Part III: Benefits Analysis Township of Abington

RMI 3501: Fall 2011 912488801 912789091

Part I: Benefits Matrix

Loss Exposure
Medical Expenses Hospital/Physician Dental Vision Prescription Long Term Care Retiree Health Care

Covered?

Coverage/Benefit Provided

Yes Yes Yes Yes No Yes

AETNA: HMO Delta Dental Premier PPO; Fidelio Dental Plan AETNA: HMO Medco Prescription AETNA: HMO; Medicare Parts A & B; Humana Medicare Regional PPO

Loss of Income: Death Non-Accidental, Non-Occupational Death Accidental Death Occupational Death

Yes Yes Yes

OASDI, life insurance OASDI, life insurance, AD&D OASDI, workers compensation, life insurance, AD&D Unemployment insurance

Loss of Income: Unemployment Loss of Income: Disability Short Term, Non-Occupational Long Term, Non-Occupational Short Term, Occupational Long Term, Occupational

Yes

Yes Yes Yes Yes

OASDI, paid time off, sick leave OASDI, paid time off OASDI, workers compensation, paid time off, Heart and Lung Act OASDI, workers compensation, paid time off, Heart and Lung Act ICMA 457, Abington Employees Pension Plan

Loss of Income: Retirement

Yes

Other Exposures Educational Assistance Work/Life Dependent Care Property/Liability Legal Expenses

Yes Yes No No No

Tuition Reimbursement Wellness Initiative, Bereavement Leave, Employee Assistance Program

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Part II: Inventory of Benefits Introduction to the Healthcare Plan Township of Abington is located in Montgomery County, Pennsylvania. The township provides coverage for 825 employees and dependents, including retirees and spouses under the age of 65. Eligible employees are defined as full-time employees who work a minimum of 35 hours per week. The majority of the healthcare plan is funded by means of a Trust. Township of Abington is part of a collective bargaining unit with Delaware Valley Health Insurance Trust (DVHIT). Medical Expenses Health Maintenance Organization Plan (HMO) Township of Abington offers their eligible employees and dependents an HMO plan through Aetna, which received an A.M. Best rating of A+. Eligible employees are defined as employees who work a minimum of 35 hours per week and are considered full-time. Eligible dependants are defined as spouses and children until the age of 26. Employees contribute to the plan through bi-weekly payroll deductions of $25. The plan is self-funded through Delaware Valley Health Insurance Trust (DVHIT). DVHIT is governed by a Board of Trustees that is made up of a representative from each municipality with each representative being given one vote of equal weight. Annual contributions are made to the Trust that must be sufficient to fund expected claim costs, administrative expenses, and a recommended risk margin. If there are any excess funds they are returned to members through rate stabilization fund (RSF) credits. The members can choose to use the credits allocated to reduce annual premium contributions due or to roll the balance forward to future years. The Trust contracts with Aetna for use of its medical provider network. Aetna allows members to choose whether to stay in network or go out of

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network. If members stay in network they will have either a $15 copay or 100% coverage, depending on the service; if members go out of network they are forced to bear all costs as if they did not have insurance. Members are able to use Aetnas website to see whether their doctor or specialist is in network and the comparative costs for choosing to stay in network versus going out of network. Employees have the option of waiving coverage in return for $1,000 which is distributed each January. Dental Township of Abington offers employees the choice between two dental plans in the form of Delta Dental Premier Plan (PPO) or Fidelio Dental Plan. Delta Dental received an A rating from A.M. Best while Fidelio Dental was not rated. Both plans are offered to all eligible employees and dependents on a non-contributory basis. The plans are funded through Trust dollars that are then used to purchase insurance. Delta Dental is administered by DVHIT. Eligible members for Delta Dental are full-time employees, spouses and eligible dependent children to age 19 or to the end of the month of their 23rd birthday if the dependent is a full-time student. Once an employee enrolls, some limitations or waiting periods may apply for some benefits. There is a $25 per person or $75 per family deductible for each calendar year, with a $1,500 per person each year maximum. Deductibles for diagnostic and preventive (D & P) and orthodontics are waived, but they do count towards the maximum and there is a $1,000 lifetime limit for orthodontic care. Delta Dental provides the same percentage of coverage whether the member chooses to stay in network or go out of network; although costs are usually lowest when you use a PPO dentist. The other option that employees have is dental coverage through Fidelio Dental Plan. Eligible employees for this plan are full-time regular employees that work at least 35 hours per week. Eligible dependents are spouses, unmarried children who are less than 19

