Benefits Analysis: The Guardian Life Insurance Company of America

Part 1: Benefits Matrix Part 2: Inventory of Benefits RMI 3501 Dr. Drennan Fall 2011 912583350 912454670

Table of Contents
BENEFITS MATRIX.......................................................................................................3-4 MEDICAL EXPENSES.................................................................................................5-10 Introduction to Healthcare Plans......................................................................................5 Exclusive Provider Organization (EPO).............................................................5-6 Choice Plus POS Plans..............................................................................................6 High Deductible Health Plan (HDHP).................................................................6-7 Dental Benefits Plan......................................................................................................7-8 Vision...............................................................................................................................8 Prescription Drug..............................................................................................................9 Flexible Spending Account (FSA)..........................................................................9-10 LOSS OF INCOME......................................................................................................10-15 Death.........................................................................................................................10-11 Life Insurance........................................................................................................10-11 Unemployment...............................................................................................................11 Severance Package......................................................................................................11 Disability...................................................................................................................12-13 Short-Term Disability Insurance.................................................................................12 Long-Term Disability Insurance............................................................................12-13 Retirement.................................................................................................................13-14 Retirement Plan...........................................................................................................13 Employees Incentive Savings Plan.......................................................................14-15 OTHER EXPOSURES......................................................................................................15 Educational Assistance Program....................................................................................15 Employee Assistance Program.......................................................................................15 Work/Life Assistance Program......................................................................................15 WORKS CITED................................................................................................................16

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 2/30 AMERICA

Benefit Analysis for Guardian Life Insurance

Loss Exposure

Provided

Coverage / Benefits Provided Medical Expense Aetna: EPO or POS plan Healthcare: EPO, POS, HDHP Spending Account Savings Account (HDHP only) Dental Benefits Plan Flexible Spending Account Health Savings Account 3 Options- Exam Plus, Exam Plus Allowance, Full Feature Flexible Spending Account Health Savings Account (HDHP only) All Health Plans* Spending Account Savings Account (HDHP only) Long-Term Disability Plan COBRA Medicare Flexible Health

Overall Medical Expenses

Yes

United Flexible Health

Dental

Yes

Vision

Yes

Prescription

Yes

Long-Term Care Retiree Healthcare

Yes Yes

Non-Accidental & Non-Occupational

Yes

Loss of Income: Death Company Paid, Basic Employee Group Term Life Insurance Optional Group Term Life Insurance Guardian Contributory Insurance OASDI Company Paid Basic Employee Group Term Life Insurance Optional Group Term Life Insurance Guardian Contributory Insurance OASDI AD&D Company Paid Basic Employee Group Term Life Insurance Optional Group Term Life Insurance Guardian Contributory Insurance OASDI AD&D Workers Compensation Loss of Income: Unemployment Unemployment Insurance Severance Package

Accidental

Yes

Occupational

Yes

Unemployment

Yes

Loss of Income: Disability Non-Occupational; Yes OASDI Short-Term ANALYSIS: THE GUARDIANSick Days Accumulated LIFE INSURANCE COMPANY OF 3/30 BENEFITS AD&D Insurance AMERICA Non-Occupational; Yes Long-Term Disability Plan Long-Term OASDI AD&D

Medical Expenses
Introduction to Healthcare Plans The Guardian Life Insurance Company of America offers a competitive employee benefits plan to its employees. The benefits plan is very extensive and it offers a variety of different coverage to suit the wide range of exposures their employees face. Guardian has three different options for the healthcare plans. They provide an Exclusive Provider Organization plan, a High Deductible Health Plan, and a Choice Plus POS plan. All plans are financed on a contributory basis. These healthcare plans are available to all full-time employees that work thirty or more hours per week. Eligible dependents are defined as legal spouse, same/opposite sex domestic partner, and children up to age 26 regardless of marital status and residence. Part-time employees are not eligible for healthcare benefits but are entitled to defined benefit and defined contribution plans provided they work 1,000 hours in their anniversary year. If an employee chooses not to participate in the medical plans, they do not receive any extra compensation. Exclusive Provider Organization Plan (EPO) Guardian Life Insurance Company provides a self-funded EPO medical benefits plan that is administered by UnitedHealthcare or Aetna through an ASO contract. Both UnitedHealthcare and Aetna have an AM Best rating of A, designating both as quality insurers. The plan provisions are the same under both Aetna and UnitedHealthcare, the only differences are the networks provided by each insurer. The Aetna EPO network is slightly smaller than its network for the POS plan; UnitedHealthcares network is also smaller in an EPO than their other plans. An employee does not need to select a primary care physician and can see an in-network specialist or other provider without a referral. Out-of-network care is not covered and if an employee chooses to visit an out-of-network provider they are responsible for the full cost of care. The plan has a 100% coinsurance amount for all in-network care after a copayment. The copayment is $20 for doctor office visits and $35 for specialist visits. There is no calendar year deductible or lifetime maximum on the benefits.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 4/30 AMERICA

