NICHOLAS W PATRYLAK - Crozer-Keystone Health System. Fall 2011

8/2/2019 NICHOLAS W PATRYLAK - Crozer-Keystone Health System. Fall 2011.

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Benefits Analysis: Crozer-Keystone Health Sys-

tem



Table of Contents

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· Exposure Analysis…………………………………………………….. 2

- Medical Expenses

- Loss of Income

· Inventory of Existing Benefits ………………………………………..

3

- Medical Expenses- Death

- Disability

- Retirement

- Other Expenses

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o

Benefit Analysis for Crozer-Keystone Health System

Loss Exposure Provided Coverage / Benefits Provided

Medical Expense

Overall Medical Expenses Yes CKHS Advantage Plan, CKHS Advantage PLUSMedical Plan, CKHS Indemnity Plan, AetnaHMO, Keystone Health Plan East HMO, FSA,DCFSA, Optional Critical Illness Insurance

Dental Yes Delta Dental PPO, FSA

Vision Yes Davis Vision PPO, FSA

Prescription Yes CHOICES Prescription Drug, FSA

Long Term Care No N/A

Retiree Health Care Yes COBRA, Medicare

Loss of Income: Death

Non-Accidental & Non-Occupational Yes Basic Life & AD&D, Optional AD&D, TermLife, Optional Whole Life

Accidental Yes Optional Business Travel, Optional Whole Life

Occupational Yes Optional Business Travel, Optional Whole Life,OASDI

Loss of Income: Unemployment

Unemployment Yes PA State: Unemployment Insurance

Loss of Income: Disability

Non-Occupational; Short-Term Yes Optional Short Term

Non-Occupational; Long-Term Yes Basic Long Term, Optional Long Term

Occupational Disability; Short-Term Yes Optional Short Term

Occupational Disability; Long-Term Yes Basic Long Term, Optional Long Term

Loss of Income: Retirement

Retirement Yes TSA- 403(b) or 401(k), Defined ContributionBenefit Plan, Defined Benefit Plan, OASDI

Other Exposures

Educational Assistance Yes Tuition Assistance, On-Site Educational Oppor-tunities

Work/Life Exposures Yes FSA, DCFSA, TFSA, Time Off, Employee As-sistance Program (EAP)

Dependent Care Yes DCFSAProperty/Liability No N/A

Legal Expenses No N/A

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Part II – Inventory of BenefitsIntroduction to Crozer- Keystone Health System’s Plan

Crozer-Keystone Health System (CKHS) consists of eight medical facilities throughout

Delaware County. The system offers benefits to 5,600 employees and their dependents. The plan

is highlighted by their award winning employee wellness program and a variety of basic plans with

optional coverage’s available to meet the special needs of enrollees. Because of CKHS robust ben-

efit plan, they are able to attract and retain employees. In addition, they administer their plan via

Internet, which makes enrollment easy and convenient.

CKHS understands that every employee has different needs and emphasizes this through

their benefit program called Crozer-Keystone CHOICES. CHOICES is a cafeteria plan that covers’

medical expenses with multiple options. These options include two PPO plans, an Indemnity plan,

two HMO plans, and a Flexible Spending Account (FSA). Along with the basic medical cover-

age’s, employees are also given the option to participate in CKHS’s Wellness Works program,

which gives an incentive for employees to maintain a healthy lifestyle. CHOICES also offers three

different defined benefit plans for profit and non-profit entities within the system. The three plans

that are offered are: Tax Sheltered Annuity (TSA) - 403(b) or 401(k), a Defined Benefit Retirement

Plan, and a Defined Contribution Benefit Plan. These plans essentially give employees the oppor-

tunity to maximize their savings for future retirement. CKHS values their employees by providing

them with desired benefits that subsequently enhance their performance and the work environment

around them.

CKHS Employee and Dependent Eligibility

All regular full-time or part time employees, that is employees scheduled to work at least

40 hours per pay, are eligible to receive benefits. Dependents are defined as an employee’s spouse,

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same sex domestic partner and unmarried children under the age of 19. In order to be eligible after

the age of 19, a dependent must be a full-time student, a full-time student who becomes disabled

while covered under the plan or disabled prior to age 19. There is a three month waiting-period af-

ter initial employment before an employee is eligible to receive benefits. Coverage will last up to

the final day of the month after an employee becomes ineligible to receive benefits.

