Thomas j Metzger - s.p.i.n., Inc.fall 2011

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Benefits Analysis: Special People in the Northeast INC.

S.P.I.N., Inc.

Benefits AnalysisParts I & II

912038604912387186RMI 3501

Dr. Drennan

Fall 2011



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Table of Contents

LOSS MATRIX…………………………………………………………….…….…1

SUMMARY OF BENEFITS………………………………………...............2

INTRODUCTION TO SPIN, INC………………………………………………....3

ELIGIBILITY………………………………………………………………..3MEDICAL BENEFITS……………………………………………………....3

Keystone HMO……………………………………………………….......3-4

Keystone POS……………………………………………………………..…4

Personal Choice PPO…………………………………………………....4-5

Dependents……………………………………………………….…..5 Prescription Drugs……………………………………………………........6

Dental………………………………………………………………………...6

Vision………………………………………………………………………....7

FSA……………………………………………………………………...….7-9

LOSS OF INCOME…………………………………………………………..…....9

Retirement ………………..……………………………………………….....9 Life……………………………………………………………………….9 -10Short Term Disability…………………………………………………….10-11 Long Term Disability…………..………………………………………...11-12

ADDITIONAL BENEFIT OPTIONS………………………………………..…12

Voluntary Universal Life…………………………………………………….12 Additional Voluntary Term Life……………………………………….…...12

Tuition Assistance Program……………...………………………………….13 Family and Medical Leave Act…………………………………………...13-14 Leave of Absence…………………………………………………………….14 Day Care Benefits……………………………………………………………14 Philadelphia Federal Credit Union……………………………………..14-15Workers’ Compensation…………….………………………………………..15 Leave Time……..……………………………………………………………15 Holidays……………………………………………………………………...15 Norcom Community Center ……………….………………………………...16



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Loss Exposures for Special People in the Northeast (SPIN) INC.

Loss of Income: Medical Expenses

Loss Exposures: Provided: yes/no Benefits/ Coverage Provided:

Overall Medical Yes IBC: Keystone HMO, Keystone POS,Personal Choice PPO, Flexible Spending

Account

Dental Yes Colonial HealthCare, Inc.: Dental

Insurance

Vision Yes Colonial HealthCare, Inc.: Vision

Insurance

Prescription Yes Express Scripts Prescription Plan

Retiree Health Care Yes OASDI, COBRA

Loss of Income: Disability

Occupational Short Term Yes Prudential: Short Term Disability

Insurance, AD&D Insurance. OASDI,

Worker’s Compensation

Occupational Long Term Yes Prudential: Long Term DisabilityInsurance, AD&D Insurance. OASDI,Worker’s Compensation

Non-Occupational Short Term Yes FMLA, Leave of Absence, OASDI

Non-Occupational Long Term Yes OASDI

Loss of Income: Death

Accidental Yes Prudential: Basic Accidental Death andDismemberment, Basic Term Life

Occupational Yes Prudential: Basic Accidental Death andDismemberment, Basic Term Life

Non-Accidental & Non-Occupational

Yes prudential: OASDI

Loss of Income: Retirement

Retirement Yes 403(b), Retirement Plan, OASDI

Loss of Income: Unemployment

Unemployment No

Other Benefits Educational Assistance Yes Tuition Assistance Program

Dependent Care Yes Dependent Care Flexible SpendingAccount

Mass Transportation No

Work/Life Benefits Yes Norcom Community Center, Day CareBenefits, Philadelphia Credit Union



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Summary of Benefits

Benefit Plan A.M. Best

Rating

Funding Financing Eligibility

Keystone HMO B+ Fully Insured Contributory Full-time employeesand their dependents

Keystone POS B+ Fully Insured Contributory Full-time employeesand their dependents

Personal ChoicePPO

B+ Fully Insured Contributory Full-time employeesand their dependents

Express ScriptPrescription

Drug

1 Partially Insured Contributory Full-time employeesand their dependents

Colonial HealthCare: Dental

A- Self-Funded Non-Contributory

Full-time employeesand their dependents

Colonial HealthCare: Vision

A- Self-Funded Non-Contributory

Full-time employeesand their dependents

Prudential: Life A+ Fully Insured Non-Contributory

Full-time employees

Prudential:

AD&D

A+ Fully Insured Non-

Contributory

Full-time employees

Prudential: STD A+ Fully Insured Non-Contributory

Full-time employees

Prudential: LTD A+ Fully Insured Non-Contributory

Full-time employees

All ratings cited on Work’s Cited page

1No rating found for Express Scripts



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Special People In the Northeast, Inc. (SPIN), is a non-profit firm headquartered in

Philadelphia, PA. SPIN offers services and quality care to individuals throughout Philadelphia

and surrounding areas with intellectual and developmental disabilities, and their families. SPIN

currently employs approximately 1,200 employees. SPIN offers benefit packages through

Colonial HealthCare, Inc., Independence Blue Cross, Prudential Insurance Company of America

and Principal Financial Group.

Eligibility:

Employees that work at least 30 hours a week are eligible for SPIN’s benefits package on

the first of the month following their date of hire. Eligible dependents can participate at the same

time the employee becomes eligible. Eligible dependents include a legal spouse, domestic

partner, or disabled dependent of any age that is incapable of self-support because of a mental or

physical handicap. For Medical Insurance, the employees’ dependent children are covered

through the end of the month in which he/she turns 26 years of age. For Dental and Vision

Insurance, dependents are unmarried children through the end of the month in which he/she turns

19 years of age, or the end of the month in which he/she turns 25 years of age, provided they are

full time students at an accredited institution.