Choice Plus POS Plans Guardian Life Insurance Company offers a self-funded Choice Plus POS medical benefits plan that is administered by either Aetna or UnitedHealthcare through an ASO contract. These two insurers both received an A rating by AM Best for financial strength and long-term viability. This option gives employees flexibility to receive care from in- or out-of-network providers. If an employee goes out-of-network their share of the cost for care will be higher than if they were to use a participating provider. The plan offers a 90% coinsurance amount for all in-network care. The out-of-pocket maximum for this plan is $1,000 per person or $2,000 per family. This out-of-pocket maximum does not include any copayments or penalties. There is no calendar year deductible for in-network care. Doctor office visit copayments are $20 and specialist visits are $35. The Choice Plus POS plan offers partial coverage when an employee chooses to use out-of-network providers. The coinsurance amount is only 70% compared to the 90% coinsurance for in-network care. This results in higher costs for employees who self-refer to providers out-of-network. There is also a calendar year deductible for outof-network care. An employee will have to pay $500 in deductibles per year or $1,500 in deductibles for family coverage before they start to receive compensation for claims. The out-of-pocket maximum for out-of-network care is $2,500 per person and $5,000 per family including the deductible, but not any copayments or penalties. High Deductible Health Plan (HDHP) Guardian Life Insurance Company provides a self-funded High Deductible Health Plan that is administered by UnitedHealthcare only, through an ASO contract. UnitedHealthcare has an AM Best rating of A for financial and long-term strength. The HDHP generally costs less and has higher out-of-pocket expenses for care, except for preventive care, which is covered at 100% when using in-network providers. The cost is less because employees will have a higher annual deductible to meet before the plan begins to pay for services, as well as higher out-of-pocket maximums than other types of plans. This plan also offers the flexibility to use inor out-of-network providers. An employee has the opportunity to establish a Health Savings Account (HSA) and fund it through pre-tax dollars. These accounts are tax-exempt trusts or custodial accounts created for employees

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 5/30 AMERICA

who elect a HDHP. The funds in an HSA can be used to pay for eligible medical, dental, and vision expenses as well as qualified insurance premiums. Any amounts not used can be rolled over from year to year. The employee who owns the account in effect owns the HSA, which makes it portable. Guardian opens and contributes to the HSA on the employees behalf based on the level of coverage under the HDHP. The maximum amount an employee can put in an HSA is $3,050 for an individual, and $6,150 for a family. If the employee is over 55 years old, they are allowed to contribute an additional $1,000. The calendar year deductible for in-network care is $2,000 for an employee in the single tier and $4,000 for husband and wife, parent and children, and family coverage. The deductible must be met before anyone in the family can receive benefits. After the deductible the plan offers a 90% coinsurance amount for all in-network care. The maximum out-ofpocket expenses for the year are $4,000 for individuals and $8,000 for any other tiers. When an employee chooses to go out-of-network, not only does their calendar year deductible increase, but also their out-of-pocket maximum increases. The calendar year deductible increases to $4,000 for employee-only coverage, and $8,000 for family coverage. The out-of-pocket maximum also doubles for out-of-network care to $8,000 for single tier and $16,000 for other tiers. Even after the higher deductible is met, an employee who chooses to go out-ofnetwork only has a coinsurance amount of 70%. Dental Benefits Plan Guardian offers a self-funded dental plan that is administered through their own organization, The Guardian Life Insurance Company of America. The plan is contributory with employees paying 50% of the cost and Guardian contributing the other 50%. The contributions by the employee are on a tax-free basis, which are deducted from their semi-monthly paychecks. The same eligibility requirements of the healthcare plans apply to the dental plan. An employee can save on their dental expenses if their dentist participates in the plans nationwide Preferred Provider Organization network. If an employee receives services from an in-network dentist, the percentage of reimbursement is higher than that for an out-of-network dentist. The dental plan has a $50 annual deductible for an individual and $150 for a family however, the deductible does not apply to

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 6/30 AMERICA

preventive services. Preventive services and basic services have 100% coverage for in-network care. Basic services only receive 80% coverage when they are out-of-network claims. Major services only have 60% coverage for in-network and 50% coverage for out-of-network. Orthodontic procedures receive 50% coverage whether in- or out-of-network. The dental plan does have an annual maximum benefit of $1,500 per person. Vision Guardian provides a self-funded vision coverage that can be included in all healthcare plans, which is administered in the same way as their dental plan. They offer an Exam Plus option, an Exam Plus Allowance option, and a Full Feature option. An employee can elect coverage if they qualify for the company medical plans (see Introduction to Healthcare Plans). Employees pay the full cost of the plan but save on taxes because the contributions are deducted from the employees paycheck on a before-tax basis. It is important to note that if a domestic partner is not a legal tax dependent of an employee, their contributions are deducted on an after-tax basis with imputed income attributable to the value of the covered benefit. The Exam Plus option covers eye exams in full once every calendar year. It provides a 20% discount on eyeglass doctor services or a 15% discount on contact lens doctor services. Under the Exam Plus option there is no coverage for out-of-network services. The Exam Plus Allowance option covers eye exams in full once every calendar year. Eyeglasses care is covered up to a $75 allowance once every calendar year plus a discount on doctors services. The same benefit is provided for contact lens services. The Full Feature option also offers full coverage for eye exams after a $10 co-pay once every calendar year. Eyeglass care is covered in full up to a $150 allowance once every calendar year after a $20 co-pay. The contact lens services are also covered in full with a $130 allowance. All three plans offer some discount pricing for laser vision correction surgery. The Exam Plus allowance and Full Feature options provide benefit allowances for covered services by an out-of-network provider.