Medical Expenses

Preferred Provider Organization (PPO) Plans

Crozer-Keystone Health System offers two PPO plans, CKHS Advantage Medical Plan and

CKHS Advantage PLUS Medical Plan. The distinct difference between these two plans is that the

Advantage PLUS plan has less out-of-pocket payments when care is provided. There are three dif-

ferent levels of coverage, the highest being when a Crozer-Keystone facility or a participating

physician is used and the lowest when an enrollee goes Out-Of-Network. There is a middle level

of coverage offered if a provider from the Amerihealth Administrators Network of physicians is

used. The PPO plans are fully self-funded and are financed on a contributory basis. By establish-

ing a self-funded plan, CKHS bears all the risk. The eligibility for the PPO plans is stated in the

“CKHS Employee and Dependent Eligibility” section of the introduction.

CKHS Indemnity PlanCrozer-Keystone Health System provides the option for an Indemnity Plan. This plan, like

the PPOs, is self-funded and financed on a contributory basis. Generally, inpatient care is covered

at 100% and 80% of reasonable and customary amounts for other services. There is a $100 annu-

al deductible per person and a $250 annual deductible per family, along with a $400 out-of-pocket

maximum. This plan is unique because indemnity plans do not typically have any networks where

benefits would be enhanced. CKHS creates an “unofficial” network with their indemnity plan

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where benefits are enhanced for employees who use Crozer-Keystone facilities. For inpatient hos-

pital care the plan pays 100% for the first 120 days and then only 80% for any days following. If

the employee receives inpatient hospital care in a CKHS medical center the plan will pay 100% of

costs, which can be a significant savings due to the high costs of inpatient care. The eligibility for

the CKHS Indemnity Plan is stated in the “CKHS Employee and Dependent Eligibility” section of

the introduction.

Health Maintenance Organization (HMO) PlanCrozer-Keystone Health System offers two types of HMOs. One is provided by Aetna

Health Inc. and the other by Keystone Health Plan East, a subsidiary of Independence Blue Cross.

Both plans are fully-insured and financed on a contributory basis. The Aetna HMO has maximums

of $1,500 per person annual copay and $3,000 per family annual copay. KHPE has lower maxi-

mums of $1,000 and $2,000 per person and per family, respectively. Both plans have the same co-

pay amounts for services provided. Aetna has an A.M. Best Rating of “A” which stands for “Ex-

cellent” [1]. Independence Blue Cross has a rating of “NR” which stands for “Not Rated” because

it has been withdrawn from public records in 2009[1]. The eligibility for the HMO plans is stated

in the “CKHS Employee and Dependent Eligibility” section of the introduction. The Keystone

HMO consists of the same eligibility requirements except a same sex domestic partner is not eligi-

ble. There is a three month waiting-period after initial employment before an employee is eligible

to receive benefits. Coverage will last up to the final day of the month after an employee becomes

ineligible to receive benefits.

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Flexible Savings Account (FSA)

Medical Flexible Spending Account (MFSA)Crozer-Keystone Health System also offers a Medical Flexible Spending Account which

gives employees an opportunity to use pre-tax dollars on qualified expenses through a payroll de-

duction (up to $3,000 per year). Some of the expenses include: childcare, medical, dental, vision,

or prescription out-of –pocket expenses, and mass transit transportation. This plan is self-funded

and administered through AmeriHealth. When enrolled, employees are issued an AmeriHealth+

Card which acts as debit card containing the pre-tax dollar balance. If the employee chooses to opt-

out of the FSA, they will be subject to regular taxation. In addition to the plan, CKHS provides

employees with an online FSA calculator that estimates expected utilization through a question-

naire. This is an important tool, because employees lose any money that is in the account at the

policy’s termination date. The eligibility for the MFSA plan is stated in the “CKHS Employee and

Dependent Eligibility” section of the introduction. In addition to this, over age dependents up to

age 26 are covered.

Dependent Care Flexible Spending Account (DCFSA)In addition to MFSA, Crozer-Keystone Health System offers a Dependent Care Flexible

Spending Account, in which an employee can contribute a maximum of $5,000 per year (single or

married with a joint income tax return) or a maximum of $2,500 per year (if married but file sepa-

rate tax returns). This plan operates the same way as a MFSA but is designed to pay for eligible de-

pendent care expenses, such as day care, babysitters and after-school programs. To be an eligible

dependent, the family member must be: claimed on the employee’s income tax return, a child un-

der age 13, a spouse, or a dependent that lives with the employee and is physically or mentally un-

fit to care for him or herself.

