less than 5 years 60 months 48 months 42 months 36 months 30 months 24 months 21 months 18 months 15 months 12 months Loss of Income Due to Retirement Retirement Post and Schell provides eligible employees with a 401 (k) profit sharing plan to satisfy their employees retirement needs. The 401 (k) plan is self-insured. The plan is administered through the Vanguard Group. Also, included in the plan is investment advice from Valley Forge Enterprise. An eligible employee can start making contributions if they are employed by Post and Schell, have reached 21 years of age, and have completed 30 days of continuous employment. An employee is eligible to receive firm contributions if an employee has both reached age 21 and completed a year of service. Any employee who works more than 1000
Benefits Analysis: Post and Schell 13

hours per year is credited with a year of service for eligibility and vesting purposes. In order to receive firm contributions you must be employed on the last day of the calendar year. However, if an employee is not employed by the firm on the last day of the calendar year, they are still eligible for firm contributions if they retired after reaching age 65, became disabled, or died. An employee will not be eligible for the plan if they are covered by a collective bargaining agreement, they are a nonresident alien, they are a leased employee, or they are providing services to Post and Schell under a separate contract and are classified as an independent contractor. Through the plan employees can make contributions to the plan through pre-tax payroll deductions. Once an employee enrolls in the plan their salary is reduced by the amount that they decide. Employees are able to deduct any amount they choose up to the IRS limits of $15,500. All contributions made to the plan are paid into a fund, which is for the exclusive benefit of plan participants. These contributions are held and invested by the Plans Trustees in accordance with a trust agreement with Post and Schell. Post and Schell makes contributions on a percentage of your compensation. The firm contributions will be equal to 5% of an employees compensation up to the Social Security taxable wage base ($106,800 for 2010) and 10% of an employees compensation in excess of the Social Security taxable wage base, but only up to the IRS limit on compensation ($245,000 in 2010). An employee is always 100% vested in the portion of their account of the contributions that they make. However, an employees vesting schedule for Post and Schells contributions made to their account is based on years of service, the vesting schedule is the following:

Benefits Analysis: Post and Schell 14

Years of Service Less than 2 2 but less than 3 3 but less than 4 4 but less than 5 5 but less than 6 6 or more

Vested Percentage 0% 20% 40% 60% 80% 100%

Employees may make withdrawals from their account without penalty after the age of 59 . Any withdrawals before an employee reaches this age are subject to penalties in the form of additional taxes on the money withdrawn. Employees may make a withdrawal from their account if they experience a financial hardship. A financial hardship is listed as the purchase of a primary home, post-secondary educational expenses for the employee or dependents, prevention of eviction from an employees principle residence, payment of burial or funeral expenses for a deceased dependents, or payment of expenses to repair damage to your principal residence. Other Types of Loss Exposures Educational Assistance Post and Schell does not offer any educational assistance in terms of tuition reimbursement; however, they do have an affiliation with a 529 Plan that employees can put money into. While its purpose and use is limited, the 529 Plan contains money that can be used to for further education. While Post and Schell does not technically offer educational assistance, continuation of legal education of lawyers and paralegals are paid for.

Benefits Analysis: Post and Schell 15

Work/Life Exposures Post and Schell not only offers various work/life benefits but also offers worldwide emergency travel assistance coverage as well. These benefits, both of which are at no cost to the employee, are offered through UNUM. A few of the work/life benefits include financial

planning assistance, stress management, and career development. These along with the other work/life benefits provide solutions and assistance for everyday challenges of work and home that employees may face. As previously stated Post and Schell offers travel assistance coverage. This coverage provides help in the event of a medical emergency, and is accessed simply with a phone call. A few examples of these benefits include: hospital admission guarantee, emergency medical evacuation, care and transport of unattended minor children just to name a few. In addition to these benefits, Post and Schell provides paid vacation to its employees. How much pay and time off depends on the role and time spent working for the corporation. It is usually split up into levels: 17-27 days for staff and associates 4-5 weeks off for principles. It is important to note that employees rarely exhaust or exceed these limits. This is due to the fact that in this industry employees make a large majority of their income by spending time in office. Also, under the Family and Medical Leave Act (FMLA), Post and Schell provides 12 weeks of unpaid leave.