Prescription Drug

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 7/30 AMERICA

Employees that are enrolled in any of the healthcare plans are automatically enrolled in the prescription drug coverage. The plan is administered through Medco, which has an AM Best rating of A-. The plan offers coverage for a 30-day supply of generic brands, preferred brands, and non-preferred brands. The respective copay for each is $10 for generic brands, $25 for preferred brands, and $40 for non-preferred brands. It will also cover up to a 90-day supply of mail order drugs with a $25 copayment for generic brands, $60 for preferred brands, and $100 for non-preferred brands. All expenses for prescription drugs are counted towards the calendar year deductible and the percentage of coverage is based on the type of healthcare plan in which the employee is enrolled. Flexible Spending Accounts (FSA) Guardian offers a voluntary Flexible Spending Account, also known as a Section 125 Plan that is fully contributory. This optional plan allows employees to deduct a portion of their salary in advance, on a tax-free basis to cover additional medical, dental, and vision expenses. Guardian Life Insurance Company provides three different FSAs to their employees. The minimum amount of annual contribution for each account is $120 and the maximum is $5,000. The contributions to the account are deducted in equal installments each semi-monthly pay period and, once enrolled, the contribution amount cannot be changed until the next enrollment period. An important aspect of which employees must be aware is any funds that are not used during the year are then forfeited back to the employer. An employee has until March 15th to claim reimbursement for eligible expenses incurred during the prior year. Full Service Healthcare FSA: This plan is used to reimburse most healthcare expenses not paid by an employees medical plan, dental plan, or other insurance. Eligible expenses include any for an employee or individuals the employee claims as a dependent on their federal tax return. This account can be used to pay for copayments, deductibles, and other expenses that may not have been covered. Over-the-counter drugs are not an eligible expense unless the employee has a prescription from a doctor. Limited Purpose Healthcare FSA: If an employee participates in a HSA in connection with a HDHP, they

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 8/30 AMERICA

cannot participate in a Full Service Healthcare FSA in the same calendar year. However, an employee can participate in a Limited Purpose Healthcare FSA that only can be used to cover vision and dental expenses. Any type of extra medical expenses incurred can be paid using an employees HSA. Dependent Day Care FSA: This account helps pay for an employees dependent day care expenses so that an employee can go to work. If married, an employees spouse must also work, be a full-time student, or be incapacitated. Eligible expenses include day care for children under age 13, and other individuals who cannot care for themselves, who live with the employee, and whom they claim as dependents on their tax return. The maximum amount that an employee can put into this account is $5,000 if they are married and file a joint tax return. Nevertheless, if an employee is married and their spouse files separate tax returns, they can only contribute $2,500 per year.

Loss of Income: Death

Life Insurance Guardian Life Insurance offers their employees three options of life insurance to protect against losses of income due do a non-accidental, non-occupational, accidental and occupational death. An employee can purchase all three options because they can all supplement each other. Also, The Guardian Life Insurance Company of America is the carrier for all three options, which has an A.M Best rating of A++. Even though this is their company, the employer still pays premiums as if it was a normal insurance agreement. The first type of coverage is Basic Employee Group Term Life Insurance. Individuals are automatically enrolled in this plan once employment begins, and it is financed on a non-contributory basis. Once an employee is eligible and designates a beneficiary, the plan will pay an amount equal to 1 times their current salary with a maximum of $400,000. The next plan, Optional Group Term Life Insurance, supplements the company-paid basic plan and is financed on a fully contributory basis through paycheck reduction. Employees become eligible for this coverage as soon as full-time employment begins and they have the option to include both spouses and children in the plan. The child life insurance option has a face amount equal to 10% of the employees Optional Employee Life

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 9/30 AMERICA

amount, with a maximum of $10,000 and a minimum of $1,000 per child. The employee has four different plans to insure their life, where as the optional spouse coverage only has two different plans. An employee has the option to acquire additional insurance equal to one times their salary, two times their salary, three times their salary, or four times their salary with corresponding limits. An employee can get additional overage for their spouse equal to one or two times their salary up to $100,000. Another option employees have to protect themselves from income loss due to death is the Guardian Contributory Insurance (GCI). An employee is eligible for this option as soon as employment begins and is used to supplement both of the previous plans. The premium is determined by the amount of coverage elected, plan selected, your age and underwriting class. The employee is responsible for paying the premium amount determined, but Guardian assists with the purchase by contributing up to 20% of the amount paid. The final form of coverage to protect against loss of income due to death is through Accidental Death & Dismemberment Insurance. Guardian Life Insurance Company of America is the carrier for this coverage provided on a non-contributory basis to all full-time employees. The amount of coverage provided is the same as the face amount of the Basic Life with a maximum of $100,000. In order to receive compensation under this insurance, the loss must be a result of an accident.

Loss of Income: Unemployment

Severance Package Besides social unemployment insurance, all Guardian full-time employees are qualified for a severance payment. A severance package would be given to an employee because of the loss of income due to lay-offs or job elimination. The amount given is determined based on a few variables including salary and length of employment.

Loss of Income: Disability

Short-Term Disability

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 10/30 AMERICA

A Short-Term Disability Plan is used to address the potential problem of losing income due to occupational and non-occupational disability. Just like their basic life insurance, the short-term disability plan is funded through Guardian Life Insurance Company of America and is financed on a non-contributory basis. An employee becomes eligible to receive compensation after missing more than seven consecutive workdays because of illness or injury. Sick days (PTO) are given to employees to provide coverage before short-term disability benefits begin. The amount of the benefit is determined on the semi-monthly base pay on the day before the disability starts. Base pay is defined as the total earnings for a normal workweek, not exceeding 40 hours, without including overtime or any other type of compensation. Based on the employees years of service, they receive either 100% or 50% of their base pay semi-monthly for six months. For instance, if an employee works less than two years they will receive only one semi-monthly pay period at 100% earnings and 11 payments at 50% earnings. As the years of service increase, so do the amount of semi-monthly pay periods at 100% earning. Guardian also offers an award of an additional 10% on short-term disability coverage (making it 60%), if the employee purchases the optional 10% Long-Term Disability Insurance (see Long-Term Disability). Long-Term Disability Long-Term Disability provides financial protection for employees if a disability continues after their short-term disability benefits have ended. All employees receive this benefit after 30 days of active full-time service and their disability continues past the 26 weeks of coverage under the short-term benefit. This plan is insured through The Guardian Life Insurance Company of America, which has an AM Best rating of A++ and is financed on a non-contributory basis. This plan provides 50% of the base pay every month as long as total disability continues, with a maximum of $15,000. Total disability is defined as someone being unable to perform the material duties of any job for which they are reasonably qualified by education, training and experience as stated in the summary plan description. Included in this plan is the option to purchase an additional 10% of coverage, which would give employees 60% of their base pay instead of only 50%. This

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 11/30 AMERICA

additional coverage is fully contributory payable on either a pre- or after-tax basis by employees. However payment to employees may be reduced when other disability/sickness insurances are present.

