Brian m Karakaedos - Final Final Final Project

BENEFITS ANALYSIS

PART I: BENEFITS MATRIX

PART II: INVENTORY OF BENEFITS

RMI 3501DR. DRENNAN

FALL 2011

Benefits Analysis: Post and Schell1

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 PLAN………………………………………………………………6-7

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 MATRIX Exposure Analysis for Post and Schell P.C.

Loss Exposure Provided Coverage/Benefits Provided

Loss of Income: Medical ExpensesOverall Medical Expenses Yes Personal Choice: HDHP with HSA

Keystone Direct “Buy-Up” POSFlexible Spending Account

Dental Yes United Concordia High OptionUnited Concordia Base OptionFlexible Spending Account

Vision Yes Keystone Direct POSFlexible Spending Account

Prescription Drug Yes Personal Choice: HDHPKeystone Direct POSFlexible Spending Account

Long Term Care NoRetiree Health Care Yes OASDI, COBRA

401 (k) plan

Loss of Income: DeathNon-accidental, non-occupational Yes OASDI

Prudential: Group Term LifePrudential: Optional LifePrudential: AD & D Insurance401(k) plan

Accident death Yes OASDIPrudential: Group Term Life


Prudential: Optional LifePrudential: AD & D Insurance401 (k) plan

Occupational Death Yes OASDIPrudential: Group Term LifePrudential: Optional LifeWorkers’ CompensationPrudential: AD & D Insurance401 (k) plan

Loss of Income: UnemploymentUnemployment Yes Unemployment Insurance through

state of PA

Loss of Income: DisabilityNon-occupational; Short-term Yes OASDI

Sick LeavePrudential: AD & D Insurance

Non-occupational; Long-term Yes OASDIPrudential: AD & D InsuranceUnum: Long Term Disability

Occupational; Short-term Yes OASDISick LeavePrudential: AD & D InsuranceWorkers’ Compensation

Occupational; Long-term Yes OASDIPrudential: AD & D InsuranceUnum: Long Term DisabilityWorkers’ Compensation

Loss of Income: RetirementRetirement Yes OASDI

401 (k) profit sharing plan

Other ExposuresEducational Assistance Yes To further law educationWork/life Exposures Yes Paid Time Off

Unum: Work-Life Balance Assistance Program

Dependent Care Yes Dependent Care FSAPrudential: Optional Dependent Life

Property-Liability Yes Voluntary Auto Group InsuranceLegal 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


Summary of Benefits

Benefit Plan AM Best Rating Financing Funding EligibilityPersonal ChoiceHDHP

n/a Contributory Fully Insured Full-time active employees and dependents

Keystone Direct POS plan

n/a Contributory Fully Insured Full-time active employees and dependents

United Concordia Dental Plan

A- (excellent) Contributory Fully Insured Full-time active employees and dependents

Prudential Insurance Company of America

A+ (excellent) Non-Contributory

Fully Insured Full-time active employees

Unum Insurance Company

B+ (good) Non-Contributory

Fully Insured Full-time active employees

Malpractice Insurance

n/a Non-Contributory

Self-Insured Full-time active employees

* Source of AM Best rating was www.ambest.com/ratings


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 employee’s 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 spouse’s 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 employee’s 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

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 IBC’s 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 employee’s taxes. The employee is responsible for paying the Benefits Analysis: Post and Schell

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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.

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 employee’s 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 Schell’s 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

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 Schell’s 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” Base Option “B”

Monthly Contribution Single: $9Family: $55

Single: $0Family: $26

Deductible Single: $25Family: $50

Single: $50Family: $100

Diagnostic/Preventive Care Plan pays 100%, deductible waived

Plan pays 80%, deductible waived

Basic Care After deductible, plan plays 80%

After deductible plan pays 80%

Major Care After deductible, plan pays After deductible plan pays Benefits Analysis: Post and Schell

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50% 50%Orthodontia (children up to 19 only)

After deductible, plan pays 50%

Not Covered

Orthodontia Lifetime Maximum

$1,500 per person N/A

Annual Maximum Benefit $1,500 per person $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,

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

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 employee’s 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 employee’s spouse up to the $250,000. Another restriction is the maximum

benefit for an employee’s 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.