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Other Medical Expense

Optional Critical IllnessOptional Critical Illness is a voluntary CHOICES benefit. It is insured by UNUM, which

received an “A” A.M. Best Rating , administered by The Farmington Company and is a fully-con-

tributory. A stated amount is paid if an employee or a dependent is diagnosed with covered illness.

Of the illnesses covered, 100% of the benefit is paid in the case of a heart attack, stroke, major or-

gan transplant, end-stage kidney failure, permanent accidental paralysis and cancer, 25% is paid for

coronary artery bypass surgery and carcinoma in situ. Coverage ranges from $5,000 to $50,000 for

the employee, $5,000 to $25,000 for his or her spouse, and a flat rate of $2,500 or $5,000 for his or

her dependent children. Spouses and dependent children are only eligible if the employee is cov-

ered.

DentalCrozer-Keystone Health System provides their employees with two Dental options: Basic

Dental and Enhanced Dental. The plans are self-funded and administered through Delta Dental on

a contributory basis. Delta Dental has a “B+” A.M. Best Rating which represents it being one of

the better companies to receive a rating of “Good” [1]. There are two networks of providers to

choose from - Delta Dental PPO or Delta Dental Premier Network. Both plans cover preventive,

basic, orthodontia and major care with a maximum of $1,500 per person. The Basic and Enhanced

Dental options gives the employee the freedom to see any dentist, however if the selected dentist is

in one of the above networks, costs are usually lower and the dentist is responsible for filling claim

forms. The Basic Dental option pays following a fixed fee schedule, a list of specified fees for ser-

vices. The Enhanced Dental option pays 100% of preventive care and fewer out-of-pocket expens-

es. The eligibility for the Dental Plan is stated in the “CKHS Employee and Dependent Eligibility”

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section of the introduction.. Employees can use their FSA to cover cost sharing (copays or de-

ductibles) and other eligible expenses.

Vision

Crozer-Keystone CHOICES includes a Vision option that covers exams, prescription glass-

es or contact lenses every twelve months. This option is self-funded, but administered through

David Vision PPO, and offered on a fully-contributory basis. Benefits are enhanced if an employee

selects a doctor who participates in the Davis Vision Network. Some of the benefits of staying in

network include fixed discounted fees for additional optional items and some optional services

with no additional costs. The eligibility for the Vision Plan is stated in the “CKHS Employee and

Dependent Eligibility” section of the introduction. Employees can use their FSA to cover cost shar-

ing and other eligible expenses.

Prescription DrugCrozer-Keystone Health System offers a very unique prescription drug plan. The plan is

self-funded and offered on a contributory basis. CVS Caremark administers the plan which con-

sists of a four tiered copayment system – generic, preferred brand, non-preferred brand and spe-

cialty. CKHS has its own employee pharmacy with lower copays and more coverage for specialty

brands than a retail pharmacy. Employees can use their FSA to cover cost sharing and other eligi-

ble expenses. The eligibility for the Prescription Drug Plan is stated in the “CKHS Employee and

Dependent Eligibility” section of the introduction.

Loss of Income Due to Death

Basic Term Life, Accidental Death and Dismemberment (AD&D) InsuranceCrozer-Keystone Health System provides Basic Life Insurance and AD&D on a non-con-

tributory basis, meaning no cost to the employee. The plans are insured through The Hartford, an

insurer with an A.M. Best Rating of “A”, signifying “Excellent” [2]. Basic Term Life Insurance

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coverage amount is one times the employee’s base salary, or a $50,000 maximum and $15,000

minimum, and AD&D Insurance has the same coverage amounts but is in addition to the Basic

Life. Both plans protect against the loss of income that results if an employee dies. AD&D and

Term Life cover occupational and non-occupational accidents that result in death, both paying a

one-time death benefit. The eligibility for these plans is stated in the “CKHS Employee and De-

pendent Eligibility” section of the introduction.