Medical Benefits:

SPIN offers three medical plans to their employees. Keystone HMO, Keystone POS, and

Personal Choice PPO are all offered through IBC.

Keystone HMO (Health Maintenance Organization):

SPIN offers a Keystone HMO (C4-F5) Single Coverage Plan. Employees are required to

select a primary care physician (PCP) from the Keystone network. Preventive care, such as

annual physicals, mammograms, and immunizations, are covered 100%. Co-payments for PCP



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visits are $30, while specialist visits with a referral require a copayment of $50. Inpatient

hospital services are covered at $400 per day. Emergency room visits consist of a $125 co-pay. If

a SPIN employee decides to utilize health care goods and services outside of this network, they

will receive no coverage. Reimbursement may be attainable for certain expenses; however the

reimbursements are strictly limited to only employees.

Keystone POS (Point-Of-Service):

A Keystone POS (Point-Of-Service) plan is also available through SPIN to its employees.

The Keystone POS (C4-F5-01) Single Coverage Plan requires participants to select a primary

care physician from the Keystone network. This plan allows freedom to go directly to most

specialists within the network without a referral. However, for x-rays, laboratory work, podiatry

services, spinal manipulation, and PT or OT, referrals are required. Like the Keystone HMO

offered, preventive care costs are covered fully. Co-payments for PCP visits are $30, while

specialists require a $50 co-pay. Inpatient hospital services are covered at $400 a day.

Emergency room visits are covered at a $125 co-pay. If an employee desires, he/she can feel free

to go outside of the PPO network. For out-of-network utilization, there is an annual deductible of

$500, and expenses following the deductible are covered at a rate of 70%. Reimbursements are

available for certain expenses, and the employee is only valid to receive such stipends.

Personal Choice PPO (Preferred Provider Organization):

Lastly, SPIN offers a Single Coverage Personal Choice PPO (C4-F5-02) Plan. This plan

does not require participants to pick a primary care physician. Participants are free to directly

visit any specialists within the PPO network without a referral. Preventive care is covered at

100%. Co-payments are $30 per family physician visit and $50 per specialist visit. Inpatient

hospital services are covered at $400 a day. Emergency room visits require a $125 co-pay.



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Participants are free to go outside of the network if they desire. Out of network coverage starts

with an annual deductible of $1,500. Following expenses are covered at a rate of 50%.

Reimbursement can be attained for certain expenses and employees are the only parties valid to

accept reimbursements.

Dependents on Medical Plans:

The eligible employee is able to add dependents onto any of these plans. The employee is

required to pay the entire cost. The cost of dependent coverage is deducted 26 times per plan

year. The deductions are taken through payroll on a pre-tax basis. The fee schedule is as follows:

KEYSTONE HMO:

Medical Coverage for Employee.............................................................................$4.60

Medical Coverage for Employee & 1 or more Children......................................$185.68

Medical Coverage for Employee & Spouse....................................................... $305.01

Medical Coverage for Employee & Family (Spouse and Child/ren)………...…$451.21

KEYSTONE POINT OF SERVICE :

Medical Coverage for Employee...........................................................................$31.46

Medical Coverage for Employee & 1 or more Children.....................................$233.60

Medical Coverage for Employee & Spouse........................................................$366.81

Medical Coverage for Employee & Family (Spouse and Child/ren) …………$530.01

PERSONAL CHOICE PPO

Medical Coverage for Employee...........................................................................$58.13

Medical Coverage for Employee & 1 or more Children.....................................$268.08

Medical Coverage for Employee & Spouse........................................................$428.17

Medical Coverage for Employee & Family (Spouse and Child/ren)…………. $608.22



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Prescription Drug Plan:

SPIN also issues an Express Scripts Prescription Plan. In order to receive the in-network

level of benefits, plan participants must use a pharmacy within the Express Scripts network. The

prescription plan is laid out as follows:

Prescriptions from a Pharmacy in-Network Prescriptions from the Express Scripts

Pharmacy

Up to a 30-day supply Up to a 90-day supply

Generic medication: $10 Generic medication: $20

Preferred brand-name medication: $20 Preferred brand-name medication: $40

Non-preferred brand-name medication: $35 Non-preferred brand-name medication: $70

Dental:

SPIN offers a self-insured dental plan to its employees that is administered through

Colonial HealthCare. Each treatment has a maximum coverage of $1,500.00 per year.

Treatment: Maximum Coverage:

Preventative Treatment

(check-up, cleaning and x-ray every 6 months)

100%

Basic Treatment

(fillings, extraction of teeth; wisdom teeth, root canals,

etc. after $25 per year deductible)

80%

Major Restoration

(dentures, caps, crowns, etc. after $25 per year

deductible)

50%

Dental coverage for dependents is charged according to the following chart:

Dental Coverage for Employee.........................…………………………………… NO COST

Dental Coverage for one dependent....................………………………………………$ 14.00

Dental Coverage for two dependents...................………………………………………$ 28.00

Dental Coverage for three or more dependents.........…………………………………...$ 38.00



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Vision:

SPIN also self-insures a vision plan and administers it through Colonial HealthCare.

FSA:

Health Care FSA and Dependent Care FSA are both offered by SPIN. FSAs allow

employees to pre-deduct a portion of their salary on a tax-free basis to pay for covered expenses.