Loss of Income: Retirement

Retirement Plan Guardian Life Insurance offers their employees a non-contributory retirement plan. Money to fund the qualified Retirement Plan, a defined benefit plan, is put in a trust, which is supposed to be used only for plan members. Plan sponsors are supposed to fund the plan correctly based on benefits, actuarial assumptions, and member population. The Pension Benefit Guarantee Corporation (PBGC) protects members to some extent. Plan sponsors pay a premium for each plan member of a defined benefit plan each year to the PBGC. When a plan sponsor terminates a plan because it is not funded correctly it is then picked up by PBGC, for which the premiums are necessary. PBGC funds the benefits that will be paid out from the trust thats set up, and monies held by PBGC from premiums. The benefit is based on a formula that multiplies the final average compensation of an employee by the years they participated in the plan. That number is then multiplied by 1.2% to find the amount of the benefit that will be paid. There are additional formulas for employees who participated in the plan for over 35 years or have an excessively high salary. An employee is automatically covered under the plan on the first day of the month in which they reach age 21 and complete one year of service. Early Retirement Special Early Retirement Normal Retirement Late Retirement Age 55 and 10 years of Benefit Servicereceive reduced benefit Age 60 and 20 years of Benefit Servicefull benefit earned to date Age 65 and 5 years of Benefit Servicefull benefit paid Over age 65 and 5 years of Benefit Service full benefit paid

Employees Incentive Savings Plan (EISP) Guardian provides an Employees Incentive Savings Plan, which is essentially a 401(k) plan. This plan is available to all full-time employees and part-time employees assuming they work 1,000 hours in a year.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 12/30 AMERICA

Contributions go into member accounts and those accounts are to be held strictly for the use of the members. In fact, a plan sponsor must fund member accounts within a certain number of days after their contributions have been withheld from paychecks or be penalized. Accounts are administered by Wells Fargo, and member contributions and any company contributions are posted to accounts after monies are deposited in the account. Plan sponsors cannot take the monies or invest the monies. Therefore, it is not "insured" but is protected. Enrollment for newly hired employees is automatic 60 days after hire date. An employee has the option to opt in or out within that time. This plan allows an employee to withdraw money during their active career to meet short-term financial needs. The minimum amount that can be withdrawn is $1,000 and is subject to certain tax penalties. Guardian offers two different investment strategies; a Retirement Target Fund and a Core investment option. An employee can contribute anywhere from 1% to 25% of their base salary on a pre- or after-tax basis. Highly compensated employees are limited to 13% of base pay. After an employee completes one year of service, Guardian will match the first 3% of an employees base salary that is contributed to the plan. An additional discretionary amount of up to 7% of an employees base salary may be credited to the account that is called Special Contributions. These contributions reflect the companys annual performance. Catch-up Contributions give participants who are 50 or older the opportunity to catch up on saving for retirement by making additional contributions over and above the maximum limits allowed by the plan. An employee may roll over into this plan all or part of a qualified lump sum received from a previous employers qualified plan. All employee contributions are 100% vested, and the schedule below shows how Guardians contributions become vested.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 13/30 AMERICA

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

Percent Vested 0% 25% 50% 75% 100%

Other Exposures
Education Assistance Program Guardian Life Insurance offers their employees a higher education tuition reimbursement program. This program is self-funded and is financed on a non-contributory basis with regards to their payment. Not only do they offer tuition reimbursement, but they will also help pay for professional designations and if employees want to further continue their education. To receive this financial assistance all educational programs must be approved and in one of the following categories: Industry Education, College Degree, or a Job-Related Graduate Program. The amount received by employees in each category is limited to $3,000, $5,000 and $10,000 respectively per calendar year. Employee Assistance Program Guardians Employee Assistance Program is offered through Integrated Behavioral Health (IBH) to all employees on a non-contributory basis. The goal is to help employees deal with personal problems in living and work that range from interpersonal relations to financial or legal problems. This program offers numerous services to deal with such problems as counseling, referrals, and assistance with elder care. Work/Life Assistance Program The Work/Life Assistance Program is offered to all Guardian employees through Integrated Behavioral Health (IBH). Guardian pays all costs associated with this program, which is designed to help their working

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 14/30 AMERICA

parents with childcare. It is very difficult for a parent to work 40 or more hours a week and manage all the responsibilities that come with having kids. With this plan employees receive information and referrals to afterschool programs, college planning, day care centers, boarding schools, and even parent education.

Benefits Analysis: The Guardian Life Insurance Company of America

Part 3: Benefit Analysis RMI 3501 Dr. Drennan Fall 2011 912583350 912454670 When your guardian angel fails you, there's Guardian Life Insurance Company of America
BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 15/30 AMERICA

Table of Contents
Introduction........................................................................................................................3 Overall Design Considerations and Objectives in Offering Employee Benefits.......3-5 Overall Objectives.........................................................................................................3-4 Overall Design Considerations.....................................................................................4-5 Problems, Issues, Concerns and Considerations in the Design of Health Benefits. .5-9 Healthcare Cost Containment.......................................................................................5-6 UnitedHealthcare vs. Aetna..............................................................................................6 High Deductible Health Plan............................................................................................7 Vision, Dental, Prescription Drug.................................................................................7-8 Funding Considerations................................................................................................8-9 Other Considerations and Issues......................................................................................9 Issues, Concerns and Considerations in the Design of other Non-retirement Benefits........................................................................................................................10-12 Disability and Life Insurance.........................................................................................10 Flexible Benefits.......................................................................................................10-11 Work/Life Benefit Considerations............................................................................11-12 Regulatory Compliance..............................................................................................12-14 ERISA.............................................................................................................................12 COBRA.....................................................................................................................12-13 PPACA......................................................................................................................13-14 Recommendations & Conclusion..............................................................................14-15 Stop-Loss Insurance.......................................................................................................14 Increase Out-of-Pocket Maximum in Choice Plus POS Plan........................................14 Conclusion......................................................................................................................15 Works Cited......................................................................................................................16 Letter of Appreciation.....................................................................................................16

