8/2/2019 Matthew d Sullivan - Cigna.fall2011
1/29
Benefits Analysis
Part I: Exposure Matrix
Part II: Inventory of Benefits
Part III: Benefits Analysis
RMI 3501
Dr. Drennan
Fall 2011
Matthew Sullivan - 912434388
Charles Yan - 912681546
8/2/2019 Matthew d Sullivan - Cigna.fall2011
2/29
Table of Contents
Benefits Matrix...1
Inventory of Benefits..2
Overall Medical Expenses....2
Health Reimbursement Arrangement (HRA).....2-3
Health Savings Account (HSA).....3
Flexible Spending Account (FSA)......3-4
Dental....4
Vision........5
Prescription...5
Long Term Care6
Retiree Healthcare6
Loss of IncomeDeath
Basic Life Insurance...6-7
Optional Life Insurance......7
Group Universal Life Insurance.........8
Loss of IncomeUnemployment
Severance8-9
Loss of IncomeDisability
Short-Term Disability........9
Transitional Work Arrangement (TWA)..10
Long-Term Disability...10
Loss of IncomeRetirement
401k Plan..11
Other Loss Exposures
Cash Accumulation Fund.11
Work/Life11-12
Dependent Care FSA12
Marsh Voluntary Package............12
Benefits Analysis.13-25
8/2/2019 Matthew d Sullivan - Cigna.fall2011
3/29
1
Benefits Matrix
Loss Exposure Is the Loss Exposure
Covered?
Coverage Provided
Medical Expenses
Overall Yes Health Reimbursement Arrangement, HealthSavings Account, Flexible Spending Account
Dental Yes DHMO, DPPO, Dental Select Option
Vision Yes Health Reimbursement Arrangement, HealthSavings Account, Flexible Spending Account,Retiree HMO*, Retiree POS*, RetireeIndemnity*
Prescription Yes Health Reimbursement Arrangement, HealthSavings Account, Flexible Spending Account
LTC Yes Marsh Voluntary Benefit
Retiree Healthcare Yes Retiree HMO, Retiree POS, Retiree Indemnity,COBRA, Medicare
Loss of Income: Death
Non-accidental, non-occupational Yes Basic Life Insurance, Optional Life Insurance,Group Universal Life Insurance, 401(k) Plan,OASDI
Accidental Yes Basic Life Insurance, Optional Life Insurance,Group Universal Life Insurance, 401(k) Plan,OASDI
Occupational Yes Basic Life Insurance, Optional Life Insurance,Group Universal Life Insurance, 401(k) Plan,OASDI, Workers Compensation
Loss of Income: Unemployment
Unemployment Yes Severance Pay, Unemployment Insurance
Loss of Income: DisabilityNon-occupational Disability
Short-term Yes Short-Term Disability Plan, PTO, TWA, OASDILong-term Yes Basic Long-Term Disability, Supplemental Long-Term Disability, TWA** OASDI
Occupational Disability
Short-term Yes Short-Term Disability Plan, PTO, TWA, OASDI,Workers Compensation
Long-term Yes Basic Long-Term Disability, Supplemental Long-Term Disability, TWA**, OASDI, WorkersCompensation
Loss of Income: RetirementRetirement Yes 401(k)
Other types of Loss exposures:Educational Assistance Yes Cash Accumulation Fund
Work/Life Exposures Yes PTO, Vacation Days, Employee AssistanceProgram
Dependent Care Yes Dependent FSA
Property-Liability Yes Marsh Voluntary Benefits
Legal Expenses No N/A
*Applies after age 65
**Does not apply for long-term disability for over 25 consecutive months.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
4/29
2
Cigna is one of the largest health services firms in the United States. They are currently dually
headquartered in Philadelphia, Pennsylvania and Bloomfield, Connecticut. The firm currently employs
almost 30,000 employees to better serve their clients in health services. As a health services organization,
Cigna offers a wide array of benefits through their Signature Benefits Program that attract and retain new
employees and also satisfies the loss exposures of their well- knowledge employees.
The majority of the benefits that Cigna offers are self-funded as they are one of the largest and
most stable health services firms. AM Best1 issued Cigna with an A rating for financial strength and with
an outlook of very stable. Almost all of the benefits that Cigna offers their employees promote better
well-being and increased knowledge of personal health.
Overall Medical Expenses
Health Reimbursement Arrangement (HRA)
Cigna offers a self-funded HRA which is administered through an ASO with Cigna Healthcare.
Every Cigna employee is eligible to participate in the HRA immediately after they have completed the
HealthQuotient, a confidential health risk assessment. Employees can have their eligible dependents,
spouses, and domestic partners covered under the HRA as well. This HRA is a contributory benefit and
Cignas goal is to finance 76% of the cost and to have the employee finance 24%. There are multiple
options to choose from based on how large each employee wishes their out of pocket maximum to be.
Once the out of pocket maximum is reached, there is 100% coverage for covered expenses. For any
option an employee chooses, there is a benefit enhancement for deciding to stay in the Cigna network.
Cignas contribution to each employee amounts to $750 for employee only coverage and $1,500 if the
employees dependents and spouses are covered as well. Cigna also contributes $250 per year if an
employee and their covered family members participate in their Well Aware Chronic Obstructive
Pulmonary Disease, Diabetes, and Cardiac programs. Cigna also contributes $150 for participation in
1AM Best rating taken from www.ambest.com
8/2/2019 Matthew d Sullivan - Cigna.fall2011
5/29
3
their Healthy Pregnancy, Health Babies Care Coaching program in the first trimester and $75 if they join
in the second trimester. Cigna will also make a $150 contribution for use of a Center of Excellence.