Any employee who is scheduled to work 30 hours per week or more is eligible for the plan after

their first 90 days of employment. The plan year is from January 1st to December 31st. If an

employee elects to participate in the medical expense reimbursement plan, their aggregate salary

reduction for contribution cannot exceed $3,000 per calendar year. This contribution is credited

to the employees Heath Care FSA. Eligible expenses under the medical care expenses

reimbursement are defined by Section 213 (d) of the Internal Revenue Code for an employee,

their spouse, or their dependent. Most medical expenses are deemed eligible for reimbursement,

however a list of expenses are not:

- Cosmetic surgery - Supplements prescribed by alternative provider

- Domestic help fees - Union dues

- Health club memberships - Over the counter vitamins

- Lens replacement insurance - Weight loss programs

Examinations: Maximum Benefit:Opthalmologist or Optometrist $60.00 annually

Single Vision Prescription $40.00 annually

Bifocal Prescription $60.00 annually

Trifocal $75.00 annually

Lenticular Prescription $100.00 annually

Contact Lenses $100.00 annually

Frames $55.00 every two years



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- Physical therapy treatments - Pre-tax insurance premiums

If an employee elects to participate in the dependent care assistance plan, their aggregate

salary reduction for contribution cannot exceed $5,000 per calendar year for a single parent and

cannot exceed $2,500 for a married couple filing separately. This contribution is credited to the

employee’s Dependent Care FSA. Coverage for a participant generally terminates on the earliest

of the following dates:

1. Midnight of the day the participant terminates employment or fails to satisfy the

requirements of eligibility.

2. The midnight on the date that contributions by the participant are discontinued.

3. The date on which all benefits are terminated by the amendment of the Plan.

If an employee is terminated and rehired within 30 days, they will re-enter the plan with the same

elections as before unless any eligibility requirements are not met.

There are some important rules and restrictions under the Dependent Care FSA.

1. If an employee is married, their spouse must also be working, a full-time student, or

incapable of caring for his/her self.

2. If an employee’s expenses are from a dependent day care center, the center must meet

state requirements and must receive a fee for services.

3. Once an employee decides how much money to allocate to the account, the amount

cannot be changed.

4. If an employee’s expenses are less than the amount allocated to the account, the

remaining amount is forfeited.



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Eligible dependents include: children under age 13 who are tax exempt, an employee’s

spouse who is physically or mentally unable to care for his/her self, or your dependent who is

physically and mentally unable to care for his/her self and for whom you cannot receive an

exemption.

Loss of Income Benefits

Retirement:

SPIN offers a 403(b) plan for both union and non-union employees; these plans mirror

each other. The 403(b) plan uses a custodial account held by a bank or an approved non-bank

trustee as its funding vehicle to hold contributions made to the plan. Employees must meet all

eligibility requirements in order to participate in this plan. Excluded employees include those

who work less than 20 hours per week. The entry date for eligible employees for salary reduction

is on the date of hire. For non-salary reductions, the employee will be eligible once they have

completed three months of service with SPIN. An employees’ total deferral may not exceed a

limit that is set by law; in 2011 that limit is $16,500. SPIN will contribute to the plan the

following amounts: (a). the total amount of the salary reduction you elected to defer and/or (b). a

discretionary matching contribution equal to a uniform percentage of the amount of salary

reduction.

Life:

Basic Term Life Insurance and Basic Accidental Death and Dismemberment Policies are

both offered to SPIN employees through Prudential on a non-contributory basis. SPIN’s Basic

Term Life Insurance Plan automatically enrolls employees for 1 times their annual earnings up to

$300,000 with a minimum coverage amount of $25,000. Terminally ill employees can receive a

partial payment of their group life insurance benefit. This payment can be used as the employee



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wishes. Payouts to beneficiaries are deposited into a Prudential Alliance Account. These

accounts are personalized and interest bearing. Upon opening, the account earns interest and the

beneficiary can transfer or withdraw funds at any time. The payment of premium can be waived

if the employee is totally disabled for 6 months, they are less than 60 years old when they

become disabled, and they continue to be disabled. This waiving of premium terminates at age

70. Upon turning 70, the amount of insurance reduces by 50%. Employees lose coverage upon

termination. This policy can be converted into an individual life insurance policy offered by

Prudential. SPIN’s AD+D policy mirrors the Life policy. The AD+D policy pays the employee

and their beneficiary a benefit for the loss of life or other injuries resulting from a covered

accident. Coverage for loss of life is 100% and a lesser percentage is offered for other injuries.

AD+D benefits are paid regardless of other coverages that the employee may have. Employees

are automatically enrolled for an amount that is equal to their Basic Term Life coverage amount

upon enrollment.

STD:

Short Term Disability coverage is applied to all SPIN participating employees through

Prudential on a non-contributory basis. The STD benefits are 66 ⅔% of weekly pre-disability

earnings, up to a maximum of $850, less deductible sources of income. Deductible sources may

include benefits from statutory plans, unemployment income, and salary continuation. The stated

minimum weekly benefit is $25. Upon disability, the employees’ benefits begin on the 15th day

following a non-occupational injury or sickness. The benefit duration is 11 weeks. During the

elimination period, disability is defined as being under the regular care of a doctor, being unable

to perform the material and substantial duties of the regular occupation, and not working at any

job because of injury or sickness. After the elimination period, employees are defined as disabled



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when they are under the regular care of a doctor, unable to perform the material and substantial

duties of the regular occupation, and the disability results in a loss of weekly income of at least

20%. Exclusions include, but are not limited to, disability caused by war or act of war,

intentional self-inflicted injury, active participation in a riot, and commission of a crime for

which the employee has been convicted. Benefits are not payable for any period of incarceration

as a result of a conviction.