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years old or less than 23 years old if he/she is a full-time student, and unmarried children who are mentally or physically incapable of earning a living. Fidelio Dental Plan offers its members three choices: Core Dental Office, PPO Panel, and Out of Network Offices. The Core Dental Office uses Dr. Cacovean and has no balance billing, no deductible, no pre-determination requirement, and accepts Fidelios payment as payment in full except Periodontia, where there is a 50% co-pay. The PPO Panel has ten office locations to choose from and has no balance billing, no deductible, a minimal co-payment and requires pre-determination for any treatment plan over $200. If members choose to go to out of network offices then they are responsible for balance billing, deductibles, and co-payments and are required pre-determination testing for any plan treatment over $200. The predetermination that is used for members of the PPO panel and out of network is done to provide the dentist with verification of the patients eligibility and availability of benefits. This also allows the patient to be aware of the out of pocket expense before work is started. The maximum benefit per year for the PPO panel and out of network offices is $1,500 per person for covered dental expenses, whereas members who choose to use the core dental office receive an annual benefit of $2,000. Vision Township of Abington offers coverage for vision through their HMO with Aetna for eligible employees and dependents. Members of the HMO are covered 100% with no copay for vision exams every 24 months. In addition, members also receive a lens reimbursement of $150 every 24 months. Prescription Drug Township of Abington offers prescription drug coverage on a contributory basis for all full-time employees and their eligible dependents through Medco Prescription coverage with

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Delaware Valley Prescriptions. Medco Prescription received a rating of A- from A.M. Best. The plan makes it mandatory that generic drugs be given if available. When filling prescriptions, the plan allows for a maximum 30-day supply if done at a pharmacy and a 90-day supply if done through mail-order. The Township of Abington provides and pays for the prescription insurance, but members are required to share the costs through a co-pay of $10 generic/$20 non-generic and $10 mail order generic/$20 mail order non-generic. Employees have the option to waive prescription drug coverage in return for a payment of $500, which is distributed every January. Retiree Health Care Township of Abington offers retirees and their spouses continuation coverage of health insurance for all full time employees who retire with the township. Those members who are eligible and choose to retire before the age of 65 stay on the Aetna HMO plan. Those members who retire at age 65 must apply for Medicare coverage A and B. Eligible retirees can receive supplemental coverage through the Humana Passive RPPO, who administers the plan. The plan received an A- rating from AM Best. The plan includes a prescription drug schedule and is broken down into four tiers, with corresponding copayments for each tier. Members may receive prescriptions either through the mail or through pharmacies within the network of the RPPO. If a member goes outside the network of pharmacies, then the member must contribute the same cost sharing as they would in the network, as well as the difference between the out of network pharmacy price and in network pharmacy price. Along with this, RPPO plan retirees are given the option to buy up for prescription drugs, but will have to pay the difference in the premium. Loss of Income: Death Township of Abington provides life insurance for full-time employees through The Hartford Life Insurance Company, which received an A.M. Best rating of A+. The value of life
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insurance is equal to two times the employees base salary. The township also provides a policy of life insurance for each retired employee with a value of $3,500. In addition Township of Abington provides AD&D to full-time employees, also through The Hartford. This benefit is provided on a non-contributory basis and is funded with Trust dollars. Loss of Income: Unemployment Township of Abington only offers unemployment insurance through the social insurance program. Loss of Income: Disability Short-Term Disability Township of Abington provides short-term disability for both non-occupational and occupational disabilities on a noncontributory basis. Full-time employees who require shortterm, non-occupational disability receive full pay up to 90 days. They are granted only one ninety day period of full pay within a twelve month time frame for any lost time due to the same illness/disability. For disabilities that occur while on the job, full-time employees receive their full pay, less any workers compensation, up to 90 days. Full-time employees also have the option of purchasing disability insurance through AFLAC, which has an A.M. Best rating of A+. The benefit is offered on a voluntary, fully contributory basis. There is no enrollment period for this benefit and employees may enroll at any time during the year. To help employees with loss of income due to sickness, Township of Abington provides paid time off for sickness. Full-time employees receive an unlimited amount of paid sick days. If the employee is sick for three or more consecutive days a doctors note is required in order to qualify for sick leave. Long-Term Disability Township of Abington provides long-term disability for non-occupational and

