Benefits Analysis:

Melmark

Part 1: Benefits Matrix Part 2: Inventory of Benefits

910929880 911197368

RMI 3501 Dr. Drennan Fall 2011

Exposure Analysis for Melmark

Loss Exposure Provided Coverage/ Benefits Provided

Overall Medical Expenses

Dental Vision Prescription Long Term Care Retiree Health Care

Loss of Income: Medical Expenses Yes Independence Blue Cross: HDHP, PPO, Health Reimbursement Account, Flexible Spending Account Yes Guardian Dental PPO, Flexible Spending Account Yes Vision Benefits of America, Flexible Spending Account Yes All Health plans*, Flexible spending account No NONE Yes Medicare, COBRA Loss of Income: Death Yes Basic Life Insurance, Supplemental Life Insurance, 403(b) plan, OASDI Yes Basic Life Insurance, Supplemental Life Insurance, 403(b) plan, OASDI, AD&D Yes Basic Life Insurance, Supplemental Life Insurance, 403(b) plan, OASDI, Workers Compensation Loss of Income: Unemployment Yes State Funded Program Loss of Income: Disability Yes STD, OASDI, Paid Time Off Yes LTD, 403(b) plan, OASDI, AD&D, Paid Time Off Yes 403(b) plan, OASDI ,AD&D, Paid Time Off, Workers Compensation Yes 403(b) plan, OASDI, AD&D, Paid Time Off, Workers Compensation Loss of Income: Retirement Yes TIAA-CREF Financial, 403(b) plan Yes Employer Funded Defined Contribution Plan (401a) Other Exposures Yes Tuition Reimbursement Yes Employee Assistance Program, Bereavement Leave, Discounted Meals, Global Fit Discount Program, Healthy Lifestyle Program Yes Dependent Care FSA No NONE No NONE

Non-Accidental & Non- Occupational Accidental Occupational

Unemployment

Non-Occupational; Short-Term Non-Occupational; Long-Term Occupational Disability; Short-Term Occupational Disability; Long-Term

Retirement Tax Sheltered Annuity Plan Retirement Pension Plan

Educational Assistance Work/Life Exposures

Dependent Care Property-Liability Legal Expenses

*= Members enrolled in any of the medical plans are automatically enrolled in the prescription drug benefit program

Summary of Benefits
Benefit Plan Independence Blue Cross High Deductible PPO* Independence Blue Cross Personal Choice PPO* Vision Benefits of America A.M. Best Rating n/a Financing Contributory Funding Self-funded Eligibility Full-time active employees, Parttime employees and dependents Full-time active employees, Parttime employees and dependents Full-time active employees, Parttime employees and dependents Full-time active employees, Parttime employees and dependents Full-time active employees, Parttime employees and dependents Full-time active employees, Parttime employees Full-time active employees, Parttime employees Full-time active employees, Parttime employees Full-time active employees, Parttime employees and dependents Full-time and Parttime Employees Full-time and Parttime Employees Full-time and Parttime Employees

n/a

Contributory

Self-funded

n/a

Fully Contributory

Fully Insured

Ameriflex (HRA)

n/a

Contributory

Self-funded

Guardian Dental

n/a

Contributory

Fully Insured

Sun Life Financial Life Sun Life Financial AD&D Sun Life Financial Supplemental Life Sun Life Financial Supplemental Dependent Life

n/a

Non-Contributory

Fully Insured

n/a

Non-Contributory

Fully Insured

n/a

Fully Contributory Fully Contributory

Fully Insured

n/a

Fully Insured

Short-Term n/a Non-contributory Disability Long-Term n/a Non-contributory Disability Retirement A++ (Superior)** Contributory TIAA-CREF Financial Services * =Includes prescription drugs ** = Source of A.M. Best Rating is www.ambest.com

