VINCENT a ROCCHI - TheGuardianLifeInsuranceCompany.fall2011

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Benefits Analysis:

The Guardian Life Insurance Company ofAmerica

Part 1: Benefits MatrixPart 2: Inventory of Benefits

RMI 3501Dr. Drennan

Fall 2011

912583350912454670


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Table of Contents

BENEFITS MATRIX.......................................................................................................3-4

MEDICAL EXPENSES.................................................................................................5-10Introduction to Healthcare Plans......................................................................................5

Exclusive Provider Organization (EPO).............................................................5-6Choice Plus POS Plans..............................................................................................6High Deductible Health Plan (HDHP).................................................................6-7

Dental Benefits Plan......................................................................................................7-8Vision...............................................................................................................................8Prescription Drug..............................................................................................................9

Flexible Spending Account (FSA)..........................................................................9-10LOSS OF INCOME......................................................................................................10-15

Death.........................................................................................................................10-11Life Insurance........................................................................................................10-11

Unemployment...............................................................................................................11Severance Package......................................................................................................11

Disability...................................................................................................................12-13Short-Term Disability Insurance.................................................................................12Long-Term Disability Insurance............................................................................12-13

Retirement.................................................................................................................13-14Retirement Plan...........................................................................................................13Employees Incentive Savings Plan.......................................................................14-15

OTHER EXPOSURES......................................................................................................15Educational Assistance Program....................................................................................15Employee Assistance Program.......................................................................................15Work/Life Assistance Program......................................................................................15

WORKSCITED................................................................................................................16

BENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OFAMERICA

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Benefit Analysis for Guardian LifeInsurance

Loss Exposure Provided Coverage / Benefits Provided

Medical Expense

Overall MedicalExpenses

Yes Aetna: EPO or POS plan UnitedHealthcare: EPO, POS, HDHP FlexibleSpending Account HealthSavings Account (HDHP only)

Dental Yes Dental Benefits PlanFlexible Spending AccountHealth Savings Account

Vision Yes 3 Options- Exam Plus, Exam Plus Allowance, Full FeatureFlexible Spending AccountHealth Savings Account (HDHP only)

Prescription Yes All Health Plans* FlexibleSpending Account HealthSavings Account (HDHP only)

Long-Term Care Yes Long-Term Disability Plan

Retiree Healthcare Yes COBRA Medicare

Loss of Income: Death

Non-Accidental &Non-Occupational

Yes Company Paid, Basic Employee Group Term Life InsuranceOptional Group Term Life InsuranceGuardian Contributory InsuranceOASDI

Accidental Yes Company Paid Basic Employee Group Term Life InsuranceOptional Group Term Life InsuranceGuardian Contributory InsuranceOASDIAD&D

Occupational Yes Company Paid Basic Employee Group Term Life InsuranceOptional Group Term Life InsuranceGuardian Contributory InsuranceOASDIAD&D WorkersCompensation

Loss of Income: Unemployment

Unemployment Yes Unemployment InsuranceSeverance Package

Loss of Income: Disability

Non-Occupational;Short-Term

Yes OASDIAccumulated Sick DaysAD&D Insurance

Non-Occupational;

Long-Term

Yes Long-Term Disability Plan

OASDIAD&D


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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.


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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 specialistvisits 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 out-

of-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 in-

or 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


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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-of-

pocket 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-of-

network 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


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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 fullonce 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


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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 co-

pay 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 aHSA in connection with aHDHP, they


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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

GuardianLife 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


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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


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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 onesemi-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 thebase 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


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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 Age 55 and 10 years of Benefit Servicereceive reduced benefit

Special Early Retirement Age 60 and 20 years of Benefit Servicefull benefit earned to date

Normal Retirement Age 65 and 5 years of Benefit Servicefull benefit paid

Late Retirement 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.


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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 automatic60 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 theiractive 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.


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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 alsohelp 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 ascounseling, 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


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Years of Vesting Service Percent Vested

Less than 2 0%

2 but less than 3 25%



5 or more 100%


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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 after-

school 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

912583350912454670

When your guardian angel fails you, there's Guardian Life

Insurance Company of AmericaBENEFITS ANALYSIS: THE GUARDIAN LIFE INSURANCE COMPANY OF

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Table of Contents

Introduction........................................................................................................................3

Overall Design Considerations and Objectives in Offering Employee Benefits.......3-5Overall Objectives.........................................................................................................3-4Overall Design Considerations.....................................................................................4-5

Problems, Issues, Concerns and Considerations in the Design of Health Benefits. .5-9Healthcare Cost Containment.......................................................................................5-6UnitedHealthcare vs. Aetna..............................................................................................6High Deductible Health Plan............................................................................................7Vision, Dental, Prescription Drug.................................................................................7-8

Funding Considerations................................................................................................8-9Other Considerations and Issues......................................................................................9

Issues, Concerns and Considerations in the Design of other Non-retirement

Benefits........................................................................................................................10-12Disability and Life Insurance.........................................................................................10Flexible Benefits.......................................................................................................10-11Work/Life Benefit Considerations............................................................................11-12

Regulatory Compliance..............................................................................................12-14ERISA.............................................................................................................................12

COBRA.....................................................................................................................12-13PPACA......................................................................................................................13-14Recommendations & Conclusion..............................................................................14-15

Stop-Loss Insurance.......................................................................................................14Increase Out-of-Pocket Maximum in Choice Plus POS Plan........................................14Conclusion......................................................................................................................15

Works Cited......................................................................................................................16Letter of Appreciation.....................................................................................................16


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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


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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


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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-of-

network claims. The new indemnityplan experienced similar problems with high costs and, eventually, both

indemnity plans were not offered anymore. By 2007, Guardian finally phased out both indemnity plans.


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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.


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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 thesingle 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 semi-

monthly 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 withboth 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


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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


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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.


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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 group-

term 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


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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


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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


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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 percentexcise 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


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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


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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 toLose That Status). Bulk Pack Web. 12/5/11

Used to obtain better understanding


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"Best's Rating Center." A.M. Best. A.M. Best. .

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 | 212-598-8000."Hoovers | Business Solutions from Hoovers. Web.

Documents

VINCENT a ROCCHI - TheGuardianLifeInsuranceCompany.fall2011