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Attending: Lise Sanders, Steven Roof, Amy Diehl, Heather St. Germaine, Yaniris Fernandez, Hilary Clark, David Hoffmann (Strategic Benefit Advisors (SBA))
Welcome and introductions around the table. The group was given the opportunity to review minutes and ask follow-up questions from May 19, 2011 BAC meeting. The group was also provided with the Benefits Matrix, as requested, displaying benefit, number of participants, annual cost, employee cost, and cost to College.
The BAC reviewed the results of a Five College RFP for life and long term disability insurance focusing on the two most competitive vendors. David Hoffmann from Strategic Benefit Advisors (SBA), the College's benefits consultant/brokers, went over the structural difference of our current life insurance benefit set up which is a multiple of salary based on age bands and how it differs from all other clients he works with. The BAC discussed the possibility of making a change to the structural set up of the life insurance plan and changing the multiple of salary to a fixed number for all employees regardless of age. The BAC discussed the timing of this possible change.
Group life insurance rates are locked in for three years, but we are not locked into the insurance carrier if we are not happy with the administration of the benefit. We will need to make a decision about this in late August or early September. If the structure of the life insurance plan design is changed there may be some slight savings that can be reapplied to another benefit.
If the BAC recommended no change to the life insurance structure then it can be revisited in one year; however, the rates for a change at that time would likely not be as good, as there would be no Five College RFP support and we would likely negotiate with the vendor we were using at the time, without competitive bids from other insurers. If we move to a new structure in FY12 it would take effect January 1, 2012.
The RFP also included rates for supplemental life insurance for the employee only. This benefit has been requested by employees for many years and would give employees the opportunity to buy additional life insurance coverage for themselves through our group life insurance carrier. The rates for coverage are very competitive when compared to buying life insurance coverage on an employee's own. The supplemental life insurance would be a term life insurance policy that would carry an employee through the term of their employment with the option to convert the policy upon termination. In David's experience when supplemental life insurance is offered at other schools one to two thirds of employees sign up. In addition to supplemental life insurance for the employee, the BAC wants David Hoffmann to ask the vendors to also provide rates for dependent life insurance with lower coverage limits for spouse and children.
The BAC then moved on to talk about health insurance and some options that may be available for 2012. David Hoffmann presented a low cost/high deductible HMO that can be added to the other two plans that we have as a way to grapple with the increasing cost of healthcare. The world outside of higher education is moving this direction; higher education is slower to adopt these plans.
In the scenario presented a family on the low cost HMO plan would realize a premium savings of $1,380 per year ($115 per month) which could be used to offset the high deductible ($1,000 for family) if needed. In SBA's experience only a small number of employees move over to the new plan in the first year. This option is often selected by younger, healthier employees and other employees who can afford the out of pocket expenses.
The BAC also learned about a tiered health insurance benefit program where salary bands determine the cost-sharing rate and therefore premium amount paid by the employee for health insurance. This salary banded tier system can be found in higher education, but not so outside of higher education. David Hoffmann presented three different scenarios that would hold the portion of the health insurance premium paid for by the employee steady from 2011 to 2012 for those making under a certain amount of money (varies by scenario). The bands then go up from there with cost sharing between the College and the employee changing every $20,000 or $30,000.
If this option were adopted, 2012 would be the baseline year with no change in the amount lower wage earners pay towards health insurance, but in 2013 when insurance rates raise again all bands will see an increase. The impact is more significant for higher paid employees in this salary banded tier system. The two main challenges are as follows: 1) a low wage earner here may be married to a high wage earner, so their household income is high, but the tiered system only looks at the annual salary of the Hampshire employee; 2) if an employee is offered a raise that moves them into a new salary band part or all of the increased income might be eaten up by the change in health insurance contribution.
The BAC then explored another idea to lower health care costs for lower wage earners. This idea is a subsidy program that is currently used by Smith College. Employees that have a household income below a certain dollar amount per their most recent tax return (1040) will receive a certain amount of money per month to offset the cost of the employee plus one or family health insurance premium. The subsidy plan is easier to explain, understand and administer when compared with the salary banded tier plan.
The BAC will continue to review and prioritize benefits such as life insurance and health insurance to assess the overall value to employees. This will be important to consider because there may be opportunity to realize savings from one benefit that can then be applied to another benefit to add value and address a need as in the case of a health insurance subsidy for low wage earners.
The BAC will meet again on Thursday, August 25 from 9:00 a.m.-10:30 a.m. Please send all comments about these minutes to firstname.lastname@example.org and your comments will be shared with the committee.