Self-funded Self-funded Fully Insured

Introduction Melmark is an all-inclusive agency that provides residential, educational, therapeutic, and recreational services for children and adults with developmental disabilities. They strive to provide the highest quality services to students and adults with developmental disabilities. They also have the same ideals and goals when it comes to providing quality coverage to their employees. A full time employee at Melmark is someone who works 40 or more hours per week and has completed 90 days of service and a part time employee is someone who works 30 hours a week. Both are eligible for benefits . An active Melmark employee is eligible to enroll in Medical, Dental and Vision coverage after 90 days of service. After 30 days of service, on the first of the month, an employee can be enrolled in Life/AD&D, Voluntary Employee and Dependent Life insurance. Family members that are eligible for coverage under Medical, Vision and Dental coverage are, dependent children and legal spouse, same or different sex domestic partner. Melmark's open enrollment period goes from April 18, 2011 through April 25, 2011. Once an employee selects his/her coverage during this open enrollment period, the coverage chosen will become effective June 1, 2011. Employees who do not enroll in coverage by April 25th, forfeit their right to elect coverage or receive any wavier payments. Medical Expense Melmarks medical plans are administered through Independence Blue Cross. There are two types that employees can choose from; a High Deductible Health Plan

(HDHP) and Health Reimbursement Account (HRA) or the Personal Choice Preferred Provider Organization (PPO). High Deductible Health Plan (HDHP) and Health Reimbursement Account (HRA) A Health Reimbursement Account is employer created account, which reimburses a portion of covered out of pocket health care expenses. Melmark established an HRA to reimburse expenses applied to an employees deductible. Melmark will fund an HRA for employees enrolled in the High Deductible Plan. The funding amount for each employee is based on coverage level and length of service at the beginning of June 1, 2011. Funding levels are as follows; $3,000 deductible for single Coverage:

Employees Less than 2 years of service as of 6/1/11 are responsible for the first $750 of the deductible. Melmark reimburses (or self-funds) up to $2,250. Employees with 2 or more years of service as of 6/1/11 are responsible for the first $250 of the deductible. Melmark reimburses (or self-funds) up to $2,750. For family coverage there is a $6,000 deductible: Employees with less than 2 years of service as of 6/1/11 pay the first $2,000. Melmark reimburses or self-funds up to $4,000. Employees with 2 or more years of service as of 6/1/11 pay the first $1,500. Melmark reimburses or self-funds up to $4,500. Personal Choice Preferred Provider Organization ("PPO") Melmark offers a PPO that works very differently from the High Deductible plan in that most plan elements are covered 100% and there are minimal out of pocket deductibles when the employee or a family member goes to the doctor. Employees who have the PPO simply present their insurance card upon receiving care or treatment. The

employee pays the deductible and the provider bills Independence Blue Cross the balance. Prescription Prescription drug coverage is included under both medical options but vary in price depending on which coverage and employee chooses. Under the HDHP and HRA option, there is a $10 fee after deductible for generic drugs, $35 after deductible for preferred and $60 after deductible for non- preferred. Also it is 2.5X copayment after the deductible for a 90day supply. Under the PPO generic drugs are $10, preferred are $20, non-preferred are $35. Both plans have a 2.5X copayment for a 90-day supply. Flexible Spending Account (FSA) Melmark partners with AmeriFlex to provide employees the opportunity to pay for out-of-pocket Medical, Dental, Vision and Dependent Care expenses with pre-taxed dollars through the Flexible Spending Accounts. Employees can save 25% of each dollar spent on these expenses. All employees get an AmeriFlex Convenience Card when enrolled. Medical FSA funds are available on day one of the plan year and maximum amount for the 2011 plan year is $2,000. The Dependent Care FSA maximum amount for 2011 is $5,000. Dental Melmarks Dental Plan is administered through Guardian Dental. There is a $50 single, $150 family annual deductible for this plan. Preventive care is 100% in network, 60% out of network and Basic Care is 100% in network, 50% out of network. There is a $2,000

lifetime orthodontics maximum for dependents under 19 years old in network, $1000 out of network.