LTD:

SPIN offers through Prudential a Long Term Disability Plan to cover its employees on a

non-contributory basis. The employees’ benefit is 66 ⅔% of the monthly pre-disability earnings,

up to a maximum of $7,500, less deductible sources of income. There are no medical questions

asked if the employee enrolls when first eligible. Deductible sources of income may include

benefits from statutory plans, Social Security to the employee and their dependents, workers’

compensation, unemployment and other income. The stated minimum monthly benefit is the

greater of 10% of your gross monthly benefit or $100. Upon reaching the definition of disabled,

the employees’ benefits begin 90 days following the accidental injury or sickness. The benefit

duration is up to the normal retirement age under the Social Security Act. Employees are

considered disabled when, because of injury or sickness, they are unable to perform the material

and substantial duties of the regular occupation, are under the regular care of a doctor, and the

disability results in a loss of income of at least 20%. After receiving benefits for 18 months, the

employee is considered disabled when, due to the same sickness or injury, they are unable to

perform the material and substantial duties of any gainful occupation for which the employee is

reasonably fitted by education, training or experience, and the disability results in a loss of

income of a specified percentage determined in the plan. Disabilities due to mental illness are



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limited to 24 months of benefits during your lifetime. Some covered illnesses include, but are not

limited to, schizophrenia, depression, anxiety, and substance related disorders, including drug

and alcohol abuse. These disabilities have a combined limited pay period during the lifetime of

the employee. Benefits will not be paid for a disability that begins during the first 12 months of

coverage due to a pre-existing condition. During the first 24 months of part-time work while

disabled, the employee can receive full benefits as long as the employees’ combined income and

disability benefits do not exceed the monthly pre-disability earnings. If the employee dies while

collecting disability benefits, a lump sum payment may be paid to their eligible survivors. Some

exclusions are disability caused by war or act of war, intentional self-inflicted injury, active

participation in a riot, and commission of a crime for which the employee has been convicted.

Benefits are not payable for any period of incarceration as a result of a conviction.

Additional Benefit Options:

Voluntary Universal Life:

A voluntary Universal Life Insurance program is offered to employees through ING

(Reliastar) Life Insurance Company. This program allows employees to purchase a universal life

insurance policy for themselves, spouse, and/or dependents through payroll deductions.

Additional Voluntary Term Life Insurance:

SPIN allows employees to purchase Additional Term Life Insurance through Reliance

Standard Life Insurance Company. This term insurance is in addition to the life insurance that is

a part of the standard benefits package. Employees can buy additional coverages for the amounts

of $10,000, $25,000, or $50,000.



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Tuition Assistance Program:

SPIN offers tuition assistance to eligible employees for a degree program that is related

to the employee’s current job. Employees who wish to take advantage of this benefit must work

at least 30 hours a week and must seek further education at a fully accredited licensed

educational institution. SPIN closely monitors this program with a Navigation Plan. This plan

must be kept on file for review by the employee or manager prior to the acceptance of Tuition

Assistance.

Once an employee is approved, tuition assistance can be used for tuition costs and/or for

any related college or computer fees. Employees will never receive tuition assistance that

exceeds the cost of the University’s tuition. Costs such as late fees, transcript fees, program

admission, degree candidacy, application, books, equipment, deferred fees, graduation fees,

travel or living expenses are not reimbursable. These costs must be incurred by the employee.

Employees can receive a maximum benefit of $2,500.00 per calendar year as long as all

requirements are met. In order to receive the benefit an employee must maintain at least a “C” or

higher in undergraduate courses and a “B” or higher in graduate courses.

Family and Medical Leave Act:

SPIN provides eligible employees with access to Family Medical Leave Act benefit. To

be deemed eligible, one must have been employed with SPIN for at least one year and for 1,250

hours over the course of a 12 month period. Family and Medical Leave is used to cover

employees for 12 weeks of unpaid, job-protected leave for reasons relating to family or personal

needs. The following reasons are acceptable for leave under the FMLA: birth of a child,

placement of child for adoption or foster care, serious medical condition of a child, spouse, or

parent, serious medical condition of self, qualifying urgency due to a spouse, child, or parent



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being on active military duty or notification of impending call to duty, or a spouse, child, parent,

or next of kin recovering from a serious illness or injury sustained in the line of active duty.

Leave of Absence:

SPIN allows eligible employees to be granted six months of leave for educational reasons

or reasons that are not covered by the Family and Medical Leave Act. Employees become

eligible after three years of employment with SPIN. While the employee is on leave, their

position is held and redeemed to them on their return. Benefits are only paid by SPIN for the first

30 days of employee leave. Once these 30 days expire, an employee can opt to continue coverage

through COBRA. Opting for COBRA would put the employee in charge of paying their

premium up to 102%. Leaves of absence are only granted once every five years for any one

employee.

Day Care Benefits:

SPIN Day Care Benefits are offered on a daily basis for employees to use for their

children. Employees can choose to use this day care center each day or as the need arises. Those

employees whose children are not regularly enrolled in the day care service may still make use of

the center at no cost. With a week ’s notice, an employee not normally enrolled can utilize the

day care services on high traffic days such as school holidays. Use of the day care center on

school holidays comes at a 50% discount of the regular non-staff rate. While employees’

children may be placed on a waiting list, employees receive preferential treatment over the

general community as that wait is waived.

Philadelphia Federal Credit Union:

As an employee of SPIN, all staff are eligible to join the Philadelphia Federal Credit

Union for financial services. Services include free checking, MAC cards, VISA credit cards, car



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loans, mortgages, and personal loans. SPIN employees can elect to use PFCU for direct deposit

of all or part of their paycheck. However, employees are also given the option to use the bank of

their choice for direct deposit.