Dependent Care
Benefits Analysis: Post and Schell 16

While Post and Schell does not offer its employees dependent care coverage, but they make assist employees who need it by making them available through a dependent care FSA. Employees can put dollars away and into this FSA that they can later use to spend on outside sources of dependent care. Property-Liability Post and Schell provides employees with the opportunity to purchase group insurance. Employees have access to auto coverage through group insurance provided on a completely voluntary basis. Legal Expenses Post and Schell does provide employees with coverage for Legal Expenses. This benefit comes at no direct cost to employees; however, the cost is baked into the rest of the benefits package. One particular area in which this type of coverage comes into play for Post and Schell is legal malpractice. Legal expense coverage is a necessity in the professional corporation world.

Benefits Analysis: Post and Schell 17

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Part III: Analysis of Decision Making & Plan Design

Benefits Analysis: Post and Schell 18

Table of Contents
Introduction...............3 Overall Plan Design Considerations Philosophy & Goals.3-4 Accomplishing the Goal4-5 Design Considerations of Health Benefits Plan History and Rising Costs6 Funding Considerations6-7 HDHP & POS Plan.7-8 Prescription Drugs8 Issues with Offering LTC and Retiree Healthcare8 Design Considerations of Non-health, Non-retirement Benefits...............................9-10 Compliance Issues COBRA11 ERISA..11 HIPAA.11 PPACA.11-12 Communication12-13 Conclusion/Recommendations.13-16 Thank You Letter...17

Benefits Analysis: Post and Schell 19

Overall Design Considerations and Objectives in Offering Employee Benefits

Philosophy & Goals Post and Schells philosophy behind offering a benefits plan is one that is simple, yet complex at the same time. In its simplest form, Post and Schells goal of offering a benefit plan is to attract and retain highly qualified employees1. Attracting and retaining highly qualified employees is important for any corporation, but even more so in one that is of a professional setting. However, as previously stated, Post and Schells philosophy isnt that simple. As Mr. Schell explained to us, for the corporation to remain as successful as it is, it must be competitive it terms of what it can offer its employees versus what another corporation can. Therefore, it is vital for Post and Schell to create and implement a plan that is seen as competitive from the employees perspective. The factor that complicates things for Post and Schell is the economics behind the plan; in other words there is a portion of their plan philosophy that is cost-driven. From year to year there is the possibility for large premium increases that Post and Schell is not aware of or cannot foresee. For example, IBC, who is the carrier of Post and Schells health portion of their benefits package, is less than transparent for a company of their size in terms of indemnity expenses. In other words, they do not tell Post and Schell what expenses each individual covered person in the plan has accrued. This inability to gather all necessary information applies to other areas of the benefits package as well. Due to this, there is always an uncertainty for Post and Schell from an

THE GOLDEN RULE https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2330921_1&displ ayName=The+Golden+Rule&course_id=_4310_1&navItem=content&href=http%3A%2F%2Fwww.bizjournals.com% 2Falbuquerque%2Fstories%2F2005%2F01%2F10%2Fsmallb1.html%3FGP%3DOTC-MJ1752087487

Benefits Analysis: Post and Schell 20

economics perspective, and thus forces them to be financially cautious in their benefits plan construction. Therefore, it is evident that the philosophy behind the plan, even at its basic level contains a two-fold goal. First, offer benefits that would attract and retain employees, keeping them from other competing employers in the industry, and second offer benefits that are financially sound and offer them in a way that keeps the corporation economically sustainable. Cost is a very important consideration in the design of a benefits plan.2 While on the surface, sustainability of the corporation may seem to be a selfish goal that focuses only on the needs of the company as a whole, it actually is a self-less goal that focuses on the employees wants and needs. While it cannot be overlooked that one goal of every corporation is to make a profit, in the same spectrum it must not be overlooked that Post and Schells desirability for sustainability comes from a genuine desire to provide the very best for its employees. In other words, if the company is not operating in a sustainable manner i.e. their benefit plan design the way in which they provide their benefits, the end result could be result in the collapse of the corporation, leaving all their employees without jobs. Desire to provide the best for employees was a very recurring theme in our discussion with Mr. Schell, and this is not the last place in this analysis that their concern for employee needs is noted. Accomplishing the Goal Now that the goal of the plan has been established, the next thing to discuss is how Post and Schell accomplishes this goal. Post and Schells benefits plan is structured in a way that
2