Loss of Income
Life Insurance Basic Term Life, Accidental and Dismemberment (AD&D) Insurance, Supplemental Life, Supplemental Dependent Life Insurance
Melmark provides Basic Term Life Insurance to help cover loss of income due to death on a non-contributory basis. AD&D plans are also provided on a non-contributory basis to arrange income protection as a result of accidental death and dismemberment. In addition to the Basic Term Life Insurance, Melmark allows employees to purchase Supplemental Life and Supplemental Dependent Life Insurance. All of the benefits mentioned above are fully insured and are provided through Sun Life Financial Services. Melmark provides coverage for active fulltime employees that work 40 or hours per week and part-time active employees that work 30 or more hours per week. Basic Term Life Insurance and AD&D benefits are equal to one times the annual salary to a maximum of $200,000 with a minimum benefit of $30,000. Supplemental Life Insurance and Supplemental Dependent Life can be purchased in increments of $10,000 with a maximum coverage of $600,000 or 5 times an employees salary, whichever is lesser. There is no open enrollment period for voluntary life. An eligible employee can apply at anytime; however an employee who does not apply during their new hire enrollment period will be required to provide evidence of insurability and coverage is not guaranteed.

Disability Income Benefit

Melmark provides active full-time benefit eligible employees who have completed one year of service with short-term and long-term disability income benefits and pays the full cost of this

coverage. In the event an employee becomes disabled from a non-occupational injury or sickness, disability income benefits are provided as a source of income. Employees are not eligible to receive short-term Disability benefits if they are receiving Workers Compensation benefits. Employees have the option to choose the long-term disability benefit on a pre-tax or a post-tax basis. Employees will be payroll taxed with imputed income, a small tax on the premium paid by Melmark. If an employee should receive long- term disability benefits, their monthly benefits will be subject to federal income tax.

Short-Term Disability (STD) Insurance/ Paid Time Off (PTO)

To address the issue of potential loss of income due to non-occupational disability, Melmark provides all full-time and part-time active employees with short-term disability. Melmark Provides 60% of weekly earnings for qualifying disabilities after a 14-day waiting period for up to 26 weeks for absence due to non-work related injury or illness. The benefit is paid for by Melmark and is provided on a non-contributory basis and is self-funded through Sun Life Financial. For short-term disability the benefit begins on the 15th day after accident or illness. The benefits are payable weekly with a 60% of income replaced. The maximum monthly benefit is $1000. Time off benefits are provided to employees who are regularly scheduled to work 30 or more hours per week. Time off benefits are pro-rated based on scheduled hours for employees working 30 or more, but less than 40 hours per week.

Long-Term Disability (LTD) Insurance

Melmark also provides Long-Term Disability Insurance in the potential loss of income due to non-occupational disability. Melmark Provides 60% of earnings after 26-week waiting period for

qualifying disabilities not related to work. This benefit is paid for by Melmark and is provided on a non-contributory basis and is self-funded through Sun Life Finances. For long-term disability the benefit has a 180-day elimination period. The benefits are payable monthly with a 60% of income replaced. The maximum monthly benefit is $5000.

Short-term Disability Retirement

Melmark provides eligible employees with an Employer Funded Defined Contribution Plan (401a). Employees will become a Participant in the Plan as of the date, which coincides with the date on which you complete one (1) Year of Service. No employee contributions are required, nor are they permitted, under the Plan, except for rollover contributions and direct transfers from other qualified plans. Melmark will bear the entire cost of funding the Plan and will pay any administrative expenses not covered by the Trust. The Plan is designed to accomplish its objectives without requiring you to invest your personal savings. All contributions made under the Plan are managed and controlled by the Trustees. Within the Plan document, Melmark has established trust provisions (Trust) to hold the assets of the Plan. Neither the Trustees, Committee or Melmark in any way guarantees the Trust from loss, nor do they guarantee the payment of any benefits, which may become due to any person from the Trust. Nothing in the Plan will be deemed to give any employee, former employee or beneficiary an interest in any specific part of the Trust or any other interest except the right to receive benefits out of the Trust in accordance with the provisions of the Plan and Trust. The Committee shall determine the percentage to be contributed for each Class of employees. Melmarks contribution is a percentage of each employees compensation. All employees in a Class will receive the same percentage of compensation as a contribution for a plan year.

SUPPLEMENTAL TAX SHELTERED RETIREMENT ANNUITY (403 b)

Employees may elect to set up a tax-sheltered account to supplement their retirement savings. Melmark will match each dollar that the employee contributes with an additional $.40 (forty cents) to a maximum of 5% of the employees annual earnings. Supplemental retirement savings are deducted from an employees pay through payroll deductions.