Workers’ Compensation:

As a statutory requirement in the state of Pennsylvania, all employees are provided with

workers’ compensation insurance. SPIN provides this to employees through a contract with

Eagle Trust Management. Workers’ compensation pays for medical expenses and lost wages for

all work-related injuries, or illness whether or not SPIN is liable.

Leave Time:

SPIN’s leave time plan combines sick, vacation, and personal leave time into one plan.

Employees’ leave time is earned with each payroll, starting from the first day of employment.

Like most benefits, SPIN’s leave time cannot be utilized until the requirements of the

probationary period are met. Employees earn the following leave time per hours per year based

on a 40-hour work week:

Management/Confidential Staff

Year 1: 120 hours or 3 weeks of leave time (earn 4.62 hrs/payroll)

Year 2: 160 hours or 4 weeks of leave time (earn 6.15hrs/payroll)

Years 3 and 4: 200 hours or 5 weeks of leave time (earn 7.69 hrs/payroll)

Years 5 through 10: 240 hours or 6 weeks of leave time (earn 9.3 hrs/payroll)

Years 11 and more: 280 hours or 7 weeks of leave time (earn 10.77 hrs/payroll)

Holidays:

The following days are deemed as holidays to all employees, both full-time and part-

time: January 1st, Martin Luther King Jr.’s Birthday, President’s Day, Memorial Day, July 4th,

Labor Day, Thanksgiving Day, day after Thanksgiving, Christmas Eve, and Christmas Day.



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Discount to Norcom:

As an added bonus, SPIN offers employees and staff access to the Norcom Community

Center. Use of these facilities comes at a discounted membership for SPIN employees of $150.00

per year. This full service community center is part of SPIN’s wellness initiatives to keep

employees healthy.



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Works Cited

“Best’s Rating Center.” A.M. Best. A.M. Best. <http://www.ambest.com>

"Ratings." Prudential. 2 Nov. 2011. Web. 3 Dec. 2011. <http://www.investor.prudential.

com/phoenix.z html?c=129695&p=irol-ratings>.



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S.P.I.N., Inc.

Plan Design and Decision Making AnalysisPart III

912038604912387186RMI 3501

Dr. Drennan

Fall 2011



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Part III: Decision Making and Plan Design Analysis:

Funding:

Since SPIN is a non-profit organization that provides services to individuals with

intellectual and development disabilities, it operates primarily through funding made by the state

of Pennsylvania and Philadelphia County, and donations paid by individual members, groups,

and corporate entities. Driven by its non-profit status, SPIN does not offer major salaries and

limits salary gaps from executives to staff. However, due to constant uncertainty of funding cuts,

SPIN has been unsure of how accurate its projections are now and for the future. With an overall

6% decrease in funding for the past plan year, SPIN needed to make radical changes in its design

and implementation of its benefits package. This issue is discussed under the heading “Cost

Management/Future Plan Design.”

Plan Design:

SPIN believes that benefits offer a huge draw to its employees, and therefore SPIN offers

comprehensive plans. In creating an environment of compensation equality, SPIN has had the

ability to receive its employees’ entrustment of their benefits. For a number of years, SPIN had

only offered two medical plans through corporate decision making: the current Keystone HMO

and the current Personal Choice PPO. With the advice of its broker Alliant, SPIN began to

administer what was described as a “hybrid” plan. Since the implementation of that plan,

Keystone POS, it has become the second most active plan, trailing SPIN’s Keystone HMO.

Because of SPIN’s Executive Team being fairly complacent over past years, and a

consistent package offered through Independence Blue Cross (IBC), SPIN did not make huge

changes to its plan for 2011. Due to a 20% increase in costs, however, SPIN was not able to

think as seriously into completely self-funding as it had hoped.



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A change that was enacted involved SPIN’s contributions to its employees’ retirement

plans. Upon noticing the exit of participation from employees in these plans, SPIN upped their

maximum match contribution to 6% for plan participants. To also retain employees and persuade

them from pulling their money out of their retirement plans, SPIN attempted to inform

employees that contribution is necessary, for in our economy, it is very unclear of where Social

Security will be standing upon their retirement. Because of this, SPIN has efficiently and

successfully altered its retirement plan design and employee participation.

SPIN strives to provide the post possible benefits package to its employees to attract and

retain them. Through this, SPIN has gained recognition for its renowned and comprehensive

benefits. Gail Meersand, director of Human Resources, explained how not only are these far

from a boasting point for SPIN, employees from other organizations have informed the company

that its benefits package is shocking and distant from any plans they have seen. As a result,

SPIN’s package has placed them above their competition, its participation rates are very high,

and its employee turnover rate is statically low.

Outsourcing:

SPIN utilizes Colonial Health Care, the third party administrator (TPA) for Alliant, to

perform the administrative functions of its dental and vision plans. SPIN also works closely with

Alliant, its broker, to ensure that all appropriate coverages are available for employees. Meersand

mentioned that the use of Alliant helped expand SPIN’s knowledge of plans, as well helping

implement plans and coverages that are satisfying to employees.

Compliance:

Meersand described that SPIN has never had major complications with compliance of

federal legislation or entities. She did, however, inform of the difficulties that arise from Health



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Reform discussions and the constant need to let its employees know of prospective changes.

Although hectic to keep track of, alterations made in the healthcare industry need to be

maintained throughout companies’ benefits packages to prohibit legal issues.