Finances of Employee Benefits, 1960-2003 https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2330921_1&displ ayName=The+Golden+Rule&course_id=_4310_1&navItem=content&href=http%3A%2F%2Fwww.bizjournals.com% 2Falbuquerque%2Fstories%2F2005%2F01%2F10%2Fsmallb1.html%3FGP%3DOTC-MJ1752087487

Benefits Analysis: Post and Schell 21

brings together what the firm must offer to stay competitive and what it can afford to offer to stay competitive. In other words, the plan is structured in a way that from year to year that the firm offers what the company must and also what it can afford. Since part of Post and Schells goal in benefit design is financial sustainability they structure their benefits in a way that balances the risk between the firm and the employees. In order to structure the plan in the format described above, Post and Schell relies heavily on the consultation they receive from their broker, AON. They work very closely with AON, who uses survey data and other resources to ensure that the Post and Schells benefit plan is a competitive plan in the industry and marketplace. Plan results are assessed on an annual basis. Since it is illegal for Post and Schell to know exactly what other firms are offering, their reliance on AON is critical to the success of their benefits plan. Therefore, it is clear that Post and Schells relationship with AON is what enables the firm to offer a benefits package that meets and accomplishes their goals. Financing/Funding Keeping in mind their goals and philosophy, Post and Schell implemented an employer contribution strategy that involves shared risk. The methodology behind Post and Schells contribution strategy is again to maintain as competitive of a plan as possible to retain talent, all the while remaining financially sustainable. As previously stated, Post and Schell assess their plan annually. One of the main things assessed is their contribution strategy. In fact, Lamb Co. Advisory Services meets with the Trustees of Post and Schell quarterly to assess and provide ranks of their funding performance. Lamb Co. Advisory Services is Post and Schells financial advising institute of choice. Post and Schell realizes that a corporation of its size cannot selfBenefits Analysis: Post and Schell 22

insure some of its benefits for instance healthcare, which we will talk about later in the paper, so they choose to fully insure their medical plan, Life, LTD, and AD & D coverage. However, Post and Schell does choose to self-insure their STD and legal expenses, both of which are funded using a general asset plan.

Design Considerations of Health Benefits

Plan History and Rising Costs The flexible plan that Post and Schell still offers today dates back to 1993. Prior to that year, Post and Schell offered a traditional indemnity plan in which the first dollar of any expense was covered. It is important to note what was going on in the early 1990s. Thanks to the Clinton administration and Hilary Care, cost of insurance skyrocketed. In fact, a year or two prior to the switch to a flexible plan, premium costs for the corporation actually rose 100%. Mr. Schell pointed out that it was in 1993 that the corporation came to the realization that the plan the firm was offering was a dinosaur and needed a change from both an employee retention perspective as well an expense control perspective. Thus after much hard work, effort, and consideration, the menu of benefit options was created. Funding Considerations The major factor behind Post and Schells decision to choose insurance over selfinsurance is cost, both current and potential future. Post and Schell has had brokers do models to simulate a self-insured plan, as Post and Schell realized the possibility a catastrophic event

Benefits Analysis: Post and Schell 23

would negatively affect the company in ways that could cripple it.3 Mr. Schell explained it best; when an employer covers approximate 300 employees, of which only 75% use the plan, there is not enough spreading of risk effectively to be self-insured. While there is the possible to have huge gain in year one, in the long run the company could end up paying through the nose. Returning to the theme that Post and Schell is very employee oriented, one of the main reasons Post and Schell doesnt self-insure is that it didnt want to expose its employees to events that could lead to an economic Armageddon. As if there needed to be any more reason to avoid self-insurance, Mr. Schell continued to list negatives about self-insuring, one of them being the companys inability to make an accurate estimation of the risk in which it was facing. Ultimately, it would be a complete shot in the dark, and the company simply did not want to take on such a risk. The negatives completely outweighed the positives of self-insurance. HDHP and POS Plan Over time the firm has experimented with different combinations of buy-ups and core plans. For the current year they decided on offering two plans, the High Deductible Health Plan (HDHP) and Direct Point-of-Service (POS) Plan. According to Mr. Schell the fundamental question behind their current medical plan design is, if premiums do increase how will the firm cover or minimize this? The two plans that they offer answer this question. An example is, if POS premiums increase Post and Schell can raise co-pays, rather than premiums, and push more of the financial burden to those who use more medical benefits. The HDHP is designed to be

