The University Record, February 28, 1994

Evaluation of flexible benefits proposal in final stages

By Jane R. Elgass

More than 5,000 members of the University community were advised last week by letter that they are members of a pool of potential participants in a telephone survey on the proposed flexible benefits plan. A smaller group of actual participants will be drawn by random sample.

The survey, one activity in a series designed to gather as much faculty and staff input as possible, will begin this week, conducted by an independent organization, Intersearch, at the direction of the University’s Flexible Benefits Advisory Committee. Institute for Social Research survey experts helped develop the survey script and interview process.

The committee’s preliminary recommendation and report were included in a supplement to the Jan. 17 issue of The University Record that was mailed to all flex-eligible employees at their home address.

The committee has decided to delay presenting a final recommendation to the executive officers until mid-March, according to co-chairs engineering Prof. David J. Anderson and Associate Vice President for Finance Chandler W. Matthews. Information gained through the phone survey will be added to that gathered at open forums, and through e-mail, letters and phone calls received since the preliminary recommendation was announced, to help the committee shape its final recommendation.

For the phone survey, faculty and staff members will first be called at their workplace, explains Matthews. If that approach is unsuccessful, faculty and staff will be called at home. Everyone in the broader pool has an equal chance of being called.

Matthews says the large sample “was selected to assure that an appropriate number of calls is completed to fully represent the University population.

“In addition, we feel that calling faculty and staff first at their job will give us a better chance of directly contacting as many people as possible,” Matthews says. “We want to encourage those who are called to participate and provide input on what will be a major change in the structure of the University’s benefits program. Their comments are valued and will serve an important role in the development of our final recommendation.”

Telephone survey participants will be asked their opinion about the committee’s study of flexible benefits, features of the proposed plan, and how well the plan might meet their needs.

Several thousand individuals provided input on the flexible benefits concept last fall and more than 350 persons attended the seven open forums held in late January and early February. Anderson says many expressed support for the proposed plan, and “many expressed a need for more information and a better understanding of the proposal.”

Most of the comments and questions, he notes, focused on several areas:

n People are concerned about the inability of those electing one-person medical coverage under flexible benefits to buy back their current benefits without additional costs.

“This issue also was raised as one of inequity in subsidies among the one-person, two-person and three-or-more-person coverage levels,” Anderson says.

Using an example from the proposal, the portion of the basic flex dollars derived from medical insurance equals $195. Based on 1994 costs, those who elect one-person coverage under flex would pay an out-of-pocket expense for Blue Cross/Blue Shield of Michigan, M-CARE Triple Option and Care Choices. Those who elect one-person coverage under different plans would have excess flex dollars.

Instead of providing more flex dollars to people who elect higher-cost plans and fewer dollars to those who elect lower-cost plans, Matthews says the committee proposed providing everyone with an equal amount of flex dollars. “Today,” Anderson adds, “people who elect one-person coverage don’t see the difference in the plan costs. The University pays these expenses in full whether they are high- or low-cost plans.”

n Some individuals feel the proposed reduction in the number of sick days from 15 to 12 would be a disadvantage for many, especially those with short service. The allotment of three family days would not change.

In addition, others believe the abuse of sick time, an issue raised in earlier focus group discussions, should be addressed outside the benefits structure.

“Many feel the attendance incentive should be allocated on a one-day increment basis,” Anderson notes. “Others feel it is not a sufficient incentive to encourage careful use of sick days. Still others think it would encourage people to attend work when ill.”

In addition, he notes, “many perceive the incentive to be inequitable, as faculty members generally do not report their time. Many non-faculty areas also do not track time.”

The proposal calls for everyone to receive a $125 incentive in the first year of flexible benefits. In future years, the incentive amount would be tied to the staff member’s prior year’s use of sick days: the fewer the days used, the larger the incentive. Faculty members would continue to receive the $125 incentive.

n Some individuals might have to pay more for life insurance because rates would be paid on an after-tax basis and would depend on the individual’s age and smoker/non-smoker status.

Under the proposal, rates would be based on age and smoker/non-smoker status. Some people could pay more, others less. The proposal allows individuals to elect any amount of coverage, within plan limits, no matter what their age.

Today, coverage is provided in declining amounts based on age. The proposed plan also would allow individuals to convert to an individual policy when they leave the University.

Matthews notes that “because the life insurance market is competitive and because the University has significant purchasing power, younger smokers and non-smokers should be able to get lower rates for coverage. These reduced rates should more than offset the difference of paying pre-tax vs. post-tax. Currently, the advantages of paying pre-tax are offset by the imputed income tax that must be paid on any amounts of pre-tax life insurance over $50,000.”

Individuals should feel free to continue to contact committee members by mail, phone or e-mail. The entire group can be reached via e-mail at “flexcom”. Names and addresses of committee members appear in the box on page 3.