PPACA:

The Patient Protection and Affordable Care Act (PPACA) holds new and strict regulation

for health insurance. For plan year 2011, SPIN effectively instituted the new mandates to steer

the company away from any compliance issues. Administratively, SPIN successfully fulfilled the

automatic enrollment requirement. Upon enlisting all employees in a health plan who had not

individually enrolled, SPIN gave its workers prompt notice that they still face the option to opt

out. If the employees wished to opt out, they were informed that they would be able to at no

penalty.

SPIN also implemented the optional W-2 form reporting requirement for 2011 under

PPACA. The legislation made it voluntary for employers to offer W-2 forms that contained a

section in which the total value of benefits (employer and employee contributions) would be

reported. The belief that many had on this operation was that in the future, this total value of

benefits would become taxable. SPIN decided to apply this form sooner rather than later because

in 2012, this option will become mandatory. In other words, all employers who offer employer-

sponsored health coverage must include this W-2 tax form in their annual reporting documents

for employees.

IRS:

Prior to new IRS regulation, SPIN had not had its retirement plans audited in over 10

years. However, due to new IRS mandates, SPIN is required to allow an external auditor access



P a g e | 24


to its retirement plans once a year, as well as all information associated with each plan. SPIN’s

most recent audit came in July/August 2011.

COBRA:

The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) states that

those who are terminated from their jobs can still find coverage. Compliance issues with

COBRA deal mostly with the administration of who is considered covered and for the amount of

time they can receive extended coverage. For SPIN, the company has to be concerned with who

is deemed eligible. Eligible people are called qualified beneficiaries; those that have the right to

elect continuation coverage following certain qualifying events. Under COBRA, qualified

beneficiaries include employees and their dependents. SPIN must also be aware of the maximum

duration that someone could continue coverage. For an employee, the maximum duration is 18

months, and for a dependent the maximum duration is 36 months. Since turnover tends to be

consistently low, SPIN manages this mandate competently.

The main issue with COBRA that SPIN must be aware of is the enrollees in COBRA.

Most enrollees in COBRA are those with high risks. This would essentially raise the cost of the

plan for everyone since these employees are still a part of the risk pool. To address this issue,

SPIN should carve out COBRA from the rest of the health plan.

As most reforms and federal laws are implemented, administrative costs for new

legislation tend to increase for companies. Issuing new paperwork and deeming employees

eligible or ineligible are two examples of tasks of which administrators must be conscious. SPIN

has begun to prepare for health reform by starting to reduce its costs to mitigate the

administrative strain that comes from reform.



P a g e | 25


HIPAA:

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is another

federal enactment with which SPIN must comply. HIPAA sets forth guidelines that must be

followed to ensure that all patient information is properly protected. Under the Privacy Rule,

employers are required to keep a record of any information in which they disclose protected

health information (PHI). SPIN must be careful not to violate privacy of employees as this could

result in heavy fines and even jail time. The Privacy Rule was modified in August of 2002,

stating that The Department of Health and Human Services must include administrative

simplification provisions which implemented national standards for electronic health care

transactions. To this end, SPIN must be careful about what information they keep electronically.

Meersand stated that SPIN keeps detailed records on health information and that she is aware of

all the implications of HIPAA. Meersand also mentioned that SPIN has never had any

compliance issues with HIPAA because she makes sure to keep all employees up to date on

regulations by holding meetings when new issues arise.

ERISA:

SPIN is careful to comply with all requirements imposed by the Employee Retirement

Income Security Act (ERISA). SPIN must adhere to the requirements of fiduciary responsibility,

communication, and discrimination testing. In order to comply with the fiduciary responsibility

imposed by ERISA, SPIN must put the employees’ best interests first. SPIN does an especially

good job at this by offering its employee assistance programs which allow employees to access

telephonic assistance along with face-to-face visits. This shows that on top of the medical plans

offered, SPIN genuinely is putting its employees’ interests first.



P a g e | 26


As per ERISA requirements, employers must also follow specific communication

guidelines. SPIN communicates (see below) its plans through meetings, emails, SPIN portal,

calendars, seminars, and using representatives to explain the enrollment processes. SPIN also

provides every employee with the Summary Plan Description and Summary Material

Modifications. Meersand mentioned that right now since the plan is going through major

changes, SPIN is having multiple meetings a week to ensure that all employees understand how

these changes will affect coverages in 2012.

Communication:

Meersand explained that one of SPIN’s biggest issues with employees and their benefits

is employees not knowing or understanding the cost associated with the plan in which they are

enrolled. It is essential for employees to gain knowledge of the true cost of health care goods and

services. Having employees realize that SPIN goes to extensive lengths to provide a large

spectrum of benefits results in increased morale among workers. To ensure this, SPIN engages in

numerous communication activities.

SPIN advises all new and eligible employees on the benefits offered by the company at

their time of hire. Upon enrollment, every employee is given an “Employee Benefits Guide,” for

the plan year, which explains effectively every aspect of the employees’ coverage and

participation. Aside from initial documentation, SPIN performs other quality acts of

communication to participants.

One change that occurred, which required effective communication, was carving out a

prescription plan from its medical plans, and instead self-insuring a prescription plan through

Express Scripts. This measure was enacted for the sole purpose of cost savings. The premiums

required for its existing medical plan far exceeded the estimated expenses incurred from self-



P a g e | 27


insuring. Obviously, through the early stages of plan change, employees experienced some

difficulties. Although SPIN sent out numerous memos, emails, and mailed documents to ensure

communication standards, employees did not seem to understand the new plan. Meersand stated

that numerous instances occurred that involved disgruntled employees calling to inquire about

their previous prescription card not being accepted upon pick-up of prescriptions. Recently, these

difficulties have been subdued. SPIN’s administrators effectively educated its employees on the

separation of its prescription plan from its previous medical plan.