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occupational disabilities. Starting on the 91st day of disability full-time employees receive onehalf of his/her gross pay, less any taxes and compensation from OASDI. Full-time employees that become disabled on the job are offered the same benefit, less any payment from workers compensation. These payments continue until the age of 65, unless the employee elects early retirement. In addition to the benefits provided by Township of Abington, full-time employees have the option of purchasing disability insurance. As previously stated this disability insurance is offered on a voluntary, fully contributory basis by AFLAC. Temporary Disability: Police Officers Police Officers can receive an additional benefit due to occupational disability. This benefit is self-insured and funded through the DVHIT. Under the Heart and Lung Act, police officers, and other public safety personnel, who become temporarily disabled in the line of duty, are removed from the workers compensation system and are given more comprehensive benefits. To be eligible the employee must be injured while on-duty and while performing an act within the realm of their job description. The injury must be temporary with recovery in the foreseeable future and officers must apply to receive the benefits. Each case is analyzed and eligibility is determined by the borough. The employee is entitled to their full pay, which is not subject to state or federal income tax, but is subject to Medicare and FICA taxes for the first six months. The benefit begins on the next regularly scheduled work day after the injury was sustained. In addition to pay, the employee is entitled to the accumulation of vacation, sick, personal, and other leave time which they would not have otherwise been entitled to past 45 days. Also, employees are compensated for any medical or hospital bills. Benefits are provided until the employee returns to work or it is determined that the injury is permanent. Retirement

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All employees of Township of Abington are to participate in the Abington Employees Pension Plan. The plan is self-funded by the township and is done on a contributory basis through payroll deductions. In order to receive full pension, full-time employees must meet retirement conditions, which can either be a combination of years of service or the normal retirement age. Civilians are able to retire with full pension when their age and years of service is equal to 85 and sworn officers are able to retire with full pension when they are at least 50 years of age and have at least 25 years of service. The normal retirement benefit is calculated by multiplying 2% of the Average Applicable Compensation by the number of years of participation completed. Employees are 100% vested after five years of service. Employees who are under extreme financial distress are allowed to withdraw from the plan. Township of Abington also offers an ICMA 457, which is a deferred compensation plan. Full time employees can take a portion of their salaries and place it into this supplemental retirement savings with pre taxed dollars. The plan is financed through an employee pay all basis and is administered by ICMA. Other Exposures Educational Assistance Township of Abington offers tuition reimbursement for job related courses or degree programs for all full time employees based on years of service. For one year of service an employee will receive 20% tuition reimbursement and after five years of service the tuition reimbursement is 100%. Reimbursement will only be paid if the employee receives a C or better and they must file a copy of their transcript with their employer. Employees are also eligible to receive a 50% book reimbursement. If the employee leaves the Township for reasons other than