There is a Lifetime Maximum of $2,000,000 per covered life. Once this limit is reached, coverage is
dropped.
Health Savings Account (HSA)
Cigna also offers another CDHP option in the form of an HSA. The HSA is self-insured and
administered through Cigna Healthcare by an ASO. A HSA is set up through JPMorgan Chase. The
same persons can be covered as in the HRA, with the same requirement of the HealthQuotient. There
are 2 options of HSAs based on if the employee wants to use the Cigna network or utilize out of network
services. For either option Cigna contributes $200 to each fund for employee only coverage and $400 if
the employees dependents and spouses are covered as well. Cigna makes the same additional
contributions for the same participation in programs as in their HRA. Cigna also will match employee
contributions to their HSA in the amount of $200 for employee only coverage and $400 if employees
dependents and spouses are covered as well. The maximum an employee can contribute by pre-tax
contributions through payroll deduction is $2,500 for employee only coverage and $5,000 if the
employees dependents and spouses are covered as well. The out of pocket maximum for in network
services is $4,000 for employee only coverage and $8,000 if the employees dependents and spouses are
covered as well. For out of network services, the maximums are $6,000 and $12,000 respectively. Once
the out of pocket maximum is reached, 100% coverage applies to all covered expenses. The same
Lifetime Maximum applies of $2,000,000 per covered life. There are benefit enhancements for choosing
to stay in network which include Preventive Care Screenings at no charge.
Flexible Spending Account (FSA)
Another benefit that Cigna offers its employees is a Healthcare Flexible Spending Account
(FSA). An employee is eligible to enroll on the first day of employment at Cigna. An employees legal
8/2/2019 Matthew d Sullivan - Cigna.fall2011
6/29
4
spouse and dependent children can also be covered under this benefit. The FSA is funded completely by
employee pre-tax contributions through payroll deductions. The maximum that an employee can
contribute into an FSA per year is $5,000. Cigna will take these deductions and deposit them into a trust
fund. An employee cannot use their FSA for expenses that they are covered under another benefit like
Medical or Dental plans. Employees can use their FSA for expenses from prescription drugs, vision care,
physical therapy, and other covered expenses. Any funds remaining in the FSA after one year will be
forfeited to Cigna which can help pay for the administrative expense.
Dental
Cigna provides Dental coverage that is self-funded and administered through an ASO by Cigna
Healthcare. The cost of coverage is contributory, with Cignas objective to pay about 60%, with the
employees to cover the remaining 40%. Contributions can be made with pre-tax contributions unless the
employee works in Puerto Rico, where they are made after-tax. Cigna offers three options for Dental
coverage: Dental HMO, Dental POS, and Dental Select Option. Under the Dental HMO Option there is
no deductible and no co-insurance. There is also no charge for routine checkup, fillings and other basic
services. There is no coverage for employees that utilize out of network services. Under the Dental POS
Option, there is a $25 deductible per person and $75 per family in the network and $100 and $300
respectively for out of network services. There is a $2,000 maximum benefit limit per year. There is a
50% co-insurance after the deductible for inlays, crowns, dentures and orthodontics. For out of network
utilization, the co-insurance is a lower rate. Under the Dental Select Option there is a $25 deductible per
person and $75 per family. The maximum benefit per year is $2,000 per person. There is 50% co-
insurance after the deductible for inlays, crowns, dentures, and orthodontics. The Dental Select Option is
only offered in areas where the Dental HMO and Dental POS are not offered.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
7/29
5
Vision
Cigna provides vision coverage through their HRA, HSA, and FSA plans. The HRA and HSA
plans are offered on a contributory basis and cover periodic and routine vision exams to determine if
corrective lenses are needed. Unfortunately, both of these plans do not cover the fitting of contact lenses
and glasses. The FSA plan that is funded by full contributions from the employee also covers the routine
vision exams. The FSA also covers contact lenses and glasses and even can be used to cover lasik eye
surgery.
Prescription
Cigna offers prescription coverage through their HRA, HSA, and FSA healthcare benefits. The
HRA and HSA plans that are both contributory cover two types of prescription drug benefits. The first
program is called the Retail Prescription Drug Program. Under this program, an employee can have
prescriptions filled at any participating pharmacy. The employee will pay the discounted cost of each
prescription until they reach their deductible. After an employee has met their deductible, they will pay
co-insurance for each 30-day supply filled at a network pharmacy. The co-insurance amount will depend
on the type of drug the employee receives. Cigna has a drug list which classifies drugs under: Generic,
Preferred Brand Name, and Non-Preferred Brand Name. The highest co-insurance will be for generic
drugs and the lowest will be for non-preferred brand name drugs. The second program is called the
CIGNA Tel-Drug Mail-Order Prescription Program. This program allows employees to have their
prescriptions filled by mail-order for up to a 90 day supply. Under this program, an employee pays the
discounted cost of the prescription until they reach their deductible. After this, co-insurance will apply
and will vary based on the classification of drugs as mentioned in the Retail Prescription Drug Program.