Under PPACA, expenses for over the counter medicines are only considered

reimbursable through consumer directed health plans when they are prescribed to employees.

These plans, like SPIN’s Health and Dependent Care FSAs, have caused issues with

communication. SPIN’s employees were not aware of the required prescription upon the plan

year beginning. Upon hearing complaints about the lack of reimbursement, SPIN was forced to

notify employees of the need for prescriptions, as well as the doctor visits that pre-empt those

prescriptions. In the future, SPIN’s plan administrators must report mandates more efficiently to

their employees.

SPIN’s employees always seem to want more benefits and do not always know

everything they should about their current plans, Meersand stated. To mitigate this issue, SPIN

holds meetings very often to explain what is offered, listen to employee requests, as well as

provide information on how new/existing plans can/will affect them. One example of the

explanation of new benefits (explained below) is SPIN advising employees on the 100%

coverage of preventive services under a new medical plan. This 100% coverage is mandated

through PPACA. Included in these preventive services is Physical Screenings. Upon

employment, and every year thereafter, some management positions and all staff positions



P a g e | 28


require a physical. Resulting because of this, SPIN encourages employees to utilize their benefits

package to complete this requirement of employment. Informing employees about this coverage

helps SPIN by creating employee satisfaction, as well as reducing the hassle of reminding

employees to get their annual physicals completed.

Lastly, SPIN uses a Health and Wellness Calendar on its website portal to inform

employees on anti-smoking initiatives, give advice on personal health and well-being, as well as

provide documents that pertain to their rights and benefits as an employee and participant. SPIN

gives its employees easy access to answer general questions they may have about their package.

Future - Cost Management/Future Plan Design:

SPIN’s plan changes for 2012, of which enrollment is going on currently, are expansive.

Due to a desire to cut costs for both SPIN and its employees, SPIN is cutting its three medical

plans: Keystone HMO, Keystone POS, and Personal Choice PPO. Instead, SPIN has decided to

convert each Management/Confidential employee to a Personal Choice High Deductible Health

Plan (HDHP HD4-HC1). Union members are given the option of remaining on SPIN’s Keystone

HMO (if previously enrolled), switching to the Keystone HMO, or adopting the new Personal

Choice HDHP. This option was due to members of the union rejecting the first offer regarding

the new HDHP. By implementing the HDHP, more responsibility is placed on the employees as

a cost containment technique. This monumental change results in a decrease in premiums paid

by SPIN and eliminates any premium paid by an employee for single coverage.

Equipped with this new medical plan is a $3,000 deductible that will be administered

through a Health Reimbursement Arrangement (HRA) from broker Alliant. SPIN has agreed to

pay half of this cost. The first $300 of the account will be contributed by the employee through

payroll deductions. Meersand declared this notion of employee expense is SPIN’s way of



P a g e | 29


attempting to give its employees an idea of how insurance works. “Benefit plans that combine an

HDHP with an HRA or HSA offer employees company provided financial protection from

significant health care costs, but shift accountability for lower-cost services and discretionary

spending decisions to the consumer” (Towers). The following $1,500 of deductible will be

funded by SPIN, and the remaining $1,200 by the employee via payroll deductions. SPIN chose

the layout of an HRA rather than an HSA because any remaining money at the end of the plan

year will be forfeited to SPIN. SPIN owns the funds contained in the arrangement. An IRS

regulation requires that employees send usage statements and other relevant documentation of

the HRA to their broker within 55 days of payment with their medical cards. Infringing on this

mandate will result in employees’ cards being shut off.

Another change will arise in SPIN’s Dental and Vision self -insured plan. The plan

remains self-insured and identical to that of 2011; however it will now be administered through

Meritain Health. This plan is funded through a general asset plan. Meritain will offer

administrative, claims, and design services to SPIN. SPIN’s decision to switch administrators

from Colonial HealthCare to Meritain Health was based on reducing costs associated with the

administrators as well as a slight increase in administrative help.

SPIN’s life insurance and disability plans will be slightly modified. SPIN’s main Group

Basic Term Life Insurance Policy will now be offered through Unum. The plan design will

remain the same. SPIN’s voluntary Universal Life Insur ance program through ING Life

Insurance will remain static. Additional Term Life Insurance will still be available in 2012.

Contrary to 2011 however, this coverage will be offered through Unum as well. All of SPIN’s

disability policies (AD+D, STD, LTD) will remain static, except they will be switched from

Prudential to Unum. All changes in SPIN’s life and disability policies are due to cost savings.



P a g e | 30


While aiming to retain the same coverage, SPIN wished to reduce rates. Unum offered great

rates and great guarantees that ultimately led SPIN to terminate its association with Prudential

and join Unum, Meersand said. SPIN had also dealt with Unum in the past, and due to Unum’s

excellent customer service, SPIN factored that into its decision.

These drastic alterations of plan design come partly due to a shift in executive staff. The

long time CEO and founder of SPIN, David Losinno, and his wife and Executive Director, Trina

Losinno, stepped down in 2011. Following these changes, Kathy Brown-McHale and Judy

Dotzman filled those holes, respectively. The presence of new forces within the company

brought about ideas of shifting the companies’ traditional ways of providing benefits through

IBC to a more modernized and fitted solution to its employees’ needs. For an early period of

time, discussions surfaced of the possibility of self-funding. After coming extremely close to

implementing that risk-bearing strategy, SPIN decided that major changes to its existing benefits

package may be beneficial in the long run towards goals of self-funding. SPIN thinks that the

new adjustments will bring the company one step closer to a self-funding arrangement.