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retirement within a specified amount of time per degree they are responsible for repaying a portion of the tuition. Work and Life Benefits As part of the DVHIT, Township of Abington offers a member wellness initiative, which promotes healthier living styles. Members who want to join the program are required to get a comprehensive physical from a doctor. Once a member receives the physical the DVHIT will pay participants $100.00. After this payment, members will be eligible to receive treatment plans and educational programs in smoking cessation, weight management, healthy heart programs, and diabetes management classes. Members and their spouses have the option of participating in a fitness program which will reimburse members and spouses $250 each year after completion of 100 visits. Members and their eligible dependents are also eligible to participate in the Employee Assistance and Work life program provided by Human Management Services through DVHIT. The program offers counseling for work life issues including anxiety, depression, substance abuse, mental issues, and child, adolescent, and elder care. Another benefit Township of Abington provides is bereavement leave. Employees will receive paid time off for up to six days for the death of an immediate family member and three days paid time off for all other family members. If a full-time employee has less than six months of service then they are only eligible to receive three unpaid days off.

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Part III: Table of Contents

Introduction Overall Design Considerations in Offering Employee Benefit Goals Importance of Joining DVHIT Demographics Unions Funding and Financing Considerations Problems, Issues, Concerns, and Considerations in the Design of Health Benefits Aetna Indemnity vs. Aetna HMO Retirement: Combination of Years Served and Age Disability: Moral Hazard and Catastrophic Event Heart and Lung Act

Problems, Issues, Concerns, and Considerations in the Design of Non-Retirement Benefits Education Reimbursement Impact of Regulatory Compliance Health Reform Conclusion

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Part III: Benefits Analysis

Introduction Township of Abington is a small community located in the southeastern portion of Montgomery County, Pennsylvania. The community is continuously voted one of the Top 100 Best Places to Live by CNN Money magazine1. It is 15.5 square miles and, as of a 2010 census, has a population of 55,310. Township of Abington employs a full-time staff of 600: including police officers, waste collectors, clerical staff and other employees needed to smoothly run the township. During the process of analyzing the Township of Abingtons employee benefits plan we were in contact with Tara Wehmeyer, the Human Resource Coordinator, and Lieutenant Steven Hochwind, the Administrative Division Commander. Tara Wehmeyer is the administrator of the Township of Abingtons benefits plan and had key information in regard to the specifics in the plan. Before his promotion from sergeant to lieutenant, Lieutenant Hochwind was an executive board member of Abington Police Association. He had a major role in the design of the benefits given to sergeants, detectives, and patrol officers. This contributed to his vast knowledge on the philosophy behind the plan and the townships relationship with Delaware Valley Health Insurance Trust. Overall Design Considerations in Offering Employee Benefits Goals The Township of Abingtons goal has been to attract and retain capable employees by offering an extensive benefits package; so far it appears to be proven true. Lieutenant Hochwind said that when he was first hired as a police officer for Abington Township one of his friends from the Police Academy told him to switch to another township so he could make more money.
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It was an easy decision for Lieutenant Hochwind to stay with Abington because, he said, although his pay was lower than that of his comrades from other townships, he had a more extensive benefits package which he valued. Lieutenant Hochwind knew that with time and experience his pay would increase and he would have the best of both worlds: great pay and great benefits. When designing their benefit plan, the Township of Abington had to the cost of the plan and how much of it would be transferred to its employees. The main issue concerning employee benefits for townships is getting coverage for employees who are a much higher risk to insure, such as police officers, waste collectors, and sewer workers. In the past, the township was underwritten individually by an insurance company that specifically looked at the demographics and the risks associated with insuring the Township of Abington. By seeking insurance through the traditional market the township found that costs were sky rocketing and became too expensive for the township to afford. They had to seek other options that would keep costs down for their employees, while still offering lucrative benefits that attracted and retained employees. Importance of Joining DVHIT The Township of Abington is a member of Delaware Valley Health Insurance Trust (DVHIT). The trust was formed in 1999 with just fifteen members to insure; DVHIT has since grown substantially and today insures 83 public entities. DVHIT is owned, operated, and controlled by the members of the trust. The purpose of the trust is to create a large risk pool of similar exposures in order to spread the risk among all its members and receive a discount from insurance carriers. In order to become a member of DVHIT, a municipality seeking membership must provide the trust with copies of current invoices from medical, prescription drug and dental providers, current plan designs, current plan summaries, a current employee census, and a threePage 13 of 26