Both programs do not include certain drugs like diet pills and growth hormones. Through the FSA plan
that is fully contributory by the employee, prescription drugs are considered a covered expense. All
prescription drugs can be covered unless they are considered to be for cosmetic purposes.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
8/29
6
Long-Term Care
Cigna offers a Long-Term Care benefit on a voluntary basis. Employees pay the entire cost of
this benefit and choose the level of coverage they would like. Cigna has contracted with Marsh to
provide this to their employees. Marsh has also been contracted by Cigna to provide their employees with
other voluntary benefits involving Group Insurance.
Retiree Healthcare
Cigna offers three types of Retiree Health Care plans for eligible employees: Retiree HMO,
Retiree POS and Retiree Indemnity. The employee must have been a full-time employee by a Cigna
company, must participate in their Signature Benefits program, be at least age 55, and have at least been
with Cigna for 5 years. Cigna also offers the retiree health care plan to surviving spouses, dependents or
domestic partners of the eligible employee. Under the retiree HMO, employees can choose from a list of
participating health care providers, no out-of-network coverage is offered. Under the POS option, both in
and out-of-network coverage is offered, however, the out-of-network coverage includes a deductible. The
Retiree Indemnity option will reimburse employees for a portion of their covered medical expenses after
the employee has met the deductible. All of the retiree healthcare options offer coverage for Dental,
Vision, and Prescription drugs just like the active employee healthcare options.
Loss of IncomeDeath
Cigna offers three types of Life Insurance to their full-time, regular employees: Basic Life
Insurance, Optional Life Insurance, and Group Universal Life Insurance. All of these options are offered
through Cigna Group Insurance and vary in how they are financed.
Basic Life Insurance
A Basic Life Insurance plan is offered by Cigna to their employees. Employees are automatically
eligible for Basic Life Insurance the day they start employment with Cigna. An employee does not need
8/2/2019 Matthew d Sullivan - Cigna.fall2011
9/29
7
to enroll in this plan, Cigna automatically enrolls each employee and pays the entire cost on a non-
contributory basis to the employee. Cigna offers term life insurance coverage that is equal to one times
the employees eligible earnings. An employees earnings will be paid to the beneficiary on the policy
after the death of the insured from any cause. There is also an accelerated death benefit that will pay
either 25% or 50% of the policy in a lump sum payment if the employee has been diagnosed with a
terminal illness. Also offered through Basic Life Insurance is Business Travel Accident Insurance. This
will provide coverage if an employee dies while away on business travel of any kind. For this benefit,
Cigna offers three times the employees eligible earnings with a minimum of $100,000 and a maximum
of $1,000,000.
Optional Life Insurance
Cigna also offers their employees an Optional Life Insurance option. Employees are
automatically eligible to enroll in this benefit on their first day of employment with Cigna. Unlike, the
Basic Life Insurance plan, employees must enroll themselves in this plan if they wish to get coverage.
The benefit is offered to employees on a fully-contributory basis with after-tax dollars through payroll
deductions. The cost of the benefit depends on the level of coverage each employee wishes to seek and
whom they seek coverage for. Employees can get coverage for themselves and any spouse or covered
dependents they have. The Optional Life Insurance plan offers a Personal Accident Insurance (PAI)
option. The PAI pays 100% if an employee or covered dependent dies as a result of an accident and will
pay a full or partial benefit if an employee or covered dependent is paralyzed or loses body parts or
members. Purchase ofPAI for employee increases in amounts of $25,000 up to a maximum of
$500,000. Coverage that passes the $250,000 amount is subject to a maximum of 10 times the
employees eligible earnings. PAI pays 100% of the benefit amount within 365 days of a covered
accident of loss of life.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
10/29
8
Group Universal Life Insurance Coverage (GUL)
Cigna also offers an additional life insurance plan through their Group Universal Life Insurance
Coverage (GUL). This plan is financed completely by the employee with after-tax dollars through payroll
deduction and is offered through Cigna Group Insurance. The GUL plan allows employees to purchase
additional permanent life insurance coverage for themselves and their spouse or domestic partner and
term insurance for their dependent children. An employee can purchase coverage for themselves up to 10
times their eligible earnings with a maximum of $3,000,000. An employee can purchase coverage for
their spouse up to 3 times their eligible earnings or $150,000 whichever is less and may purchase $5,000
or $10,000 coverage on a term basis for each covered child. Benefit payments under $5,000 will be paid
in a lump sum payment and any payments over $5,000 will be deposited into a personal checking
account.
All Cigna Life insurance plans ends when the employee retires, terminates, or dies.
Loss of IncomeUnemployment
Severance Package
Cigna offers a severance package to most full-time employees that have been terminated from
their employment. This benefit is funded and administered by Cigna. Cigna pays the entire cost of
severance. There are 2 options offered to employees, Schedule I-A and Schedule I-B. Under I-A, two
weeks of severance pay is provided at the employees base salary for each completed yea r. The chart of
Schedule I-A benefits is provided below:
8/2/2019 Matthew d Sullivan - Cigna.fall2011
11/29
9
Schedule I-B provides severance pay at the employees base salary regardless of length of service. The
chart of Schedule I-B benefits is provided below:
2
All severance benefits that are offered by Cigna are contingent upon the employee releasing Cigna and all
officers and employees from any liability related to their employment and that the employee will not
solicit any customers or employees of Cigna to end or change their relationship with Cigna for one year
following the employees termination.