Optional AD&D, Optional Term Life, Optional Whole Life, Business Travel Accident PlanThere are four optional insurances that can be used to supplement or modify Basic Life and

AD&D that are issued on a fully-contributory basis, meaning the employee pays all costs. Option-

al AD&D, Optional Term Life and Business Travel Accident Plan are insured by The Hartford and

Optional Whole Life is insured by UNUM. If the $50,000 maximum does not seem adequate, an

employee may elect Optional AD&D which increases the coverage from one to ten times the em-

ployee’s annual pay (up to a $500,000 maximum). Optional AD&D allows for dependents and

spouse to be covered, as well. Optional Term Life can be supplemented in order to provide Term

Life Insurance for an employee, their spouse and/or eligible dependent children. This also allows

for the coverage to increase from one to five times the employee’s annual pay, with a maximum of

$1,300,000. The cost per pay period for an employee is calculated through biweekly payments

where a coverage amount, which is based on age per $1,000 of coverage, is multiplied by the

amount of coverage desired. For example, a 40 year old wants $20,000 of coverage so you would

multiply the coverage amount for a 40 year old, $.053 per $1,000 of coverage, by 20 equaling a

payment of $1.06 per pay period. Optional Life Insurance for children is a flat rate and does not

vary with number of children you have. Optional Whole Life can be purchased in order to add

even more protection. This plan offers permanent coverage for the employee, spouse, dependent

children and grandchildren. The employee can elect different amounts of additional life insurance

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benefits and optional benefits to modify coverage, called riders. An Accidental Death Benefit Rid-

er can be added to the Whole Life policy that gives an additional death benefit of equal value of the

policy amount if a covered accident causes a death. Business Travel Accident will pay for a loss

that occurs within one year of an accident resulting from business travel. The coverage amount is

one times your annual base salary up to a maximum of $500,000. All four optional coverage’s

listed above have the same eligibility requirements for employees and dependents as stated in the

“CKHS Employee and Dependent Eligibility” section of the introduction.

Loss of Income Due to Disability

Optional Short-Term Disability (STD) InsuranceCrozer-Keystone Health System offers Optional Short Term Disability coverage that pays

60% of an employee’s weekly pay up to the plan maximum when disabled as a result of illness or

injury. The coverage is fully-contributed starts after all accrued sick days have been used, or 30

post illness or injury happened. It is fully-insured and administered by UNUM. The eligibility for

the STD is stated in the “CKHS Employee and Dependent Eligibility” section of the introduction.

Long Term Disability (LTD) InsuranceLTD is fully-insured by UNUM and is offered on a non-contributory basis. Like the STD,

the benefit pays 60% of the employee’s base monthly pay up to a monthly maximum. For in-

creased coverage, 66.67% of the employee’s base monthly pay with a maximum of $8,000, an em-

ployee could buy Optional Long Term Disability. Benefits for LTD begin after being disabled for

60 or 90 consecutive days. The eligibility for the LTD plans is stated in the “CKHS Employee and

Dependent Eligibility” section of the introduction, except they stop at age 65 because LTD is offset

by OASDI or retirement benefits and instead of the three month waiting period for LTD, coverage

starts after a year of employment.

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Loss of Income: Retirement

Defined Contribution Retirement Plan, Tax Sheltered Annuity (TSA) Plan- 403 (b) or 401 (k),Crozer- Keystone Health System offers a Defined Contribution Retirement Plan, where an

eligible employee can receive money through a qualified Fidelity Investment option. Specifically,

CKHS offers a Tax Sheltered Annuity in the forms of a 403 (b) and a 401 (k). A 403 (b) plan is for

non-profit entities within the system, which are offered through Fidelity Investments and/or TIAA-

CREF. The TIAA-CREF currently has an A.M. Best rating of “A++” which can be classified as

“Superior” [1]. Those employed by for-profit entities may contribute to a 401 (k) through Fidelity

Investments. The benefits for the two plans are based on employee and employer contributions

made to the TSA. This means that Crozer-Keystone will “match” a percentage of what the em-

ployee contributed to his or her TSA. The amounts are determined through a contribution percent-

age formula. This formula uses factors such as age, percentage of the employee’s salary, and any

investment returns or losses. The table on the next page shows the age-based contribution sched-

ule:

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When looking at the 403 (b) and a 401 (k) contribution plan, It is evident that CKHS values

their employees by offering a 50% rate of contribution to all employees. These high rates give all

CKHS employees the incentive to save more for retirement on a tax-deferred basis. This can be

demonstrated in the chart below.