year health, dental and pharmacy rate history. Once they receive this information the current members of DVHIT will vote if two thirds agree then the municipality is accepted. This process that DVHIT uses is very critical because by looking at the past information of the township and then voting the trust members are essentially only pooling risks that they believe will be good and sustainable. This has led to the success of DVHIT, which over the past fifteen years has exceeded financial expectations; in fact it has been so successful that each year DVHIT has excess funds that are returned back to its members in forms of multi trust discounts and rate stabilization funds. By joining DVHIT, the Township of Abington was able to control the largest factor in designing there employee benefits package - costs. DVHIT also eliminated some of the administration and claims processing that were a burden on a township. The Township of Abington did not face any problems when applying to become a member of DVHIT because they had similar characteristics as the members previously in the trust and exhibited excellent claims history. The similarity among the members of the trust is important because it reduces adverse selection and prevents other members from subsidizing their costs. Without this process the trust would not exist and could not be sustainable in the long run. Demographics One of the most important factors that the Township of Abington needed to consider was the unique risks associated with the occupations that it must employ. When designing the benefit plan they need to consider these risks and offer plans that tailor towards the individuals needs. For instance, police officers are in the way of danger each time they are on duty; therefore they need to have an extensive benefits plan that will protect their health and financial needs. The Township of Abington does not use classes because they have determined that occupation, not
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class, is the best way to determine pricing. Unions Many of the employees of the Township of Abington are members of unions; the police officers are members of Abington Police Association, the waste collectors are in a union, and so on. The unions collectively bargain with the township as to which benefits they want to be offered. Lieutenant Hochwind noted that the township has negotiated fairly and none of the unions have had to go into arbitration. Union negotiations are a major consideration in the townships offering of employee benefits. The township must make sure that they follow the contracts provided to each occupation. Since clerical workers are not members of a union the Township of Abington must consider how they choose to offer benefits to these workers. They have typically offered benefits that are fairly consistent with the union contracts. The Township of Abington must also carefully consider who to appoint as their Trustee on the Board of Trustees of DVHIT. This is a key consideration because the township wants to be able to offer as many of their benefits through the trust as possible. Since each municipal member has only one vote of equal weight, the Trustee must have good communication skills and knowledge of employee benefits. This will be shown to be important when the Trustee for the Township of Abington brings to light a benefit that they feel should be offered or other considerations to the Board of Trustees. Funding and Financial Considerations The Township of Abington contributes money to DVHIT which then purchases insurance to provide their employees benefits. Employees contribute a percentage of their salary based on their occupation to the trust through payroll deductions. Since different occupations are associated with different amounts of risks it is important for the township to require a higher

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percentage of salary deduction to higher risk occupations. For example, clerical workers face a much lower risk than police officers, therefore the percent of their contribution is 3/4ths of one percent compared to the one percent that police officers contribute. The trust has largely been attributed to containing costs and keeping employee contributions to a minimum. This has been proven by the lack of an employer contribution. DVHIT is the crucial factor in funding and financing because the Township of Abington is able to spread their risks with a larger pool. This keeps costs down and allows the township to offer meaningful benefits. DVHIT determines how much each entity contributes by assessing past claims experience and the demographics each entity has. It is then the job of the township to determine how much each employee needs to contribute in order to meet the necessary requirements established by DVHIT. The Township of Abington goes through DVHIT for all of its benefits and pays for the benefits through trust dollars. The issue with going through DVHIT is that choices are limited to what they offer, but because this trust is tailored to townships with police departments it is able to offer benefits that meet members needs. Problems, Issues, Concerns, and Considerations in the Design of Health Benefits Aetna Indemnity vs. Aetna HMO The Township of Abington previously was enrolled in an indemnity plan offered by Aetna before switching to their current HMO. Under the indemnity plan costs were increasing rapidly and at a high rate. This became too costly for employees and the Township of Abington realized that the freedom of choice was not necessarily needed. Since the majority of the townships employees live within Abington or the surrounding communities an HMO was a better option. The HMO offered by Aetna allowed the employees healthcare costs to decrease