Self-funded Healthy Insurance-Its about risks, vulnerability, and cost savings https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2352714_1&displ ayName=SelfFunded+Health+Insurance%3A+It%27s+About+Risk%2C+Vulnerability%2C+Cost+Savings+&course_id=_4310_1&na vItem=content&href=http%3A%2F%2Fwww.bizjournals.com%2Falbany%2Fstories%2F2005%2F12%2F05%2Ffocus4 .html

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offered at a lower cost to employees and makes them take a consumer driven approach to their medical benefits. The POS plan is more like a traditional indemnity plan. The POS Plan is offered to employees for comfort level. Mr. Schell says that some employees like to know that the same amount of premium is going to come out of their paycheck every other week and every time they go to the doctor it is the same co-payment. However, Mr. Schell goes on to say that some employees who choose the POS plan are probably not making the right economic decision for themselves. Basic dental coverage is offered free to Post and Schell employees and they still can buy more comprehensive coverage at a relatively low rate. However, an employee cannot purchase a dental plan that is Cadillac Coverage. This could be an issue for employees that have high dental expenses for themselves or their dependents. Another issue is the limited vision coverage that an employee can buy. The HDHP does not offer vision coverage at all, and the POS plan only offers it as a limited benefit. The HDHP does however offer a limited purpose HSA which can be used to cover some vision expenses. This HSA could theoretically cover all vision expenses for a given year but once it is used up the employee is paying totally out-ofpocket. This again could be an issue for employees that have high vision expenses. Prescription Drugs Post and Schells prescription drug coverage is baked into both of their healthcare plans. This does not present any problems in the POS plan because employees know what the co-pays will be every time they buy a prescription drug. However, problems could arise in the HDHP plan. This is due to the fact that an employee is paying out of pocket for prescription drugs until they reach their deductible. For instance when an employee is used to paying small co-pays for prescription drugs and then all of a sudden they have to pay for the full cost of one it comes as a huge shock.
Benefits Analysis: Post and Schell 25

Issues with offering Long-term Care and Retiree Healthcare Post and Schell chooses not to offer long-term care, but they have looked into it on numerous occasions. The main reason that they do not offer it is because the interest is so low. Post and Schell surveyed all of its 300 employees and found that only six people would be interested. This low participation resulted in them not being eligible for group rates so it was not financially efficient for them to offer long-term care. Post and Schell also does not offer retiree health care because it is an unfunded liability. Mr. Schell points out that over time various law firms that have failed due to unfunded retiree health benefits. Mr. Schell also states that if we had current employees today taking some percentage out of their income to pay retiree health benefits of former employees it would be a drain on todays income.

Design Considerations of Non-health, Non-retirement Benefits

Life Insurance, Short-term Disability, & Work/Life Benefits As previously stated, Post and Schell always has their employees at heart when making any business decisions, particularly when designing their benefits plan. The design of the life insurance, short-term disability, and work/life benefits portion of the plan is no exception. With employees needs in mind, Post and Schell designed these three benefits in a way that ensures both employee satisfaction and sustainability of the firm. Due to the industry that Post and Schell is in, that being professional services industry, their employees tend to be highly compensated. Therefore, the loss of a lawyers life will bring a strong financial burden upon that lawyers family. With this in mind, Post and Schell offers that maximum amount of life insurance allowed to all employees, which is $50,000; however, they
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also offer its partners, who are the HCEs of the firm, an additional $300,000 of coverage by means of imputed income. Post and Schell realizes that since its employees tend to be highly compensated, missing work due to being disabled could put a huge financial burden on the families of its employees. Therefore, to guard against this devastation, a key component of the STD coverage is that it is distributed in scales depending on role in the company i.e. staff gets two-thirds pay while partners get 100% pay. This is done to protect employees families, in particular those of the partners, from suffering a tragic financial loss. While Post and Schell would like to provide 100% pay for all employees, it is simply economically unfeasible. Overall, both employer and employees find this distribution of the benefit to be fair. Again, this is another example of how Post and Schell has its employees best interest at heart when designing their benefits plan. Post and Schells work/life benefits are very unique compared to the rest of the benefits package. What makes it unique is that it is not only provided at no cost to the employees, but also it costs Post and Schell absolutely nothing. While it is true that certain administration expenses can arise, Post and Schells provide of this benefit offers it to them at no additional charge. It is highly probable that the costs are spread out among other benefits that the provider offers, but there is no direct cost involved with the work/life benefits. Knowing this, it is obvious that there is little to consider when offering this benefit. Also, this provides another clear example of Post and Schells philosophy of being employee-oriented with their plan.