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 16/30 AMERICA

Introduction
The Guardian Life Insurance Company of America is a private mutual insurance company headquartered in New York City, NY. As a mutual company, Guardian does not have shareholders; they are owned by the policyholders. The company was founded in 1860 under the name of Germania Life Insurance. However, they changed to Guardian Life Insurance Company of America in 1917 to reflect patriotism as well as protection and security. Guardian has regional offices in Pennsylvania, Washington, and Wisconsin and boasts a $225 million annual profit for 2011. Guardian employs over 5,400 full-time employees. The company is ranked 245th on the fortune 500 list and has an AM Best rating of A++. During this project Alison E. Weeks helped us gather and analyze information about Guardians current benefit plans. Alison has been working for Guardian Life Insurance since 1998 and is currently employed as the Communications Manager for Corporate Benefits. She is one of a select few managers within the Human Resources Department that works directly with Senior Executives and the CEO in determining the plan design and cost. The CEO makes the final decision concerning the offered benefits. During her time with Guardian Life Insurance, Alison has seen past aspects of benefit packages fail, and she is determined to provide employees with the proper benefits and coverage they need.

Overall Design Considerations and Objectives in Offering Employee Benefits

Overall Objectives As an insurance company that provides a large variety of quality products to consumers and members, it is crucial that the benefits they offer their own employees are of a high value. Weeks added, The benefits offered are those typically offered by major employers and are meant to attract and retain employees. She claims that this is the most important aspect of offering benefits because to have a successful company they must first have talented employees who have a tenured understanding of the company and the products that they offer. By retaining employees for a long period of time, it also helps build a

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 17/30 AMERICA

stronger company culture, specifically in regional offices, according to Weeks. A second objective in offering the overall benefits plans is to compete with other employers in the same industry. Weeks states that Guardian does significant research into what benefits other employers and, especially, competitors offer their employees. Some of their main competitors are AXA Financial Inc., CNA Financial Corporation, and John Hancock Financial Services Inc. She says it is important to stay aware of competitors benefits; if Guardian is not offering benefits at a comparable quality they may lose potential hires. Weeks also added, We look at statistics of employees who leave, and we conduct exit interviews to gain information on possible overall plan faults. Overall Design Considerations Since Guardian employs highly talented and trained employees in the insurance industry, the employees have a more in-depth understanding of insurance and employee benefits than the average worker. Weeks and the team of employees that design the benefits have taken this into account and make sure they offer as quality of benefits as financially possible. All full-time employees are eligible to participate in all of the benefits offered in the package, consisting of medical plans, life insurance plans, retirement plans, and many other voluntary plans. Part-time employees can only participate in defined benefit and contribution plans assuming they work 1,000 hours in a year. A design consideration particular to Guardian is offering their employees benefits administered by their own company. They administer many of the benefits on their own while Aetna and UHC assume administrative duties when necessary. They supply their own products for both dental and vision coverage, and they are also the carrier for their life insurance plans and disability plans. As an important note for life and disability plans, Weeks said, Products may not be the same as those offered to clients since we are a much bigger company than a typical Guardian client. Larger groups for life insurance allow for better pooling and cost sharing of risk. The large number of employees also helps reduce the possibility of adverse selection in other benefits options, because the hope is that there are enough good risks in each plan to help subsidize

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 18/30 AMERICA

higher-risk employees. Other broad considerations involved in the design of the benefits plan include any information or advice that Guardian receives from benefits consulting firms that they hire to assist in the plan design. These firms help Guardian by providing information on other employers benefits design, performing actuarial work, and assisting in pension planning. Weeks declined to mention specific consulting firms used by Guardian. The benefits team devotes a large part of its time to claims review to help spot possible problems or areas that need to be reevaluated in its benefits plan. Weeks also claims that the company does look at possible cost containment strategies for higher cost savings. Guardian finances close to 75 percent of the total cost of the medical expenses, leaving employees with about 25 percent of the remaining cost contributed by payroll deductions. The EPO plan is actually financed closer to 30 percent by employees. Life and disability insurance, along with the retirement plan, are offered at no cost to employees illustrating Guardians value on their employees. Employees primarily finance vision, additional life insurance, and flexible benefits. Guardian does make contributions to Employer Incentive Saving Plans (401(k)).