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by limiting the providers in the network. Lieutenant Hockland noted that he has not received negative feedback from the change, and in fact it was viewed positively. This change was viewed positively by employees because the cost decrease was significant enough that they did not mind the limited network. Also, the majority of employees did not have to switch providers when the indemnity plan was dropped which was another positive aspect. Another consideration that went into this change was the impact on the townships contributions. As the costs to offer an indemnity plan increased, so did the amount that the Township of Abington was forced to contribute to the trust. Since the switch, the township has not been forced to contribute any funds and their contributions to the trust were stabilized. Another issue that an HMO addresses is overutilization. Traditional indemnity plans increase consumption of health care goods and services because people enrolled in those plans see the cost as the price of their premium or payroll deduction. By switching to an HMO the employees are forced to educate themselves and become more aware of the costs associated with their health care, resulting in rational consumption. This has been proven by the decrease in claims made by employees of the Township of Abington in the years following the switch from an indemnity plan to an HMO. Retirement: Combination Years of Service and Age The Township of Abington had to consider the different occupations and their demands when designing their plan. A major consideration that had to be taken into account was the eligibility requirements for demanding occupations, such as police officers. The township chose to follow suit of other municipalities that had police forces and base their retirement eligibility on a combination of years of service and age. In order to be eligible for retirement police officers must be at least 50 years old and have 25 years of service. This was done because the township
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had to consider what was best for the township and their citizens. Since police work is considered a young persons job and very demanding it was necessary to have retirement eligibility start at 50 instead of 65. Without taking into account the demands of the occupation, the Township of Abington could end up having a police force of seniors who are not at the physical fitness which is required to perform their duties 100%. This consideration was necessary to protect both the officers and citizens. Disability: Moral Hazard and Catastrophic Event One of the biggest potential problems with this benefit plan is the townships choice to offer short term and long term disability on a non-contributory basis up to a certain amount of days. The plan allows any full time employee who becomes disabled on the job or off the job to get full paid salary up to 90 days for a short term disability and if they become disabled in the long term, they can receive one half his/her gross pay less any workers compensation. The money that is paid for disability claims comes from DVHIT. As a township that employs police officers and other hazardous occupations, it is necessary to protect them if they become injured on the job and off the job; however by allowing them to go on disability without contributing, Township of Abington is faced with a moral hazard issue. Most employers handle disability through insurance or workers compensation, which both force employees to contribute. By having employees contribute the employer is not as much at risk for false claims, which can drive up the cost of the program. The Township of Abington should change this program so they do not cover non-occupational injuries. With the program the way that it is currently, it is difficult for the township to protect against false short-term, non-occupational claims, which are hard to prove to be false.