In order to enroll in this plan, an employee must be hired or rehired on or after January 1 of

the current year, have completed at least one year of service with CKHS, and are at least 21 years

of age. Along

with employ-

ee eligibility

standards,

there are predetermined vesting requirements that must be met. In order to become fully vested, an

employee must work for three years where he or she is paid for at least 1,000 hours and reach nor-

mal retirement age of 65. One can also be 100% vested if he or she becomes totally or permanently

disabled and/or if the individual's employment ends. In addition, if an employee reaches the normal

retirement age, they will remain fully vested and may continue to make contributions. When an

employee is eligible to withdrawal funds from his or her plan, they have the option of single lump

sum payment or can be paid in the form of a monthly annuity.

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Age Contribution Percentage<20 1.00%

20-29 1.75%

30-39 2.50%

40-49 3.50%

50-59 4.75%

60+ 6.25%

TSA Incentive Contributions

Years of Service Maximum Contribu-

tion Matched

Maximum CKHS

“Matching” Contribu-

tion

Rate of Contribution

Under 10 $2,000 $1,000 50%

10 - Plus $4,000 $2,000 50%



Defined Benefit Retirement PlanIn addition to CKHS’s Defined Contribution Retirement Plan, a Defined Benefit Plan is

also an option for employees. It is important to note that unlike a contribution plan, a defined bene-

fit plan is a retirement plan that has a fixed annual amount that is stored into the employee’s retire-

ment funds. A defined benefit plan also uses actuarial calculations (time value of money) to deter-

mine amount needed to be invested to reach a specified goal. To become vested, the employee

must wait five calendar years in which the employee is paid for at least 1,000 hours. An employee

can receive benefits when he or she reaches a normal retirement age of 65. This plan can paid out

in a monthly annuity or a lump sum. The eligibility requirements are the same as stated before in

the defined contribution plan.

Other Exposures

Educational AssistanceCrozer-Keystone Health Systems offers Tuition Assistance and on-site educational opportu-

nities in order to promote further education of their employees. Full-time employees can only re-

ceive 100% (up to $4,000 a year) while Part-time can receive 50% (up to $4,000 a year). Both are

contingent upon receive a grade of “C” or better. This would include the costs of books, lab fees,

registration fees, mileage, meals and any other incidental expense. On-site educational programs

are held throughout the health system. Examples of such programs include training, credit/degree

programs, and clinical schools. The eligibility for Tuition Assistance and on-site educational pro-

grams is stated in the “CKHS Employee and Dependent Eligibility” section of the Introduction but

the employee must also have been hired 90 days prior to be eligible to receive the Tuition Assis-

tance benefit.

Work/Life Exposures

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Crozer-Keystone Health System provides an Employee Assistance Program (EAP) which

offers consulting and referrals. CKHS partners with Carebridge, a group of trained counselors that

can help various problems, such as family or marital problems, stress or anxiety, and drug or alco-

hol abuse. The goal is to balance work and family to promote a healthy and enjoyable lifestyle.

Employees have a quick and easy access to Health Management programs through CKHS’s PPO

and Indemnity plans. These programs include nutritional and diabetic counseling, smoking aware-

ness, and even provide a fitness reimbursement plan (up to $400 annually) for employees who ac-

tively use Crozer-Keystone Healthplex Facility. CKHS also has an Employer Assisted Homebuyer

Program, which gives a $5,000 forgivable loan-to-grant and additional assistance in order to pro-

mote living in Chester or Delaware County.

Part III—Benefits Analysis

Company Overview

Crozer-Keystone Health System (CKHS) is a health system that consists of five hospitals,

several outpatient centers, Healthplex Sports Club and a network of primary-care and specialty

practices. Established in 1990 by the merger of Crozer-Chester Medical Center and Delaware

County Memorial Hospital, the system covers around one million people today. CKHS serves Del-

aware County, Pennsylvania, and parts of New Jersey and Delaware. Improving the health status

of their patients is goal of CKHS. There is also a stress on working with the community and build-

ing a healthy environment throughout the health system.

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We were fortunate enough to get in contact with Christine Keck, the Employee Benefits Di-

rector of Crozer-Keystone Health System. She currently works with CKHS’s Benefits Managers,

Brokers, and the vice president of HR department. Ms. Keck contributes a substantial amount of

her work in the overall development of benefits. This includes the creation, implementation and

distribution of benefits.

Overall Design Considerations and Objectives in Offering Employ-

ee Benefits

Crozer-Keystone Health System designs their employee benefit package with the em-

ployee’s needs and desires at the forefront of all decisions. The goal is to offer a comprehensive,

yet affordable, benefit package that will attract and retains employees, while creating a productive

work environment. The CHOICES benefit package is designed to cover any employee from a

medical specialist to a facility’s janitor. Christine Keck stressed that that CKHS is constantly eval-

uating and refining programs to ensure that they are competitive with other area health systems.