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 non-

contributory 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

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 employee’s 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 Maximum Period of PaymentLess than age 60 To age 65, but not less than 5 yearsAge 60 60 monthsAge 61 48 monthsAge 62 42 monthsAge 63 36 monthsAge 64 30 monthsAge 65 24 monthsAge 66 21 monthsAge 67 18 monthsAge 68 15 monthsAge 69 and over 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 employee’s 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

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 Plan’s 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 employee’s

compensation up to the Social Security taxable wage base ($106,800 for 2010) and 10% of an

employee’s 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 employee’s vesting

schedule for Post and Schell’s contributions made to their account is based on years of service,

the vesting schedule is the following:

Years of Service Vested PercentageLess than 2 0%2 but less than 3 20%3 but less than 4 40%4 but less than 5 60%5 but less than 6 80%6 or more 100%

Employees may make withdrawals from their account without penalty after the age of 59

½. 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 employee’s 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.

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

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.

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Part III: Analysis of Decision Making & Plan Design

Table of ContentsIntroduction……………………………………………………………………………………………………………...............3

Overall Plan Design Considerations

Philosophy & Goals………………………………………………………………………………………………….3-4

Accomplishing the Goal……………………………………………………………………………………………4-5

Design Considerations of Health Benefits

Plan History and Rising Costs………………………………………………………………………………………6

Funding Considerations……………………………………………………………………………………………6-7

HDHP & POS Plan…………………………………………………………………………………………………….7-8

Prescription Drugs………………………………………………………………………………………………………8

Issues with Offering LTC and Retiree Healthcare…………………………………………………………8 Benefits Analysis: Post and Schell

19

Design Considerations of Non-health, Non-retirement Benefits…………...............................9-10

Compliance Issues

COBRA………………………………………………………………………………………………………………………11

ERISA………………………………………………………………………………………………………………………..11

HIPAA……………………………………………………………………………………………………………………….11

PPACA………………………………………………………………………………………………………………….11-12

Communication……………………………………………………………………………………………………12-13

Conclusion/Recommendations……………………………………………………………………………………….13-16

Thank You Letter………………………………………………………………………………………………………………...17

Overall Design Considerations and Objectives in Offering Employee Benefits

Philosophy & Goals

Post and Schell’s philosophy behind offering a benefits plan is one that is simple, yet

complex at the same time. In its simplest form, Post and Schell’s 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 Schell’s philosophy isn’t 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

1 “THE GOLDEN RULE”https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2330921_1&displayName=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


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 Schell’s 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

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

2 “Finances of Employee Benefits, 1960-2003” https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2330921_1&displayName=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


the same spectrum it must not be overlooked that Post and Schell’s 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 Schell’s benefits plan is structured in a way that

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 Schell’s

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 Schell’s 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


Schell’s 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 Schell’s

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 Schell’s financial

advising institute of choice. Post and Schell realizes that a corporation of its size cannot self-

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 1990’s. 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 Schell’s decision to choose insurance over self-

insurance 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

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 doesn’t self-insure is that it didn’t 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

company’s inability to make an accurate estimation of the risk in which it was facing.

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


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

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 Benefits Analysis: Post and Schell

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vision expenses for a given year but once it is used up the employee is paying totally out-of-

pocket. This again could be an issue for employees that have high vision expenses.

Prescription Drugs

Post and Schell’s 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.

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 today’s 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 lawyer’s life will bring a

strong financial burden upon that lawyer’s 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

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 Schell’s 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 Schell’s 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 Schell’s 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,

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 post-

retirement 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

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 employer’s 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. Schell’s 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.

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 Schell’s

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 Schell’s 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

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 firm’s 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.

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 doctor’s 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 Schell’s current plan allows them to not only attract and retain

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.


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)


Documents

Brian m Karakaedos - Final Final Final Project