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Another issue with funding disability on a non-contributory basis is that the township is at risk for a catastrophic event that could leave them insolvent. Given the nature of the occupations at the township if a large event were to occur and left several police officers injured, then the Township could be at risk for not having adequate funds to pay all the claims. This is why the Township of Abington may want to consider getting some excess coverage for disability to protect their solvency. By having insurance take over at a certain point the township can save them from losing all their funds from one event. The final part of disability that needs some consideration is the fact that these claims are paid by the trust. This means that both moral hazard and catastrophic events will have an effect on all the members involved in the trust. The trust can control the moral hazard from each township because if a township or entity has a large number of claims, their contributions to the trust will increase the following year or they will be forced out of the trust and required to get insurance elsewhere. It is important for the Township of Abington to understand that the DVHIT will not allow itself to go insolvent and any costs that go beyond the townships contributions will not be paid for by the trust. This puts a certain amount of responsibility back on the employer and helps protect the DVHIT. Heart and Lung Act Township of Abington is required to comply with the Heart and Lung Act for its police force. Similar to short-term disability, officers that have injuries that fall under the Heart and Lung Act are paid their full salary. Compliance with the Heart and Lung Act creates a moral hazard issue for the Township of Abington. While on disability officers are paid their full salary but their salary is not subject to state or federal income tax and only subject to FICA taxes for the first six months; this typically results in an increase in the amount the officers are receiving each
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paycheck. Taking the pay into consideration and the fact that the benefits may not be terminated without the permission of the officer, a large moral hazard issue is created. The Act states that individual municipalities must pay for the claims, which is an issue the township must greatly consider. The Township of Abington must make sure they are setting enough funds aside to pay for any claims that arise and consider purchasing Heart and Lung coverage. This coverage is not available through the traditional market and the township would have to purchase it from Penn PRIME. Problems, Issues, Concerns, and Considerations in the Design of Non-Retirement Benefits Education Reimbursement Township of Abington offers all full-time employees an opportunity to receive reimbursement for education they receive while employed. Offering education reimbursement was an important consideration when they approached the issue of the lowered retirement age for police officers. By offering education reimbursement police officers can receive a degree which can open them up to opportunities once they retire. Lieutenant Hockland noted that many officers do not necessarily like being eligible to retire at 50 but with other opportunities available to them it was not as bad. One of the Deputy Chiefs of Police received his PhD through the education reimbursement program and now teaches at three colleges and universities, in addition to his full-time job as Deputy Chief. With opportunities such as this the township is more likely to fulfill their goal of having officers retire early. Impact of Regulatory Compliance The benefit plan that the Township of Abington offers is excluded from ERISA because it is considered a local government. This means that they do not have to comply with the requirements under ERISA such as fiduciary duty, communication requirements, and minimum
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standards of operation. An issue that arises without the ERISA requirements is that the township is not required to have a summary plan description. SPDs are a huge factor in communicating the employee benefits and explaining what employees have coverage for. In place of an SPD, the township uses an employee manual that has the same content; however the manual the Township of Abington uses is old and not updated. Without the presence of an updated manual the employees are not receiving the right information about their plan because it has changed since the manual was created. The township should update their manual each year to provide employees with the correct information that is up to date. Without federal regulation the Township of Abington has to abide by the standards set forth by the DVHIT and must follow any state laws that apply to them. The DVHIT makes all members comply with COBRA and HIPAA requirements. One of benefits of being part of the trust is that they handle all the administration and on DVHITs website employees can fill out applications for COBRA coverage and the site provides a contact number for any questions with the coverage. On top of this, it is also the job of the township to communicate this information and explain to employees the details about COBRA. The township does this through emails and information sessions where employees can find out more and ask questions concerning COBRA coverage. HIPAA release forms are provided to employees on DVHIT website and must be filled out in order to file a claim. The role that the DVHIT plays in administering these requirements relieves the township of some responsibility, but places them in a position where they must communicate effectively in order for employees to understand what these requirements mean for them. For example, it is the job of the township to inform employees that pre-existing conditions may affect their ability to get coverage for the first twelve month unless they were previously insured.