Ms. Keck stated that Crozer-Keystone Health System offers a “high-middle” salary to their

employees and it is their robust benefits that are a key factor in attracting and keeping employees.

By offering a cafeteria plan, the employees have the power to choose what plans fit their needs and

at what level of coverage. Ms. Keck explained that this kind of flexible plan is beneficial because

it eliminates coverage that employees may not need. The closer the plan can be to covering the

employee’s needs, the more productive and loyal they will be.

Demographics

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Demographics is an important tool that can be used in the designing of benefits. Specifical-

ly, CKHS uses factors such as age, gender and family status to create a benefits package that best

fits the needs of the employees. Currently, CKHS’s average employee age is 45 and has a gender

distribution of 80% female and 20% male. Because the ratio of females is much higher then male,

CKHS made sure to increase the variety of benefits directed towards females. As a result, Child

care and Maternity Leave were added to the plan. This is an example where CKHS utilized the de-

mographics of their company to further enhance their benefit plan.

Funding and Financing Considerations

Crozer-Keystone Health System incorporates self-insured and fully insured funding in their

benefit plan. Because CKHS is a large network they are able to use the law-of-large numbers to

predict expected losses. Selecting to self-fund allows them to customize the plan and save money

if there is a favorable loss experience. CKHS self-funds using a General Asset Plan as their self-

funding vehicle. They do not currently have any stop loss because it was removed twelve years

ago. The reasoning behind this was that CKHS is big enough to handle a high dollar claim and in

their experience they had only one claim it the stop loss limit. CKHS decided to fully-insure their

HMOs, various Life Insurance, and short and long-term disability. This is because they wanted to

offer HMOs to provide a variety of medical plans and for the different Life Insurance and disability

they did not want to bear the financial risk that could result from a catastrophic loss. This is espe-

cially important that they fully-insure these because the health system does not have a reserve.

When choosing an insurer Ms. Keck and her coworkers look at cost, customer service and compe-

tency. She looks at company’s ratings and how many locations they have.

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In terms of financing, they offer benefits on both a contributory and non-contributory basis.

CKHS subsidizes benefits differently for full time and part time employees. For medical benefits,

CKHS pays 87% of the premiums for full-time employees and 67% for part time employees.

CKHS uses different forms of communication, such as print materials and small group sessions, in

order to educate the employees on the true cost of their benefits and to evaluate satisfaction of the

plans. For Tax Sheltered Annuities, CKHS matches contributions up $2,000 if the employed under

ten years and $4,000 if over ten years. Non-contributory benefits include Basic Life, AD&D, Long

Term Disability and Retirement Plan. Ms. Keck stated that these are necessary to provide and

something that the employees value, especially for employees with families.

Design of Health Benefits

Types of Plans Offered

In order to answer the issue of providing a benefit plan to suite the wide needs of their em-

ployees, Crozer-Keystone Health System offers plans with differing combinations of deductibles,

covered services and payment levels. After the merger in 1990, CKHS did not have a cohesive

benefit plan until 1996. Delaware County Memorial Hospital had its own self-insured PPO - very

similar to the PLUS plan, and Crozer-Chester Medical Center had its own self-insured indemnity

plan - similar to the indemnity plan CKHS offers today. In 1996, using their current broker Foster

Higgins, Crozer-Keystone Choices Flexible Benefits Plan was designed and offered to all employ-

ees in the health system.

The cafeteria plan allows for every employee to choose a plan that meets his or her needs

without paying for unnecessary coverage. The two PPOs have been the most utilized health plans,

particularly the CKHS Advantage PLUS Medical Plan. Ninety-percent of employees are currently

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enrolled in one of these plans. She stated, “Our employees use our doctors. The PLUS plan gives

them 100% coverage when using CKHS doctors and facilities. But it also gives them the choice to

go to any provider they want. They like the great coverage in-network and having the choice to go

anywhere.” One problem that has been reoccurring is the low participation rate in the indemnity

plan. Ms. Keck said this is a result of it being too expensive and in the future they are phasing this

plan out. Beyond the medical plans CKHS offers dental, vision, basic life, AD&D, business travel

accident, long term disability, Retirement Plans and many optional coverage’s, in order to satisfy

different needs. Most of the plans offer different level of coverage one can elect and have the op-

tion to add on dependents if not initially offered.