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

Healthcare Cost Containment When Alison Weeks first came to Guardian 14 years ago, the company offered HMO plans that were fully insured, as well as a one of a kind Guardian-administered medical plan that, according to Weeks, closely resembled a traditional indemnity plan. The Guardian Medical plan was self-funded and becoming costlier every year. In 2004, they offered a similar plan, administered through UnitedHealthcare that had a much larger network than the Guardian Medical plan. The new plan was believed to offer a similar benefit with a larger network, which they hoped would attract many of the employees in the Guardian plan and reduce out-ofnetwork claims. The new indemnity plan experienced similar problems with high costs and, eventually, both indemnity plans were not offered anymore. By 2007, Guardian finally phased out both indemnity plans.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 19/30 AMERICA

When Guardian was seeking advice from benefits consulting firms about the cost of their indemnity plans, the firm performed a study that proved self-funding all Guardian medical benefits would lead to a smaller increase in cost over time. This led to the adoption of their EPO plan and Choice Plus POS plan. Weeks did not provides us with the actual percentage of savings from switching to self-funding their medical plans, but she was adamant about the large savings they had over the past couple years. She also mentioned that as healthcare costs continue to rise, at some point she believes all the plans they offer will resemble some aspect of a consumer-driven plan. The move to all consumer-driven plans will be long and complaint-filled as employees retain more costs than ever before. UnitedHealthcare vs. Aetna Guardian self-funds all of their medical plans, but they administer all of them through an ASO contract with either UnitedHealthcare or Aetna. Both insurers offer identical EPO plans and Choice Plus POS plans. Guardian offers a High Deductible Health Plan that is only offered by UnitedHealthcare. Weeks explains that these carriers were chosen mainly through a request for proposal. The proposal was sent out to multiple carriers, and then Guardian and an outside benefit consultant reviewed the findings. Weeks described visits that were made to carrier offices where plans would be managed in order to meet necessary administrators. Based on these factors, Guardian decided to elect coverage from both UnitedHealthcare and Aetna. When asked the reason for multiple carriers, Weeks responded, To provide choice to employees. I am surprised sometimes new hires will gravitate to an Aetna plan only because he/she has always been in Aetna plans through prior employers. Weeks acknowledges that there are possible cost containments associated by going through solely one carrier. However, she believes providing choice to employees is an integral part of their entire benefits plan. Moreover, Weeks said the only difference in the two insurers is the network, which is based on the carrier. She was careful to note that a large majority of Aetna providers are also in the UnitedHealthcare network, which makes some administration work easier.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 20/30 AMERICA

High Deductible Health Plan Weeks identified that one of the major reasons they offered a HDHP was to provide another option for employees and, at the same time, save on plan costs. She added that it offers Guardian the ability to cut costs without cutting benefits. The HDHP contributions cost Guardian a third of the price that the company pays for both the Choice Plus POS plan and the EPO plan contributions. Weeks said that this plan costs the company $440 a month in contributions for a family tier. She compared that to the single tier of the other two medical plans, which each cost the company nearly $400 a month in contributions. She claims, Although this plan has many attractive qualities, many employees do not fully understand everything the plan has to offer. When asked about plan communication, she answered that they offer more information on this plan than any other healthcare option. Additionally, she indicated the communication about the supplementary HSA option this plan offers is also more than sufficient. Weeks believes that once an employee sees the $2,000 deductible that is associated with the plan, one often strays from this option. She explained that because contributions are semimonthly and through payroll deductions, employees put more weight on a high deductible, compared to the savings a HDHP plan offers on premiums. This is confirmed by the very low participation rate of 11 percent. Vision, Dental, and Prescription Drug Vision and dental plans are self-funded by Guardian and also administered by the company. Weeks pointed out that these two optional types of coverage have a lower amount of complaints compared to other insurances offered. A main reason for this has to do with both vision and dental having a smaller percentage of enrolled employees. She also made a point to explain how there are a large amount of employees who work directly with the vision and dental plans in the sales department. Weeks went further to say, Employees seem to have a better understanding of these coverage options and do not request as much communication as compared to the medical plans. Prescription drug coverage is included in all plans and is administered through

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 21/30 AMERICA

Medco. Weeks described that they were able to help contain costs on this included benefit because they increased copayments across all bands of the formulary. Non-preferred brands saw the highest increase in copayments because of the high expense they put on the medical plans. She said that Guardian is anticipating more employees using generic or preferred brands because of this. Funding Considerations Guardian self-funds their healthcare plans, so this helps them keep accurate records, fund accordingly, and focus on any particular areas of their plans that are experiencing higher claims. Furthermore, by not fully insuring their medical plans, Guardian does not have to pay monthly premiums to an insurance company. They pay insurers to administer the plan, but it is still funded by Guardian, and they only have to pay for losses that occur. If an employee does not suffer losses in a particular month, Guardian retains the monthly contributions from an employee to their healthcare plan. Weeks says that self-funding allows Guardian the capability of providing uniform health plans to employees all over the country. This is supported with the use of Aetna and UnitedHealthcares national networks. Since the company is self-funded, it also does not have to pay federal taxes on premiums. The EPO plan costs the company the most out of all medical plans. Guardian offers a greater subsidy to the other plans to help steer people away from the EPO. The employees contribute close to 30 percent for EPO coverage, with Guardian paying the remaining 70 percent. Weeks mentioned that 2011 was the first year Guardian increased the cost sharing of total premiums for the medical EPO plans because they are trying to phase the plan out before PPACA regulations set in and deem it a Cadillac plan. She said that it resulted in around five percent of total EPO plan participants switching coverage, almost all to the Choice Plus POS plan. Guardian shares about 25 percent of monthly premiums with employees for both the HDHP and the Choice Plus POS option. They also take the amount of participation in each plan into account for funding, according to Weeks. The highest number of enrolled employees is in the Choice Plus POS plan, with 52 percent of participating employees. Funding for this benefit is especially taken into account because the plan provides 70

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 22/30 AMERICA

percent coverage offered out-of-network. The second highest participation is in the EPO plan, with 37 percent of employees. Because this is the richest of offered plans and has a 100 percent coinsurance amount, Guardian has to plan on paying in full for many goods and services. Funding considerations for the HDHP plan are not as vital because there is only about 11 percent participation by employees. Other Considerations and Issues The overall demographics of the employees is something that Weeks stated as an important aspect in healthcare design. Their workforce is predominately female with only 40 percent of the workforce being males. Weeks stresses the importance of this in the design because they have a larger amount of maternity claims. The average age of employees is around 41 according to Weeks. Since Guardian operates nationwide, it poses new issues because they have employees located in many different states. Weeks insisted that this issue played a large part in the decision to self-fund because, at the time, many states were starting to require certain coverage options be included in many plans. Guardian performed several surveys in 2008 about their benefits plan to get employee feedback. When asked about the results, Weeks noted, It was very dependent on the audience. She said that younger employees thought that premiums were too high. Also, she said that many of the employees covered in the family tier thought that prescription drug copayments were too high. However, she mentioned that there was positive feedback on many of the offered plans. In particular, a vast majority of people complimented the comprehensiveness of the EPO plan. Weeks restated how this is going to be one of the most challenging aspects of changing their coverage to help cut costs. Another aspect that received good reviews was the flexible spending accounts. Employees especially liked the dependent FSA that allows them to use pre-tax dollars to pay for dependent care.