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The Township of Abington is required to follow any state laws that apply to them and must comply. An example of this is, Act 600 of 1956 The Municipal Police Pension Law which applies to police pension plans. The act applies to any township with two or more police officers and it sets for guidelines for police pension plans and when they can retire. This is important act for the Township of Abington to understand because they must comply with the guidelines set forth by the act. This act has been in place for a long time and it is part of the townships routine to comply with this act. The township already budgeted to account for the changes in the police pension when the act first was established and today they do not have any issues complying with this act. Health Reform When we interviewed Lieutenant Hochwind he did not seem concerned about the changes that were coming in the future. His was confident that the trust would inform them of any changes and that the township would simply just have to comply with the trust changes. The issue with this is that the Lieutenant is underestimating what these changes could mean for the township. Some of the changes in health reform directly affect the current benefit plan the township has. The first change that will impact the townships health benefits plan is the no preexisting condition exclusion 2. This exclusion will no longer allow plans to exclude participants because of a previous health condition. The township will face an issue with this because by accepting participants with preexisting conditions the members of the benefit plan without a pre-existing condition may be subsidizing the cost of that participant. This can lead to issues with how much of this cost falls on the members of benefit plan and how much will be retained by the employer. Most likely this extra cost will fall on plan members and will drive the cost up and could result in healthy individuals dropping out to get coverage elsewhere.
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Another health reform change that will impact the Township of Abington is the no cost sharing for preventive care 2. This change will impact the administration of the plan because if it no longer done through cost sharing than their needs to be another way to get payments for this type of care. Another issue facing administration will be explaining to employees what is considered preventive care and what is not. This will probably be done through the trust; however it will be just important for the Township of Abington to understand so they can explain this change to their employees. The biggest change Township of Abington will face in general is adjusting to the changes and communicating them to the employees. One problem that may arise in these changes is a cost shift that the DVHIT may put on the townships in the trust. That is why it is important for the Township of Abington too understand the changes ahead of time, so they can implement ways to deal with the new problems that arise from the changes. Conclusion In the past few years, the Township of Abington has been able to offer a benefit plan that meets employees needs and keeps cost down. This was made possible through the membership in DVHIT. The membership was a simple solution to the past problems they faced with increasing costs; however the trust will have to undergo some changes in the next years to comply with health reform. The changes the trust makes could spark huge changes in the townships plan design in the upcoming years and as of right now Lieutenant Hochwind is not concerned.

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Works Cited 1. "Best Places to Live 2010 - Top 100: 26-50 - from MONEY Magazine." CNNMoney - Business, Financial
and Personal Finance News. Cable News Network, Aug. 2010. Web. 01 Dec. 2011. <http://money.cnn.com/magazines/moneymag/bplive/2010/top100/index2.html>. 2. Jones, Mark C. "Health Care Reform Update: Changes Plan Sponsors Should Make This Year." Pillsbury 8 Sept. 2010.

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December 3, 2011 Tara Wehmeyer Human Resource Coordinator Abington Township 1176 Old York Road Abington, PA 19001 Dear Tara, We want to start by saying thank you for all the documents you sent us and all the questions you were able to answer. The documents you sent us were extremely informative and gave us good in sight on what benefits the township offers and how they are funded. We really appreciate your ability to answer questions we sent you via email because we know how busy you are working and we hope we did not distract you too much. Without the documents and questions you answered we would not have been able to do the project. Once again Tara, thank you for taking the time out of your day to help us complete this project. Sincerely, Corey McCann and Katie Webb

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December 6, 2011 Lieutenant Steven Hochwind Administrative Division Commander Abington Township 1176 Old York Road Abington, PA 19001 Dear Lieutenant Hochwind, Thank you for taking the time out of your day to let us interview you. Your information regarding Abington Townships benefit plan and their membership in DVHIT allowed us to do a proper analysis of the plan. Your interview was a critical part of our project because if we did not get enough information we could not have done the project at all. Thank you for your inside knowledge about negotiations and how exactly the trust functions. We really appreciate you sharing that knowledge with us because all of your information provided us with the tools to do the project. Thank you again and we hope everything runs well this year with the townships employee benefit plan. Sincerely, Corey McCann and Katie Webb

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