Compliance Issues
Post and Schell, along with its broker AON, go to great lengths to make sure that they comply with all federal regulations currently in place. This includes COBRA, ERISA, HIPAA,
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and PPACA. Post and Schell has not had to deal with any losses or claims regarding regulation. Although Post and Schell takes it upon themselves to administer some portions of the plan, they confer heavily with their broker to make sure that they are complying with each and every piece of regulation that is in effect. COBRA While Post and Schell complies with the regulations set forth by COBRA, they are only required to do soon an occurrence basis. In the event that an employee is terminated by the firm, they have a process in place that would with COBRA regulation. It is important to note that this process relies heavily on the broker. ERISA Post and Schell has not had any significant problems complying with ERISA. This is due to the fact that their retirement plan is designed in such a way that the plan provides neither postretirement health and welfare benefits nor a pension plan. Post and Schell complies with ERISA vesting standards for their defined contribution retirement plan by utilizing a 6 year vesting schedule. In order to comply with communication requirements under ERISA, Post and Schell currently uses email to communicate with their employees about their retirement plan. In addition, the company takes care to email all employees a Summary Plan Description. Within the Summary Plan Description, are such things as what fiduciary responsibility is, the party who bears it, and the effects it has on employees. HIPAA

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Post and Schell has not had any reported problems with compliance under HIPAA. As Mr. Schell pointed out, if even they wanted to give out their employees health records, they are unable to do so because IBC keeps them under lock and key. While this poses a problem in other aspects of their benefits process it does make complying with HIPAA regulation very easy on the firm. PPACA When we first asked Mr. Schell and Ms. McNichol about PPACA, or healthcare reform, their reaction was priceless. Each of their heads immediately dropped, and shook in disgust. They are not happy about health reform to say the least; Mr. Schell called it a jumble. One of their biggest issues with PPACA is that no one really knows what is going to happen. Not only do employers not know what is in PPACA, but also they do not know what decision the courts are going to make regarding the law. Mr. Schell pointed out that the way the law stands now it puts a heavy burden on the employers to comply with all the new regulation, especially with all the new alphabet soup agencies that are arising from the law. Not only is there confusion from the employers perspective, but there is also going to be more confusion from the employees perspective pertaining to their benefits. Another major concern that both Mr. Schell and Ms. McNichol had is big one. There looks to be a tremendous incentive for employers, especially employers that are the size of Post and Schell, to drop the coverage that they offer and simply pay the fine for doing so. Mr. Schell explained that the fine appears to be approximately $2,000 per uncovered employee. In Mr. Schells eyes, this fine appears to be a lot less expensive than what it would cost an employer to insure that same employee. Finally, Mr. Schell stated that one of the goals of health reform should be to make it easier for employees to understand and one way to do that is with less regulation, which PPACA clearly does not accomplish.
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Communication About two years ago Post and Schell decided to make a commitment to communication from the CEO down. They decided to put much more effort and focus on the communication process of their benefit plan. Prior to making this commitment, the company would start informing its employees about their benefits for the upcoming year roughly two weeks prior to the end of open enrollment, which is obviously not a lot of time. Now, the company starts communicating to employees in July; the reason for that is simple. During the planning of the benefits for the next year they foresaw a huge increase in some of their health plans that they offered, in particular the Keystone Direct POS plan. Since Post and Schell decided to put an emphasis on communication, it has played a major role in the success of Post and Schells benefit plan. In fact, Mr. Schell says that because the plan is so well communicated, employees are starting to understand it, therefore resulting in high participation in the high deductible health plan.