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 23/30 AMERICA

Design of Other Types of Non-Retirement Benefits

Disability and Life Insurance Guardian is a life insurance company, but they also provide disability insurance to consumers as well. Weeks went on to say that short-term and long-term disability insurance is one of their most profitable lines of business because they are the preferred choice for disability benefits of many companies. Their attractive disability products are also offered to all employees on a non-contributory basis. Weeks said that both their short-term and long-term disability plans are very appealing to employees because they feel secure knowing that, if an illness or injury were to occur, they will have coverage. When asked about Guardians ability to make sure their employees are not abusing the system, Weeks explained that they do have programs in place that assist in this area. She declined to comment on exactly what programs they utilize to counteract the possible moral hazard problem. Guardians basic group-term life insurance plan is one that many employees are familiar with because, like dental and vision, many employees work directly with this line of business in sales. The types of plans offered are slightly different because of the large number of Guardian employees but share many similar aspects. Weeks commented on the amount of employees who elect to enroll in the voluntary optional groupterm life insurance: There is a high participation rate because our employees understand the importance of life insurance and its benefits. She said that because of the high participation rate in the optional coverage, it led them to offer another life insurance option, called Guardian Contributory Insurance. Guardian also makes contributions to this plan of up to 20 percent of the premium, demonstrating their value on employees. Flexible Benefits Weeks stated that the main reason they offer flexible benefits is to allow employees to pay for expenses

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 24/30 AMERICA

they normally accrue with pre-tax dollars. In a survey of Guardian employees, many stated how important the flexible spending accounts (FSA) offered to them are. The Dependent Day Care FSA is the most praised and appreciated of all types offered. This is because the average age of employees is about 41, meaning a large percentage of them have children. Having this option to pay for day care services with pre-tax dollars gives employees one less reason to worry, making them happier and more efficient in the office. The Limited Purpose FSA provides members of the HDHP with an additional pre-tax benefit to accompany their HSA if they choose to participate. This flexible benefit can only be used to pay for costs related to either dental or vision care. Being able to have two different accounts funded with pre-tax dollars makes the overall cost of the HDHP decrease, making the plan more appealing. Ever since Guardian has included the Limited FSA, the participation in the HDHP has gone up. This is important to the company because they are trying to lower the amount of individuals enrolling in the EPO plan that is going to be greatly affected by PPACA. Work/Life Benefit Considerations Weeks believes that employee wellness is one of the biggest aspects concerning healthcare today and, in turn, healthcare costs. This is why Guardian places a large emphasis on the work/life benefits and services they offer. All programs offered are financed on a non-contributory basis with the intent that employees will voluntarily want to be healthier. All of Guardians regional offices have multiple wellness managers who promote, inform, and organize all benefits regarding work/life issues. Wellness managers organize inter-office competitions awarding small prizes to employees who have lost the most weight, exercised the most, and even participated in the most wellness programs. These contests provide friendly competition and a support group to encourage wellness. On top of this, managers organize participation and sponsorship by employees in numerous walks (aids/cancer). This shows employees and the general public that Guardian is genuinely concerned with overall health and wellness. This can have a significant effect on the cost of healthcare because healthier employees use less healthcare goods and services. Also their size makes them very credible- allowing a justification for lowering premiums associated with a healthier population. All of these reasons would result

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 25/30 AMERICA

in lower overall healthcare costs. Guardian must be aware that Cadillac levels are not subject to change, although there is no stopping the ever-increasing cost of healthcare goods and services.

Regulatory Compliance
ERISA The Employee Retirement Income Security Act of 1974 (ERISA) has proven to be a problem for Guardian Life Insurance. This federal mandate provides protection standards on defined benefit plans provided by employers. When asked about ERISA, Weeks began to explain what happens after a plans funding has been proven insufficient. She explained, Once an employer cannot meet these standards, the financial responsibility of the plan is switched to the Pension Benefit Guarantee Corporation (PBGC). Guardian is required to pay PBGC a premium and, in exchange, they are responsible for monitoring the retirement plans trust fund and administering benefits when necessary. When asked to explain how this happened to Guardian, Weeks was reluctant to give us a straightforward answer, but she said working through PBGC is good for their company, and more plans than people think are being turned over to the PBGC. ERISA also extends its standards to the funding of Guardians Employees Incentive Savings Plan (401(k)). To avoid any issues relating to fiduciary responsibility, Guardian uses Wells Fargo & Company to control both employee and employer contributions. They also do this because Guardian does not insure their 401(k) plans, but Wells Fargo provides a form of protection similar to insurance. It is very important that Guardian knows they cannot transfer all fiduciary responsibilities of either plan and must still meet ERISA requirements. COBRA The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) was passed to provide coverage after an employee/employer relationship has ended, resulting in the loss of benefits. Employers, like Guardian, that provide group health plans to their employees must offer a continuation of coverage every time an employee is terminated, quits, reduces work hours, or divorces. When asked how Guardian complies with COBRA obligations, Weeks spoke about how they bring in an outside legal counsel to ensure they comply with