Loss of IncomeDisability
ShortTerm Disability (STD)
Cigna provides their employees with a Short-Term Disability plan. Cigna offers this benefit on a
non-contributory basis to the employee. To qualify for this plan the employee must be a full time
employee and enrollment is automatic the first day of employment with Cigna. Only employees can be
covered under the STD plan, no dependents can be covered. An employee is covered under the STD plan
if the cause of disability is of a medical condition related to an accident, illness or pregnancy. An
employee receives 100% of base salary for the first six weeks absence and receives 75% of base salary for
20 weeks after. STD coverage ends when a Cigna employee changes from full-time status, the employee
is terminated or if Cigna terminates the plan. Under Cignas STD plan, there is also a Paid Time Off
(PTO) benefit. The first 5 days of a disability leave will be funded by an employees PTO time. An
employee will receive 100% of their salary for the first 5 days regardless of their service time.
2Schedule charts provided from Severance Summary Plan Description of Cigna
8/2/2019 Matthew d Sullivan - Cigna.fall2011
12/29
10
Transitional Work Arrangement
Cigna also offers their employees a Transitional Work Arrangement (TWA) option. The TWA
option gives employees the ability to return to work at a reduced function if they are able to perform at
least 50% of their work duties. Through the TWA program, employees will work less than regular hours
and receive their pro-rated pay for that period. To supplement the difference, employees will receive
partial STD benefits which should accumulate with their pro-rated pay to their normal salary.
Basic and Supplemental LongTerm Disability
Cigna offers a LongTerm Disability (LTD) Plan for all full-time employees under an insurance
contract by the Life Insurance Company of North America. Cigna includes two parts within the LTD
plan: Basic LTD and Supplemental LTD. Employees are automatically enrolled and covered for the
Basic LTD on the first day of work and Cigna pays the full cost of the plan. The Supplemental LTD plan
is optional, coverage begins when an employee decides to enroll and they pay the entire cost for coverage
with pre-tax dollars through payroll deductions. An employee is covered under the LTD plan if the
disability is of an injury or sickness and if the employee is unable to perform all their work duties. Cigna
offers LTD benefit payments after an employee has completed the applicable waiting period. The LTD
benefit amount is given on a monthly basis and is equal to the gross disability benefit minus other income
benefits. The Basic LTD plan is equal to 50% of the employees monthly eligible earnings while the
Supplemental LTD plan is equal to an extra 15% of the employees monthly eligible earnings. Both LTD
plans combined will provide an employee benefit amount equal to 65% of the monthly eligible earnings.
LTD benefits end when an employee has earned 80% of their indexed covered earnings on their regular
job or if employee has passed the maximum benefit period at age 65.
Loss of IncomeRetirement
8/2/2019 Matthew d Sullivan - Cigna.fall2011
13/29
11
Cigna 401(k) Plan
Cigna offers all of their employees a 401(k) plan as a retirement benefit. The Cigna 401(k) Plan
is a contributory benefit as employees can make contributions into their 401(k) account and Cigna
matches these contributions. All employees are automatically enrolled in this program upon their first
day of employment with Cigna. Employees can make pre-tax contributions through payroll deductions
up to 16% of their salary. Employees can choose to make any contributions from 0% up to 16% without
paying taxes on those contributions. Cigna will match employee contributions up to 6% of the
employees salary. Employees are considered fully vested after 2 years of employment. Employees are
100% vested in their own contributions but must fulfill 2 years of employment to gain 100% of Cignas
contributions into their 401(k) account. If an employee ceases employment with Cigna before the full 2
years, at least part of their funds will be forfeited.
Other Types of Loss Exposures
Cash Accumulation Fund
Cigna offers their employees a Cash Accumulation Fund to help cover education expenses. This
benefit is optional to employees and is offered on a fully contributory basis to employees. The Cash
Accumulation Fund allows employees to accumulate cash which can be used for college tuition and other
educational expenses. This benefit can be used by the employee, the employees spouse, and dependents
of the employee. The employee can make pre-tax contributions to this fund by payroll deductions.
Interest earnings in the Cash Accumulation Fund are tax deferred. Employees will pay taxes on the
interest if they withdraw more than their total contributions. The interest rate for the Cash Accumulation
Fund can fluctuate but will never be less than 4%.
Work/Life Benefits
Cigna offers their employees multiple benefits that help them cope with both work and personal
life problems. Cigna has an Employee Assistance Program (EAP) to help employees deal with any
8/2/2019 Matthew d Sullivan - Cigna.fall2011
14/29
12
problems they might have. The EAP helps address employees personal problems, specifically mental
hazard issues. Every employee has the right to utilize this benefit, even if they are not enrolled in any
other benefit plans. Cigna also offers Paid Time Off (PTO) and vacation days. Employees receive 100%
of salary during PTO, when they have suffered from any illness or injury that restricts them from working
for short periods of time. Cigna also provides their employees with multiple vacation days per year
depending on their service time. Employees can sell back their vacation days to Cigna and even buy 2
more vacation days per year.
Dependent Care FSA
Cigna offers their employees a Dependent Care FSA to cover expenses involving their
dependents. This benefit is offered to all employees on a fully contributory basis and is self-administered
by Cigna. The employees are able to make pre-tax contributions through payroll deductions. The
maximum amount that an employee can contribute is $5,000 annually and the employee must contribute
at least $100 to be eligible for this benefit. The funds in the Dependent Care FSA can be used for covered
expenses like child care, housekeeping related to child care, and dependent care in a licensed facility. The
Dependent Care FSA cannot be used for any expenses that are not considered a covered expense. At the
end of the year, any expenses that are left in the account are forfeited to Cigna to help pay for the
administrative costs of applying the plan.