Recommendations/Conclusion
While Post and Schells is an almost perfect plan in terms of setting and achieving plan goals, attracting and retaining employees, and keeping the firm financially sustainable, there are a few aspects of the plan that could be adjusted to further maximize the performance of the plan. It should be noted that a fundamental aspect for any benefit plan is to be willing to change and adapt annually to better meet employee needs and company goals. Post and Schell, being so employee-oriented with their plan, certainly recognize this necessity and are always looking for ways to improve all aspects of their company, in particular their benefits package. They realize

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that a high quality benefit plan is fundamental for both employee satisfaction and overall company success. Listed below is a few of the areas that we suggest Post and Schell should into in order to continue to improve upon their already successful plan:

Dental & Vision Both the dental and vision coverage offered by Post and Schell is fairly basic. In order to improve the overall plan as a whole, we suggest that Post and Schell engage in talks with their broker and provider, United Concordia, to look into the possibility of adding Cadillac coverage to their dental plan. This would allow for such things as orthodontia to be covered under the plan. While it may cause a problem for the firm in terms of cost, we feel as those it is certainly an area that should be explored in order to further their coverage as a whole. In terms of the Vision plan, Mr. Schell himself admits that it is a very basic plan. Now, while it may prove useless to offer a more in-depth vision plan, we yet again suggest exploring the option of expanding coverage. Short-term Disability One particular aspect of the STD plan was the way in which the firms policy defines disabled. It is as close to an Own Occupation policy as possible. In other words, a person is labeled disabled if they unable to perform the duties of their job within the scope of their employment. For example, a trial lawyer is disabled if they are unable to show up in court. In our opinion, this definition of disabled brings about a high degree of potential moral hazard.
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This is due to the simplicity of the definition and the lack of difficulty involved in being deemed disabled. When inquired about this issue, Mr. Schell explained that the provider of the benefit bears a majority of the risk because Post and Schell self-insures for only 90 days; however, we feel as though Post and Schell essentially bears the risk in the end. This is due to the fact that an increase in claims resulting from moral hazard will result in the increase of premiums needed to be paid by Post and Schell to the provider, essentially causing costs to rise. While Post and Schell does take certain measures, such as requiring second opinions and doctors notes, we advise that they take even further steps to control moral hazard by keeping a close eye on both frequency and severity of claims. Communication Post and Schell has made it a point to provide excellent communication of their benefit plan to their employees. There one particular that we think they should apply more focus. First, we feel as though Post and Schell should provide more consultation to employees in regards to them enrolling into the HDHP. Mr. Schell mentioned that some people are still clinging to the indemnity plan that they offer. We feel as though, by offering more consultation with regards to the benefits of switching from indemnity plan to HDHP, Post and Schell would be providing more incentive for employees to make the switch and therefore employees would begin leaving the indemnity plan behind. Conclusion Overall Post and Schell offers a complete benefits package. Their package, being both high in quality and competitiveness in the industry, plays a huge role in the ensuring the overall success of the company. Post and Schells current plan allows them to not only attract and retain
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talented employees but also provide the firm as a whole with financial stability and economic sustainability. By doing these two things, the plan in turn allows Post and Schell to meet their ultimate goals and philosophy behind having a plan in the first place. Each person who played a role in the design and administration of the benefits package has done an incredible job. This current plan, which overall is an excellent plan, will not only bring success to the company now, but will provide a template for which to base future plans off that will ensure the ongoing success of not only their benefits package, but also the company as a whole.

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December 9, 2011

Dear Mr. Schell,

Brian and I would like to thank you for taking the time to meet with us on November 28th. We are well aware that this is a very busy time of the year and are grateful that you made time to speak with us.

The interview assisted us immensely with regard to the preparation and completion of our project. In addition, it also furthered our education on the subject of benefits as whole. Thanks to your assistance, we are very confident that we will be receiving a high grade. Without your help, none of this was possible.

Enclosed is a copy of our project for you to review at your leisure. Thank you again, Brian Karakaedos Matthew Burkhardt **This is a copy of our thank you letter sent to both Mr. Schell and Ms. McNichol. (w/ attached project)

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Benefits Analysis: Post and Schell 35