Subsidy Decisions

In order to decide on the percentage of employee and employer contribution, CKHS used a

percentage very similar to the one DCMH and CCMC used with their HMOs and PPOs. The rea-

soning behind this was, “Employees were happy with this contribution amount and we wanted to

keep is close to that to keep employee satisfaction”. The percentage of employee contribution has

increased slightly because of increasing healthcare costs and the size of the benefit plan. Ms. Keck

mentioned that the 13% of employee contribution is still lower than the average employee contri-

bution.

Potential Problems with High Average Age and High Rate of Female Employment

As stated previously in the “Demographics” section, the average age is around 45 years

old. Ms. Keck addressed this issue “Our higher average age means higher expense in medical and

disability.” This can be an issue if these higher expenses drive up premiums in these areas.

Younger, healthier employees may forego insurance if the cost is too much thus destroying a key

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principal of insurance - risk sharing. The United States Department of Labor states, “Average

medical-costs of a 50-year-old are two to three times those of a 30-year-old”. This higher average

age combined with the employees being 80% female, who generally use more health care services

than men, leads to even further increases in health care costs. It creates an incentive for younger,

male employees to not enroll because costs may be too high.

Cost Containment

Crozer-Keystone Health System utilizes a number of cost containment techniques in order

to combat the problem of cost inflation in healthcare. There are three ways to do this: decrease the

frequency or severity, and supplement costly services with cheaper ones. Ms. Keck mentioned the

employee wellness program, Wellness Works, as a way to decrease frequency and stated, “The

wellness program incentivizes employees with annual rewards for healthy lifestyles if they partici-

pate in educational programs, healthy habits, and preventive screenings. It can be as simple as at-

tending a fitness class offered in the same hospital where they work.” This program is a way of

keeping CKHS’s employees healthy and may result in decreased demand for healthcare. In 2012,

CKHS is implementing a $0 copay initiative program as another technique to control healthcare

costs. In this program CKHS will pay for the first three 30-day fills of a generic drug, if a person

is currently taking name-brand medications. This programs goal is to have employees try and then

switch to generic medications which would mean lower healthcare costs because generic drugs are

less expensive than brand-name drugs. Other cost containment strategies include: making CKHS

smoke free, the “Clear the Air” quit smoking program, the employee assistance program, and the

use of steerage, small to no co-payments, to increase the use of CKHS facilities.

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

Other Non-Retirement Benefits

Crozer-Keystone Health System strongly promotes employees to further enhance their

skills and knowledge within their specified profession. They demonstrate this by offering tuition

assistance and discounted on-sight educational opportunities. These two programs help strengthen

CKHS’s employee base, which in turn creates a better quality of service. Mrs. Keck affirms, “It is

very important to give our employees the incentive to better themselves, especially in the realm of

education. This essentially will help the overall quality and capacity of our health system.” By in-

vesting in their employees, CKHS creates a sophisticated working environment and ensures a

strong future. In addition, by providing educational assistance, CKHS is able to determine all the

employees who are dedicated in their fields.

Flexible Spending Accounts

Flexible Spending Accounts (FSAs) can be extremely beneficial to employers by attracting

and retaining key employees. CKHS had this in mind when they incorporated three different FSAs

into their health plan: Medical FSA, Dependent Care FSA and a Transit FSA. Although the Medi-

cal FSA was the most popular account, CKHS’s employees substantially participated in the Depen-

dent Care FSA. This is due to the fact that the number of eligible dependents (5,877) surpasses the

number of eligible employees (5,400). Because both of the accounts fit the needs of most employ-

ees, Mrs. Keck was pleased to announce the success behind the plans.

Although CKHS has implemented a well working FSA plan, a new issue arises in the realm

of legality. Because CKHS offers employees a choice between taxable benefits and non-taxable

benefits, they have inadvertently created a Section 125 plan. By forming a Section 125 plan,

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CKHS is required to undertake additional administrative procedures including: writing a plan doc-

ument, distributing a summary plan description (SPD) to all participants, and most importantly

they must pass nondiscriminatory testing. Failure to comply with these section 125 requirements,

CKHS may experience harsh penalties. To mitigate any future losses through the failure of compli-

ance, it is imperative for CKHS to keep track of all of their employees and the benefits offered to

them.