Marsh Voluntary Package
Cigna offers a multitude of property-casualty benefits through a contract with Marsh. These
benefits are offered on a voluntary basis to employees, Cigna makes no contributions to any of these
benefits. Employees can make after-tax contributions through payroll deductions. Some of the benefits
that Cigna offers their employees include: Group Auto Insurance, Group Homeowners Insurance, and Pet
Insurance. Employees take advantage of these benefits because of the convenience factor by just being
able to take payroll deductions to pay the premiums.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
15/29
13
Part III: Benefits Analysis
Introduction & Background of Cigna
Cigna3 has a very long and rich history as it was formed by the merger of two of the
oldest insurance companies, the Insurance Company of North America (INA) and Connecticut
General Life Insurance Company (CG), in 1982. After this merger, Cigna became one of the
largest insurance companies in the world, offering both property-casualty coverage as well as
employee benefits lines. In 1998 and 1999, Cigna sold off its life insurance business to Lincoln
National Corporation and their property-casualty line to ACE. Since then, Cigna has sold off
different lines including their individual and group life re-insurance to a subsidiary of Swiss
Reinsurance Company and their retirement business to Prudential. Cigna has also focused on
acquiring new health services firms, health networks, and technology firms to expand their
employee benefit lines. All of these actionshave been an attempt for Cigna to become a global
health services firm.
Cignas deals have proven effective as they are now a major health services firm that is
dually headquartered in Philadelphia, Pennsylvania and Bloomfield, Connecticut. Cigna has
accomplished their goal of becoming a global firm as they currently operate in 29 countries
around the world. Most recently, Cigna has started business in Singapore and Turkey in
2011. In 2010, Cigna acquired Vanbreda International and began their reputation as leader in
international benefits. They are one of the largest players in the health services industry, serving
over 66 million customers worldwide, as it employs nearly 30,000 employees to serve their large
3All history provided from www.cigna.com and interview with Mr. Wolf
8/2/2019 Matthew d Sullivan - Cigna.fall2011
16/29
14
customer base. Cignas future plans include becoming solely headquartered in Bloomfield,
Connecticut and to continue to expand operations in foreign countries.
With nearly 30,000 employees contracted with Cigna, there are around 47,000 lives
covered under some type of benefit offered. To help understand all of the benefits that Cigna
offers under their Signature Benefits Program, Jim Wolf has offered his guidance with many
years of expertise with Cigna. His current title is Director of Employee Benefits and Plan
Strategy. Jim deals directly with the consultants of Towers Watson to design the best package
for Cignas employees. His primary functions also consist of overseeing the regulatory
compliance, administration, and communication of the benefit program. Jim has helped keep
Cigna ahead of many of the new regulations and the industry trend to more consumer driven
options.
Design Considerations and Objectives in Offering Employee Benefits
Cigna offers an extensive benefits package to their employees and covered dependents
through their Signature Benefits Program. The reasoning behind this is to stay competitive with
the industry and to promote better health within their employees. Cignas mindset is that a
benefits program should be only a factor in an employees decision to join or stay with
Cigna. For those employees that make benefits their primary factor, they are usually thought of
as the individuals that are going to cause an adverse selection problem. Cigna believes that if
they can remain competitive with the industry in their benefits program, that their workplace
environment will sway prospective employees to be a part of Cigna. To remain competitive
within their industry, Cigna offers their employees multiple options of health coverage and also
dental, vision, prescription drug, life insurance options, disability, and retirement options. To
8/2/2019 Matthew d Sullivan - Cigna.fall2011
17/29
15
attract and retain their own employees, Cigna believes it has become the norm within their
industry to offer all of these benefits. Some of Cignas largest competitors are Aetna and United
Health Group. When offering benefits to their employees, Cigna keeps these organizations in
mind and tries to stay on par with them. A major difference Cigna believes they have from their
competitors is that they offer benefits that will make their employees attentive to their personal
health situations. Cigna offers an extensive Employee Assistance Program (EAP) that promotes
employee health and provides assistance to any employee in need of advice or recommendation,
both personal and work related. They also offer a wide array of wellness programs and health
initiatives. Cigna believes their EAP and the wellness programs and initiatives give them a
competitive advantage in regards to their competitors. Cigna appears to be accomplishing their
objective based on their good retention rates and high employee satisfaction. Employees have
been responding well to the freedom of choice and the increase attention to their own healthcare.
Demographics
Cignas situation is different from most companies offering benefits to their employees in
the sense that they are a health services firm offering benefits lines to businesses as well. When
deciding which benefits to offer, they have to understand that many of their employees have
extensive knowledge in the benefits field and know what products will provide the best value to
them personally. This is also a main reason why Cigna has tried to stay ahead in the trends of
the industry. With employees of high knowledge, they know where the industry is going and
what new products will be providing the most coverage, so it is Cignas responsibility to
continuously provide their employees with the most advanced products, like their CDHPs.