In 2013, due to PPACA, SPIN will need to reduce its maximum contribution allowed to

its FSAs to $2,500 annually. Currently and in 2012, SPIN’s FSA carry limits of $3,000 and

$5,000 for Health Care and Dependent Care FSAs respectively. Further in the future, SPIN may

need to reduce its well-known comprehensive benefit package, or at least reduce its costs, to

comply with an implementation known as the “Cadillac Tax” in 2018. This tax will require all

employers to pay a 40% tax on health plans that are very rich. Since SPIN offers many

attractions in its package, it may face uncertainty as to whether it will be subject to taxation. The

excise tax will charge employers 40% of the amount of total benefits exceeding a stated limit for



P a g e | 31


individuals and families participating. Today, the limits are $10,200 and $27,500, respectively.

These extremes are subject to change with current and future trends in the market.

Recommendations for the Future:

In analyzing SPIN’s current benefits plan, suggestions are limited due to SPIN’s profit

status and the fluctuation of government funding. Comprehensively, SPIN offers vast benefits,

excluding the 2012 change to only one medical plan offered to Management participants.

Chances are that groups of employees will opt-out of coverage due to the lack of choice or the

dissatisfaction with the new plan design. Though opting out does not hurt SPIN as a whole, the

action may bring down its reputation that is paired with its benefits package and impact its low

employee turnover rate.

SPIN’s current and future goals are to reduce costs in an effort to counter the lack of

funding the company is receiving. Like most businesses, SPIN is concerned with cutting costs in

this time of economic downturn. Recently, ERISA has been tougher on companies who are

cutting costs against the best interest of employees. While this seems to be an effective business

strategy, SPIN must also comply with ERISA. ERISA requires plan administrators to act in the

best interests of their employees under the “Fiduciary Responsibility” clause. SPIN must be

weary of cutting too much and thus not putting the employees’ best interests first (Marcotte).

Organizing benefits packages in order to subsidize its financial costs may result in compliance

issues with ERISA.

In conjunction with the new HRA that SPIN is implementing, it may be a wise decision

to also incentivize employees to use this HRA. As stated in the article, Employers are using

Account-Based Plan Designs to Engage Employees in Health Care, it states that if employees do

not change the way they use health care that their out of pocket costs will be higher under the



P a g e | 32


HDHP than with the previous PPO. To combat this problem, the article suggests that employers

should use various incentives to get their employees to use the HRAs more. SPIN may want to

use some of these incentives such as contributing to employees’ accounts if they participate in

activities that help keep them healthier. SPIN could add cash to employees’ accounts for various

activities such as accessing their health, checking their blood pressure regularly, joining weight

watchers, enrolling in disease management programs, and/or visiting SPIN portal, the e-health

website (Towers). Not only will these incentives help to alleviate some out of pocket costs that

employees may face, but it also will benefit SPIN by reducing turnover from the healthier

employees.

Conclusion:

Stemming from SPIN’s decision making to cut costs while still offer inclusive benefits, it

has placed itself in a comfortable position to satisfy and retain employees. SPIN has executed

impressively in implementing these plans, regardless of the lack of funding or its profit status.

SPIN’s benefits team works efficiently to provide coverage that attracts employees as well as

protects its bottom line. Upon new plans being offered, however, SPIN must make sure all

requirements are met to distance the company from regulatory issues. Due to SPIN’s consistent

efficiency, this problem does not seem to be a huge possibility in the future. SPIN has defined

itself as an upper echelon company regarding benefits, and strives to use this important tool of

employment to get the most out of its employees as well as attract top talent.



P a g e | 33

Works Cited

Meersand, Gail. Personal Interview. 6 Dec. 2011.

Jones, Mark C. "Health Care Reform Update: Changes Plan Sponsors Should Make This Year."

Pillsbury Law. 8 Sept. 2010. Web. 7 Dec. 2011. <www.pillsburylaw.com>.

Marcotte Stamer Esq., Cynthia. "Tough Times Are No Excuse for ERISA Shortcuts." Employee

Benefit News (2010). Source Media. Web. 7 Dec. 2011. <https://blackboard.temple

.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2402810_1&display

Name=Current+Economic+Situation+No+Excuse+for+ERISA+Shortcuts&course_id=_4

310_1&navItem=content&href=http%3A%2F%2Febn.benefitnews.com%2Feletter%2Fp

rofile%2F14%2F534.html%3FET%3Debnbenefitnews%3Ae534%3A2130205a%3A%26

st%3Demail>.

Towers Perrin. "EMPLOYERS ARE USING ACCOUNT-BASED PLAN DESIGNS TO

ENGAGE EMPLOYEES IN HEALTH CAR." Towers Perrin HR Services. Web. 5 Dec.

2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrappe

r.jsp?content_id=_24 16121_1&displayName=Employers+Are+Using+Account-

Based+Plan+Designs+to+Engage+Employees+in+Health+Care+%28PDF%29&course_i

d=_4310_1&navItem=content&href=http%3A%2F%2Fwww.towersperrin.com%2Ftp%2

Fgetwebcachedoc%3Fwebc%3DHRS%2FUSA%2F2006%2F200607%2FHW_PlanDesig

n.pdf>.

Thomas j Metzger - s.p.i.n., Inc.fall 2011

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