Benefits Analysis:

Melmark

Part 3: Benefits Analysis

910929880 911197368 RMI 3501 Dr. Drennan Fall 2011

Part 3- Decision Making and Benefits Plan Design Analysis Introduction

Melmark is one of the premier organizations in the country offering services to those with special needs. Melmark is located in Berwyn, Pennsylvania. Currently they employ 681 employees. A lot of consideration and time goes into planning the benefits for their employees. They take in to account cost first and for most as well as the number of employees, their marital status and their age too. They take the time to have the benefits explained clearly and more than once throughout the year to those who dont understand them. While working on this project, Colette Brown was gracious enough to take time out of her busy schedule and help us collect information to analyze Melmarks present benefit plan. Colette is the Vice President for Human Resources at Melmark with over 22 years of human resource experience. Some of Colettes responsibilities include recruitment and retention, employee recognition, training and development and benefits and compensation. Colette works closely with Melmarks broker John Cerami from

Radnor Benefits. The benefits committee includes Colette, Chief Financial Officer Delyn M. Byerly, Chief Operating Officer George P. Linke and Human Resource Generalist Jessica.

Overall Design Considerations in Employee Benefits

Goals After speaking to Colette Brown, it was clear to us that the employees at Melmark were top priority in the design process and considerations for the overall benefits package. During new hire orientation benefits are gone over and explained, as well as annually during the renewal process. One-on-one assistance is also provided during the enrollment period. In addition Radnor Benefit Group is also available to provide assistance and answer questions. Overall they try to encourage employees to call Radnor, because they are the benefits experts. Colette mentioned that attracting retaining employees is the key when designing the benefits package. That was the big reason on why they worked hard not to have any cost increases passed on to their employees the past year, as well as additional money was adding to the HRA by Melmark to minimize their out of pocket cost as much as possible. They think it is a tool to both recruit and retain employees. In order to actually know if their benefits package is actually recruiting and retaining employees, there are a couple things they do. First, Melmark takes part in an annual benefits survey that Radnor coordinates for them. These surveys are of the employers in area, and ask questions about the benefit levels theyre providing, and detailed information questions such as; by weekly premiums for various benefit levels, what employees with single family coverage are paying, plan design questions, what are co-pays and etc. They look at this and make sure their plan design is competitive with the other employers. Second they do employee satisfaction surveys annually and third, when an employee leaves they are given an exit interview with questions about the benefit plan.

Demographics When designing their benefits package, Melmark took into consideration the demographics of their employees. Employees marital and family status, age and occupation were all factors that were involved in the designing process. The average age of the employees at Melmark is 36. Out of the 681 employees, 80% of the employees enroll in employee only coverage, or employee child coverage. Not many of the

employees get coverage for their spouses. Of the 20% of employees that opt-out it was assumed that they get coverage elsewhere mainly from their spouses. Funding and Financing Considerations Melmark uses an approach where they use a combination of self-funding and fully insuring their benefits plan. Colette stated that the plan design was in the best interest of the employees. Cost was one of those factors that went into consideration while designing the plan. Melmark decided that on a non-contributory basis to self-fund their STD and LTD as a recruit and retention tool. The organization has a philosophy of wanting to provide good quality benefits when employees are having hardships such as disabilities. Melmark also felt that it was cost effective to fully insure their Life, AD&D and their supplemental Life insurance.

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

Independence Blue Cross vs. United Healthcare Prior to 2010 Melmark had a traditional PPO with United Healthcare. In June of 2010 their one year contract was up and it was time for their renewal process. United Healthcare presented Melmark with a 52% increased premium. The organization knew