Obviously Cigna has employees that do not have extensive knowledge in the benefits industry as
well. With nearly 30,000 employees, Cigna has locations around the United States and also
8/2/2019 Matthew d Sullivan - Cigna.fall2011
18/29
16
around the world. This is also a factor in plan design when they are electing which benefits to
offer to their entire work force. The age range of Cigna employees is very large considering they
have 30,000 employees. Because of this, Cigna must offer a wide array of benefits that can be
utilized by employees in different life cycles. For all employees, Cigna provides Summary Plan
Descriptions (SPDs) for all of the benefit options they offer. These SPDs are extensive and go as
far as to explain everything that is covered, not covered, how to enroll, and even how to dispute
claims. All of the SPDs are hosted on the Cigna website for all employees to have easy access to
any information regarding their benefits package. Cigna also has toll free hotlines that are listed
in each SPD for employees to call regarding any issues or concerns they may have about their
plan.
Financing and Funding
Funding is a main factor in the benefit plan design that Cigna offers to their employees.
Cigna has elected to self-insure almost all of the benefits that they offer to their employees. All
of the healthcare benefits they offer are self-insured and administered by Cigna Healthcare
through an ASO contract. Their vision and prescription drug coverages are all offered through
these medical plans that are self-insured. Cigna has decided to self-insure these benefits because
they believe the wellness programs they have established have produced a reliable and
consistently good claims history. For Long Term Care, Cigna has elected to contract with
Marsh to provide a voluntary benefits package to their employees. Through this package,
employees can elect which level of coverage for LTC they need and can have their premiums
deducted from their payroll after-tax. Employees can also elect to receive coverage for Group
Auto, Group Homeowners, and even Pet Insurance through this package with Marsh. For Life
8/2/2019 Matthew d Sullivan - Cigna.fall2011
19/29
17
Insurance, Cigna contracts with Cigna Group Insurance and the plan is administered by Cigna
Group.
The goal that Cigna has in all of their benefits is to finance about 75% of the cost of the
plan, with the employee providing the remaining 25%. Cigna believes this is enough to provide
substantial value to their employees, with the employee sharing a large enough cost to
responsibly consume the benefits offered. Cigna also believes it is important to note when the
employee contributions are taking place. That is why Cigna was at the front of the trend in
implementing Consumer Driven Health Plans (CDHPs). When employees have to pay for the
first dollar coverage and have to reach a limit with their own money before coverage exists, they
will consume more responsibly to prevent using their own finances. This has been a major
advantage to Cigna as they have kept their employees thinking about the true cost of benefits.
For non-healthcare benefits, Cignas contribution levels vary between as little as 60% to as much
as full contributions for term life insurance and other benefits. Cigna tries to exceed the industry
average in contributions so they can attract and retain as many employees as possible without
attracting adversely selected employees.
Design of Health Benefits
Cignas main objective in offering health benefits is to provide employees with rich
coverage while giving the employees the decision making responsibility, but at the same time
containing as much cost as possible. To meet this main objective Cigna offers an HRA, HSA,
and FSA option to their current employees, different retiree healthcare options to their former
employees, and a voluntary Long Term Care option.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
20/29
18
Consumer Driven Health Plans (CDHPs)
In the past Cigna used to offer HMO and PPO options. During this time period, they
experienced problems and friction with their employees. Many employees were not happy with
the HMO because of the lack of choice to use their provider they liked if they were out of the
network. Cigna also was growing less receptive to these options and when CDHPs started
evolving they decided to implement them. The cost containment and employee decision making
responsibility were two of the largest reasons Cigna decided to implement them.
Now, Cigna only offers CDHPs for medical expenses. Cigna offers an HRA and multiple
coverage levels of an HSA. The benefits that Cigna offers are very rich and can be customized
to each employees needs. Cigna makes contributions to both the HRA and HSA to help
subsidize the first dollar expenses that employees will have to make before the high deductible
health plan coverage begins. Cigna also provides more contributions when employees
participate in some of the wellness programs they offer, including the Well Aware Chronic
Obstructive Pulmonary Disease, Diabetes, and Cardiac programs and the Healthy Pregnancy,
Healthy Babies Care Coaching program. Cigna has seen increasing participation levels in these
programs as employees want to capture more contributions from Cigna, but at the same time
these programs are helping Cigna contain costs through having healthier employees. The more
an employee participates in a wellness program, the more likely they will be to be more attentive
to their personal health.
To continue the upward trend in participation levels, Cigna has multiple outlets of
communication to their employees. Cigna sends emails to all employees twice a month to
remind them about all of the wellness programs they offer. Cigna also sends a newsletter to all
8/2/2019 Matthew d Sullivan - Cigna.fall2011
21/29
19
employees once a year and has multiple health and wellness teams that are on site. This will
reward Cigna in the form of fewer claims in the future, a happier employee at work, and an
employee that will be able to work longer in their lifetime.
Cigna has elected to self-insure the high deductible health plan after the HRA or HSA.
Cigna also has Cigna Healthcare as the administrator for these benefits through an ASO contract.