Communication to the Employees

CKHS’s benefits department uses multiple communication techniques to inform the em-

ployees about their choices of benefits. One of the main attractions is their online website

(www.crozerbenefits.org), where employees have their own personal accounts. The website pro-

vides all the information needed to fully understand the benefits that are offered. It also shows the

specific plans that each employee has signed up for, the premiums that need to be paid, and the

overall guidelines that need to be followed in order to participate. In addition, CKHS distributes

enrollment guides, benefit programs, summary plan descriptions, and even monthly newsletters

that focus on current topics. When it come time for enrollment, CKHS also holds benefit fairs and

small group presentations for a more in-depth explanation of benefits. All of these communication

techniques are vital to CKHS’s distribution of benefits.

When asking Mrs. Keck about the importance of communicating with employees, she en-

lightened us with the following: “Without communication, our health plan would be inexistent. It is

our job to make sure every employee knows bout all the benefits offered to them. If we fail this

task, we will lose our competitive edge, essentially loosing our employee base.” CKHS’s benefits

department allocates about half of their time communicating with their employees.

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http://www.crozerbenefits.org/

http://www.crozerbenefits.org/



Regulatory Compliance

With constant reforms in the health market, it is very hard for an employer to keep track

and adhere to all of the new regulations. This especially holds true with Crozer- Keystone Health

System, because they offer benefits to a large number of employees. They address this issue by

outsourcing its regulatory duties to other third party administrators (TPA). Mrs. Keck explains

why: “There are allot of administrative duties and cost that go along with HIPAA and COBRA. So

we decided to outsource and shift the burden to professionals, ones that we know will do the job

right.” Another issue with CKHS’s regulatory compliance is that it has an insufficient amount of

personnel in the benefits department to take on the work. This dilemma creates a heavy debate

within CKHS’s benefits department - either to outsource by using a TPA or handle it internally and

hire more employees.

CKHS currently outsources its COBRA administrative duties to AmeriHealth Administra-

tors and works with a leading Philadelphia law firm to comply with HIPAA (Mrs. Keck was reluc-

tant to disclose the name of the law firm). By outsourcing to these firms, CKHS relieves itself from

duties such as: comprehensive administration and communication materials, notifying qualified

beneficiaries, collection and remittance of premium billing, eligibility maintenance, customer ser-

vices and most importantly reporting. Mrs. Keck was pleased to say that CKHS has only has to

send a record file every two weeks. Another key benefit that CKHS has in outsourcing is that they

shift large portion of their liability and fiduciary responsibilities, which is in important because of

the heavy costs associated with them. Although CKHS outsources, they still encounter issues with

the complexity of notification requirements within COBRA. In order to deal with this situation,

Mrs. Keck makes sure that any new information on a qualified beneficiary is promptly filed and

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passed on to the TPA. Fortunately, CKHS has never encountered a problem with regulatory com-

pliance.

Conclusion

Crozer-Keystone Health System provides their employees with benefits that fit their needs,

while taking into account effectiveness and costs. Implementing a plan that has choices is crucial

in achieving this. By knowing what the employees and their families need, is a way that CKHS at-

tracts and retains employees. The plan encourages their employees to utilize CKHS facilities in or-

der to reduce costs. By offering five medical plans and then a number of voluntary and optional

plans, CKHS’s benefit plan thoroughly covers employee’s needs.

Page 25 of 27



Thank You Letter

Dear Ms. Keck,

We would like to thank you for your assistance and participation throughout the process of writing

our project. Through our meeting and other contact, we really got to understand the benefit plan

and the reasoning behind it. We appreciate the time you put aside for us, as we know you are

very busy.

Attached is the final version of our project. Please feel free to share it with whomever and do not

hesitate to give us your feedback. Please let us know if you have any questions or would like addi-

tional information.

Thanks again!

Sincerely,

David Kremer and Nicholas Patrylak

Page 26 of 27



Work Cited-

Keck, Christine. Personal Interview. 5 December 2011.

“Chapter 2 - Employment, Wages, and Benefits.” The U.S. Department of Labor Home

Page. Web. 07 Dec. 2011.

<http://www.dol.gov/oasam/programs/history/herman/reports/futurework/report/chapter2/

main.htm>.

[1] A.M. Best Rating: http://www.ambest.com/

[2] Insurance Journal: http://www.insurancejournal.com/news/national/2011/04/12/194334.htm

http://livepage.apple.com/




Documents

NICHOLAS W PATRYLAK - Crozer-Keystone Health System. Fall 2011