that they could not absorb the premium increase so they had to look elsewhere for coverage. Two options that were presented to Melmark by the broker were to find a new carrier or look at other plan designs. It was at that point where it was decided that Melmark was going to move away from a PPO as a core benefit to a High Deductible Health Plan with Independence Blue Cross. High Deductible Health Plan and HRA In order help contain costs and still give their employees adequate coverage, Melmark decided to implement HDHP with and HRA through Independence Blue Cross. With the high deductible in place, Melmark subsidized the deductible for their employees. In a way they are self- insuring the coverage for their employees through the health reimbursement account. The goal was to get the employees the most coverage they could, at the least cost possible. In 2011 Melmark had a 13% increase from Independence Blue Cross. Since the prior years new plan design took a while for employees to get accustomed to, Melmark decided that they did not want to traumatize their employees with a high deductible. Melmark absorbed the full cost of the premium increase. Funding Considerations Cost was a big part of the funding considerations. The other part was that they wanted their employees to have access to not just any health care but to affordable health care. Colette stated that it was more cost effective to go with what Independence Blue Cross was offering than to self-insure the health benefits. She also looked into the options of stop-loss insurance or gap insurance and it was more expensive. Assuming more risk with self-insuring was something Melmark was not prepared to do. The cost coupled with the risk made it an easy decision to go with Independence Blue Cross. If it

were significantly less expensive than Independence Blue Cross, Colette said she would have considered it. Colette also expressed that employees had more confidence with a big name like Blue Cross.

Problems, Issues, Concerns, and Considerations in the Design of Other Non-Retirement Benefits
Flexible Benefits Melmark offers its employee several Flexible Spending Accounts. Partnered with Ameriflex the FSAs are used to pay for out-of-pocket Medical, Dental, Vision, and Dependent Care expenses. Colette understood that employees needs are different and their tolerance for risk is also different. The difference in employees financial situations also played a factor in providing FSAs. The main goal of the FSA is to allow employees flexibility in choice. Melmark wanted to provide employees choice to opt-in or opt-out on an la catre basis. Communication With the switch to Independence Blue Cross from United Healthcare Melmark had to spend more time educating employees on the new plan design. Several different communication techniques were used to communicate the new plan design. Benefit Enrollment Guides were mailed to employees homes with letters attached to them informing them about open enrollment. The letters stated that the open enrollment period was approaching and that they needed to make their plan elections or they would go without benefits. The benefits committee also sent out the enrollment guides

electronically to employees. Flyers were placed around campus and employee work areas reminding employees of open enrollment. There were also meetings held in the auditorium where the benefits committee would give power point presentations and walk through the plan design. enrollment. During the open enrollment period, Melmark had a conference room set up with 15 laptops. Human Resource representatives and Radnor Benefits representatives were on staff to help employees through the enrolment process. After enrolment, if any One-on-one sessions were also available to assist with

employees had any questions, they were able to talk to the Human Resource Generalist Jessica and she would help facilitate getting in touch with the carrier. Or the employee could call Radnor Benefits directly. Wellness Programs Melmark being in a school setting, it is important that the teachers and other specialist in the school are in good physical health. The wellness programs that are in place are communicated during open enrollment and the time of hire. Flyers are also used to communicate wellness programs throughout the year. The school has a small gym in the building with several pieces of equipment free of charge. There is a shower that employees can use if needed after a workout. The school offers healthy eating options in the cafeteria. The program also offers employees discount memberships to participating gyms outside of the organization.

Regulatory Compliance
HIPAA With the rules and regulations of HIPAA being so strict, Colette takes extra precautions when dealing with employees privacy. If an employee asks the Broker to speak to a carrier or get information on their behalf, the Broker has the employee fill out a privacy form. Whenever the Broker sends any information to Colette, it is sent in an encrypted file where a password is needed. Any personal information sent through email the transmissions of the files are secure. Administratively Colette said that the changing of the carriers with Melmark is usually a smooth process. The biggest issues were the drafting change of the plan design and the strain it might cause to the employees. The Melmark employees were already familiar with the PPO and just paying the co-pay every time they went to the doctor. Now with the HDHP and HRA they are taking a much more active role in submitting claims to the carriers. Employees now have to submit documentation to AmeriFlex, who handles all the administrative issues for the HRA. The employees now have to submit estimates of benefits and copies of claims to AmeriFlex in order for them to be reimbursed. For many employees at Melmark this is more work on their part, many are only high school prepared at best and not many of them know how to use these computer websites, and the benefit paper work is not something that many of the employees enjoy either. COBRA Even though Melmarks COBRA compliance is out-sourced to Ameriflex, Colette is fully aware and implements the requirements of COBRA. Colette has up to 30 days to notify Ameriflex when an employee is no longer working for Melmark. Ameriflex then

has up to 14 days to sends out the notification of COBRA rights and coordinates the COBRA process. COBRAs continuation coverage allows qualified beneficiaries with qualifying events to continue their health care coverage for 18 months for a single employee and 36 months for employees with dependents. With a great communication system in place, the language and the coverage is easily understandable to employees.