Cigna is comfortable self-insuring because they are a huge firm with stable income and a stable
outlook in the future4. Cigna has also decided to self-insure these benefits because they believe
their claims history is very credible and that they have taken the proper steps to contain costs and
promote less unnecessary consumption of healthcare. During plan design meetings, Mr. Wolf
has compared the claims experience to that of Cignas book of business and it has always been
lower for Cigna employees. He attributes this to the increase awareness through the health and
wellness programs and also the free preventive care benefits that are offered through their
medical plans. Cigna believes if preventive care is free to employees they will utilize it more
when necessary and can possibly avoid extremely large claims in the future. With the consistent
increasing of costs in healthcare, this cannot be understated5. Due to the programs and benefits
that Cigna offers their employees in health benefits, they have been able stay below the average
claims in their book of business. This is proof that the health and wellness programs and
initiatives they are offering have been effective and are helping save Cigna money. Even though
some of these programs might be expensive to implement and maintain, they have proved to be
worth it which is why Cigna continues them and is always expanding these initiatives.
4www.ambest.com
5Bulk Pack Article: U.S. Health Care Trend Survey, Summer 2010
8/2/2019 Matthew d Sullivan - Cigna.fall2011
22/29
20
Flexible Spending Account (FSA)
Cigna provides their current employees with a Flexible Spending Account (FSA) option
to help cover their medical expenses they incur. Employees do participate in this plan and Cigna
has noticed many choose to complement their HRA or HSA with an FSA. Even though Cigna
provides no financing through this plan, employees have shown their appreciation of before-tax
payroll deductions in the fact that they are participating in this plan. Cigna administers this plan
on their own with employees financing on a fully-contributory basis.
Cigna still allows their employees to contribute up to $5,000 but this amount will be
decreased to $2,500 beginning in 2013 due to PPACA6. This might cause some frustration with
employees, especially the ones that rely solely on the FSA to cover medical expenses, but this is
not something that Cigna can control. They have begun to communicate this change to their
employees and there has been no backlash as of yet, but Cigna does expect some when the
changes go into effect in 2013.
Retiree Healthcare
Cigna has decided to offer three options of retiree healthcare benefits to their former
employees. These plans consist of: Retiree HMO, Retire POS, and Retiree Indemnity. They
have elected to continue these benefits for their retirees because that is what their former
employees are most comfortable with. Cigna views their retirees as stubborn in a sense and
would not be very receptive to change. They feel as though their retirees appreciate the option of
these three plans and they can elect which level of freedom they need in their healthcare options.
If a retiree is mostly concerned with cost, Cigna provides the HMO option and if they want more
6Bulk Pack Article: Preparing for Health Care Reform A Chronological Guide for Employers
8/2/2019 Matthew d Sullivan - Cigna.fall2011
23/29
21
freedom, they have the indemnity option. Cigna believes this is key because their retirees have
different mindsets when it comes to healthcare after retirement.
Cigna self-insures these plans as well and administers them though an ASO contract with
Cigna Healthcare. The reasoning behind this is mainly that they are a stable, huge firm and
believe they can control costs and end up with a lesser price than if they went out and purchased
these options. Also, the wide location of Cigna retirees, could pose a problem if they looked to
receive coverage.
In the future, Cigna is moving towards dropping these HMO and PPO options and
providing an indemnity wrap-around option. They have already begun offering this to their
retired employees and believe it provides the best coverage and value to them. This indemnity
wrap-around would provide coverage for medical expenses that Medicare does not cover or after
coverage is exhausted through Medicare. So far, Cigna believes this option has been effective in
providing the best coverage for their retired employees at the lowest cost and has reinforced their
plan to drop the HMO and PPO options.
Long Term Care
Currently Cigna offers Long Term Care coverage by means of a voluntary benefit with
Marsh. The convenience factor is prevalent for employees7. They enjoy the fact that if they
elect coverage, they do not have to make any premium payments and Cigna will automatically
deduct their pay after-tax. While looking towards the future, Cigna is beginning to think about
offering Long Term Care on a contributory basis. They need to research the industry to see what
their competition is offering their employees. While Long Term Care is not as big of a factor as
7Bulk Pack Article: Pricing Worksite Benefits Right: The Best Price is Not Always the Lowest When it Comes to
Voluntary
8/2/2019 Matthew d Sullivan - Cigna.fall2011
24/29
22
medical plans, employees with knowledge in the benefits field might start factoring this into their
decision. During the current economy while many employers are dropping benefits or making
them less rich, Cigna might elect to continue offering this as a voluntary benefit until the
competition requires them to make an adjustment. But Cigna also knows how important it has
been for them to stay ahead of the industry.
Design of Other Types of Non-Retirement Benefits
Cigna holds a standpoint, when it comes to employee benefits in general, of offering
great value to their employees at low cost to Cigna. When offering other types of benefits, it is
essential for Cigna to capture what their employees truly value. Cigna has found that their
employees truly value work-life balance benefits. Some of the main benefits Cigna offers to
their employees would be their Paid Time Off (PTO), vacation days, Employee Assistance
Program (EAP) and Transitional Work Arrangement (TWA). Employees value the sense that
Cigna truly cares about them and that their personal life is important as well. After healthcare,
Cigna employees value these work-life balance benefits very highly. Communication of these
benefits is extremely important. Employees need to know of these benefits to fully understand
the notion that Cigna truly does care about them.
Other benefits that employees value are their Severance and Disability benefits. Cigna
employees want a sense of security. Cigna employees want security in their income if their
employment with Cigna is to end. The severance package Cigna offers is rich in comparison to
others and Cigna employees value this highly. They also value the Short Term and Long Term
Disability benefits that Cigna provides. If anything is to happen, employees know they have
security from Cigna. The STD and LTD benefits that Cigna offers are extensive and can cover
8/2/2019 Matthew d Sullivan - Cigna.fall2011
25/29
23
anything from occupational to non-occupational accidents. This satisfies Cigna employees that
know they will be covered no matter what the cause.