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 26/30 AMERICA

all rules. The only issue they face is the administration costs associated with notifying, tracking, and documenting all facets of compliance. Guardian must constantly train, pay, and update their personnel to deal with such administrative tasks, which is very expensive. Weeks stated that Guardian would rather pay these extra fees brought upon by COBRA then be involved in a lawsuit with an unsatisfied employee. PPACA Guardian Life Insurance is extremely compliant with the Patient Protection and Affordable Care Act (PPACA). A lot of plan alteration was done in order to fulfill requirements immediately imposed by PPACA. Some of these changes included eliminating any lifetime maximums and providing coverage of dependents up to age 26. But PPACA has not been fully implemented yet and will not be until 2018. Because of this, Guardian needed to evaluate their current plans and determine if any other changes are necessary to be fully compliant. The evaluation concluded that their EPO plan, that was once grandfathered, needed to change. Their EPO plan received grandfather status on March 23, 2010, along with all the benefits associated with it. Grandfathered plans are not subject to as many regulations as non-grandfathered plans. But, instead of keeping this status and the benefits of it, Guardian decided to alter the plan design. Their thinking behind this is that eventually all grandfathered plans are going to change. With healthcare costs continuing to rise, there is no way of maintaining 2010 contribution percentages four or five years down the road. In addition, they realized their EPO plan would eventually be indentified as a Cadillac plan. By the year 2018 any plan deemed a Cadillac plan will be imposed with a 40 percent excise tax per plan for every dollar spent over the designated limits. Weeks stated that this is a big concern of Guardians and was a major factor in the decision to alter and, hopefully, eradicate the EPO plan in the future. Since the EPO is the most generous plan offered, it has attracted around 40 percent of all employees, making eliminating it tough. But the change of increasing employee contribution to premiums will make this process much easier. With this change Guardian is hoping to drive individuals out of the EPO and into their other plans. If employees gradually change during open enrollment it will keep administration costs down when

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 27/30 AMERICA

Guardian does eliminate the plan. Also this avoids the problem of creating disgruntled employees, which usually leads to a decrease in productivity. Guardian should be aware that Cadillac levels are not subject to change, although there is no stopping the ever-increasing cost of healthcare goods and services.

Recommendations & Conclusion

Stop-Loss Insurance Weeks mentioned that even though Guardian self-insures their medical benefits, they do not have any type of stop-loss insurance. This could prove detrimental if they were to experience a year with multiple catastrophic losses. Her defense was that since they have a large reserve and many employees, the years with smaller claim totals should offset the financial loss associated with any catastrophic claims. This may prove true so far, but, without stop-loss insurance, Guardian is at risk for all claims regardless of the severity. Guardian could purchase stop-loss insurance with a very high dollar amount when coverage would begin. This would help reduce the possibility of catastrophic claims, and premiums would not be overly expensive if they have a high dollar amount when the coverage starts. Increase Out-of-Pocket Maximum in Choice Plus POS Plan If Guardian were to increase the out-of-pocket maximum for the Choice Plus POS plan, employees may not be so reluctant to enroll in the HDHP. Even though the POS plan covers in-network care at 90 percent, there are still costs associated with consuming healthcare goods and services. If an employee sees that they have the possibility of paying the same out-of-pocket costs compared to the HDHP, they may be more inclined to try out the High Deductible plan that has a significantly smaller monthly contribution. Again, if employees leave the richer plans and join the HDHP, it will result in savings for Guardian.

Conclusion For the last 150 years, Guardian Life Insurance Company has strived to provide generous benefits while

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 28/30 AMERICA

still containing overall benefit costs. In more recent years, their benefit plans have experienced some changes to help contain costs, yet they still offer various competitive options for healthcare, retirement, life insurance, and more. Guardian is aware of the challenges in the future of rising costs and increased regulations for benefits. They are determined to find a strong balance between costs and the quality of benefits while still complying with regulations. Guardian has taken the initiative to start effectively dealing with all these problems, and in the future will remain successful in offering attractive benefits at a reasonable cost to the company.

Works Cited
Athey, Eric N. "The Advantages of Having "Grandfathered" Health Plan Status Under PPACA (And How to Lose That Status). Bulk Pack Web. 12/5/11 Used to obtain better understanding

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 29/30 AMERICA

"Best's Rating Center." A.M. Best. A.M. Best. <http://ambest.com>. Weeks, Alison. Personal interview. 2 Dec. 2011 Weeks, Allison. 2010 Employee Benefits Summaries_2011. : Guardian, 2011. Print. "The Guardian Life Insurance Company of America | Company Profile from Hoover's | 212-5988000." Hoovers | Business Solutions from Hoovers. Web. <http://www.hoovers.com/company/The_Guardian_Life_Insurance_Company_of_Americ The quote used on cover page

From: SPENCER A BIRKEL <spencer.birkel@gmail.com> Date: Thur, Dec 8, 2011 at 3:34 PM Subject: Re: Benefits analysis project To: "Alison E. Weeks" <Alison_E._Weeks@glic.com> Dear Alison,

Thank you so much for taking time out of your busy schedule to guide us through our group project. Without you and your constant effort to respond to the numerous emails we sent, this assignment could not have been done. With this information and the meeting we had over lunch last Friday we were able to put together an effectual analysis in a timely manner. As you requested the final project with all parts is included in this email. We hope you enjoy reading the finished product and if you have any comments, questions or concerns do not hesitate to ask. I cannot stress enough how helpful you were through this process and we look forward to speaking with you in the near future. Thanks, Spencer A. Birkel Vincent A. Rocchi

* This is a copy of the thank you email we sent Alison Weeks. *

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF 30/30 AMERICA