ERISA During the process of the benefit plan design Colette had to be aware of all regulatory and compliance issues concerning ERISA. Melmark has Pension Attorneys and a Chief Financial Officer to make sure that they are in compliance with all of the ERISA requirements. Melmark does provide employees with a defined contribution pension plan. With respect to fiduciary responsibility the plan has to be carried out in a way that the sole purpose of the plan is in the best interest of the plan beneficiaries. Colette and her benefits committee have established a great system that communicates their benefits plan to employees. Enrollment Guides are mailed to employees homes. If an employees needs assistance with understanding the plan designs, they are also encouraged to go to the Human Resource Generalists office. Health Reform With regards to the health reform, Colette had a few concerns. One of the new regulations that require employers to provide preventive care at 100% with no cost sharing. With this new rule in place, it was estimated that it will increase the benefits cost by 1%. Another regulation in place is that if an employer offers dependent care, the employer must offer dependent care up to the age of 26. This regulation did not have any

effect on Melmarks benefits cost. Colette had expressed was that in 2013 it will be mandatory that the value of employer sponsored health coverage be reported on employees W-2 forms. The payroll staff and the finance department are now preparing for the changes that will take place. Another concern Colette expressed was that

Melmark has a different health plan for executives. Executives or highly compensated individuals have Independence Blue Cross Personal Choice which is a high end benefit plan. The issue is that before health reform only self-insured plans were subject to nondiscrimination rules. The potential legislation to extend non-discrimination rules to fullyinsured medical plans keeps getting pushed back. Melmark will deal with the issue when it is officially in effect.

Recommendations for the Future

During the process of analyzing Melmarks benefits plan, there was one area where we noticed that may need to be addressed in the future. Melmark offers employees an HDHP with an HRA where Melmark pays full cost of the deductible. When the one year plan renewal was up, Independence Blue Cross set a 13% increased premium. Melmark choose to stay with IBC and pay the high deductible in good faith because of the prior year new plan design and the confusion it caused. Melmark is doing this for 2011. If the premiums stay the same or increase, Melmark has to make the decision to continue to pay the deductible or let the employees pay their own deductible. This may cause some concerns and issues with employees who now cannot afford to pay the high deductibles. We recommend that Melmark in future years first pay the deductible on a contributory basis where the employees can gradually get used to paying a deductible if there would be any type of increase in premium.

Conclusion
Melmarks strong relationship between its human resource department and broker is something that ensures their success in any benefits plan they implement. Although they will have a renewal process soon and will have to choose once again which package or plan they want to stick with or change, Melmarks benefits team has the knowledge and experience to design a comprehensive benefit package that will bring them continued success with their employees in the future.

Thomas, Robin. COBRA Health Insurance Plan Update. PayScale. 17 Feb. 2011. 6 Dec. 2011 <http://www.payscale.com> Brown, Colette. Personal Interview. 5 Dec. 2011.

December 9, 2011 Colette Brown Vice President for Human Resources Melmark 2600 Wayland Road Berwyn, PA 19312-2307 Dear Colette, We are very thankful that you were able to take time out of your busy schedule to help us with our group project. With your patience and your understanding, we were able to complete our assignment. We would also like to thank you for allowing us to interview you and ask the very important questions. At the end of the interview you asked if you got an A for your knowledge of Employee Benefits and yes you earned an A. Talking with you allowed us to have a better understanding of the process that goes into designing a benefits plan for a company. We also left the interview with an understanding of how to link the topics we learn in class and how to apply them to real life situations. Once again we thank you for all of your support. Sincerely Weather-Regina Garrison Jamie Walters