Cigna also offers voluntary benefits to their employees through a contract with Marsh.
Some of the benefits covered under this contract are Group Auto, Group Homeowners, and Pet
Insurance. These benefits are offered on a voluntary basis, so employees do pay the entire cost,
but Cigna believes that their employees appreciate the fact that Cigna acknowledges their
personal exposures and provides an outlet for them to cover these expenses. Even though the
employees are paying the entire cost, Cigna appears noble by their concern for their employees.
Regulatory Compliance
Cigna utilizes all of their resources to remain in compliance with the regulations of
HIPAA, ERISA, PPACA and COBRA. Cigna has employees that concentrate on compliance
with these regulations and retain lawyers to ensure compliance. They have taken great pride in
the fact that they have been ahead of most of these regulations and stress attention to detail when
designing each benefit to ensure regulatory compliance.
Cigna has taken appropriate measures to ensure compliance with HIPAA. Cigna is
especially exposed to violations of HIPAA with the utilization of many health and wellness
programs. To ensure compliance with HIPAA8, Cigna has made a point to not offer advantages
for losing weight or other milestones like that. Rather, Cigna offers advantages for just
participating in certain programs. There are no requirements to meet, other than just attend.
Cigna views attendance in these programs as enough to get employees to consciously view their
personal health and hopefully make the necessary changes to create a healthier lifestyle.
8Bulk Pack Article: Overview: Final Regulations on HIPAA Nondiscrimination Provisions and Wellness Programs
8/2/2019 Matthew d Sullivan - Cigna.fall2011
26/29
24
For COBRA compliance, Cigna contracts with an organization called Ceridian. Once an
employee has become COBRA eligible, Cigna will provide Ceridian with the information of the
qualified beneficiary and Ceridian handles the rest of the administrative process. Although this
does not exempt Cigna from any fiduciary responsibility, Cigna prefers the administrative
process to be taken care of by an outside party. Cigna contracts with Ceridian for all of their
benefits they offer to their employees and provides their contact information in all of the SPDs so
employees can contact them at any time with any questions about continuation coverage.
To comply with PPACA Cigna actually has been very proactive in their adjustments.
Some regulations Cigna implemented before PPACA were lifetime maximums, preventive care,
waiting periods, and dependent child care9. Cigna had lifetime maximums in their plans but they
were eliminated. The old lifetime maximum that Cigna had was $2,000,000 per covered life but
when Cigna was hearing news about PPACA, they decided they would be ahead of the curve and
eliminated this stipulation. Cigna also implemented changes in free preventive care and waiting
periods. Cigna began offering preventive care at 100% coverage before it was required. Cigna
saw this as a great way to contain costs especially in their CDHPs. They also always offered no
waiting periods for their employees. Whenever an employee joins Cigna, coverage begins
immediately after an election of benefits. Cigna also was ahead of the curve in dependent child
care. Employees of Cigna were able to receive coverage for their children up to age 26 before
PPACA was even passed. These changes and the others required by PPACA have cost Cigna
millions of dollars to implement in their benefits plans. The amount of man-power and resources
it took to decipher the regulations and find out what they would need to change was daunting in
itself. Then Cigna actually had to make the changes to the SPDs and effectively communicate
9Bulk Pack Article: Preparing for Health Care Reform A Chronological Guide for Employers
8/2/2019 Matthew d Sullivan - Cigna.fall2011
27/29
25
all changes to every employee. This PPACA bill alone cost Cigna millions of dollars and is only
one example of the costs that are incurred when new regulation occurs.
As of yet, Cigna has not had any problems with complying with regulations. Cignas
outlook of the new regulations are double sided in the sense of what they are offering their
employees but also as their book of business to other firms. During the interview, Mr. Wolf
expressed the fear of the unknown in the future. Most of the PPACA regulations are not coming
until 20132018. He sees many employers struggling with the new regulations that will be
forthcoming, if they are even allowed, specifically the preexisting condition exclusions. For
Cigna, he believes there could be difficulties with multi state coverage. Cigna has employees in
all 50 states and even outside of the United States. How the states are going to respond to these
new regulations has yet to be seen and Mr. Wolf expressed the future in regulation is indefinite.
Conclusion
Overall, Cignas Signature Benefits Program is very rich and comprehensive for their
employees. Cigna takes a great deal of time and resources to ensure employees needs have been
met while also containing the cost of the benefits program. By implementing the new CDHP
benefits and providing extensive wellness programs, Cigna has been able to offer broad benefits
while consistently keeping low claims. Cigna takes their employees health very seriously and
are legitimately concerned with their well-being, which is what puts Cigna apart from the rest.
Whether it is through healthcare options, disability, or work-life options, Cigna truly cares about
their employees. The future is unknown but Cigna will always remain on top of the industry in
satisfying their employees needs.
8/2/2019 Matthew d Sullivan - Cigna.fall2011
28/29
26
Works Cited
AM Best. Web. 28 Nov. 2011. .
Cigna Corporation. Web. 28 Nov. 2011. .
Listed Bulk Pack Articles provided by Dr. Drennan
8/2/2019 Matthew d Sullivan - Cigna.fall2011
29/29