The document provides an overview and recommendations from the Faculty Benefits Committee regarding employee contributions to health insurance plans at Penn State. It discusses the history of contribution models and recommends returning to a modest salary indexing model from 2012. It also finds evidence of cost shifting between the university's PPO Blue and PPO Savings plans, with higher-income employees in the PPO Savings plan receiving substantially larger university contributions. The committee recommends eliminating differences in university contributions between plans and income levels to provide equitable compensation.

1. FACULTY BENEFITS COMMITTEE OVERVIEW
OF CONTRIBUTIONS REPORT
MARCH 17, 2015

2. RECOMMENDATIONS 1
REFINE DEFINITION OF EMPLOYEE CONTRIBUTION
Insurance Coverage Overall
Include New Fees as Part of
the Employee Contribution
• Out of Pocket Expenses
• Deductibles
• Coinsurance
• Surcharges
Penn State
Contribution
73%
Employee
Contribution
18%
Employee
(Other)
9%
• Recommendation 1 provides that the university will include non traditional expenses (out of pocket expenses,
deductibles, coinsurance and surcharges) in its calculation of employee contributions.

3. RECOMMENDATIONS 2
REITERATING 1998 JOINT COMMITTEE ON BENEFITS AGREEMENT
Penn State
Contribution
80%
Employee
Contribution
20% Penn State
Contribution
70%
Employee
Contribution
30%
Insurance Coverage for Employees Insurance Coverage for Dependents
• Recommendation 2 asserts that the university should continue to support faculty benefits consistent with the
principles established in the 1998 Joint Committee on Benefits agreement.

4. RECOMMENDATIONS 3: END STEEP SALARY INDEXING
FLAT BENEFITS CONTRIBUTIONS MODEL (2010)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
No Indexing (2010)
$0
$50
$100
$150
$200
$250
No Indexing (2010)
• In 2010 all employees paid a set contribution to participate in the university healthcare system.
Monthly Contribution Contribution as a Percent of Income

5. MODEST SALARY INDEXING
BASED ON THE AUGUST 30, 2011 SENATE REPORT
• Employee contribution for healthcare based on annual base salary;
• Those making $45,000 or less will contribute the flat percentage as indicated on the chart;
• Those making over $45,000 will contribute a percentage that has been modeled by actuarial
experts; the basic premise of the model is that the more an individual earns, the more the
individual will pay toward healthcare;
• This model provides for a cap of the employee contribution at an annual base salary of
$121,000;
• Monthly and annual savings for employees would be significant for the majority of faculty
and staff based on this model.
• In August of 2011, the Faculty Benefits committee reported on a plan to index
contributions to income.

6. RECOMMENDATIONS 3: END STEEP SALARY INDEXING
MODEST SALARY INDEXING MODEL (2012)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
No Indexing (2010) Modest Indexing (2012)
$0
$50
$100
$150
$200
$250
No Indexing (2010) Modest Indexing (2012)
• The August 2011 modest indexing plan was implemented in 2012.
Monthly Contribution Contribution as a Percent of Income

7. 0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Modest Indexing (2012) Steep Indexing (2014)
$0
$50
$100
$150
$200
$250
Modest Indexing (2012) Steep Indexing (2014)
RECOMMENDATIONS 3: END STEEP SALARY INDEXING
STEEP SALARY INDEXING MODEL (2014)
The university adopted a steep indexing plan based on a flat percentage of income. This led to noticeable spikes in contribution rates
in PPO Blue. (The committee has no evidence that the administration consulted either the Senate or the Faculty Benefits Committee
before applying the steep salary indexing to university employees.)
Monthly Contribution Contribution as a Percent of Income

8. RECOMMENDATIONS 3: END STEEP SALARY INDEXING
CALLS FOR A RETURN TO MODEST INDEXING PLAN
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Modest Indexing (2012)
$0
$50
$100
$150
$200
$250
Modest Indexing (2012)
• Recommendation 3 calls on the university to return to the modest indexing agreed to in 2011.
Monthly Contribution Contribution as a Percent of Income

9. • Over the summer, the committee became aware of possible cost shifting as the increases on
the higher income employees seemingly exceeded the decreases in lower income employees.
RECOMMENDATIONS 4: EQUITABLE COMPENSATION
CONCERNS ABOUT COST SHIFTING

10. Income 25K 30K 35K 45K 50K 60K 70K 75K 85K 100K 140K Total
PPO Blue
Employee Only -$40,000 -$50,000 -$130,000 -$57,000 -$31,000 $46,000 $37,000 $78,000 $108,000 $203,000 $196,000 $360,000
Employee + Spouse -$22,000 -$37,000 -$116,000 -$55,000 -$24,000 $43,000 $44,000 $96,000 $159,000 $405,000 $395,000 $888,000
Employee + Child(ren) -$15,000 -$30,000 -$81,000 -$29,000 -$19,000 $26,000 $21,000 $45,000 $73,000 $128,000 $76,000 $195,000
Family -$62,000 -$92,000 -$295,000 -$130,000 -$78,000 $130,000 $104,000 $290,000 $449,000 $870,000 $675,000 $1,861,000
Subtotal -$139,000 -$209,000 -$622,000 -$271,000 -$152,000 $245,000 $206,000 $509,000 $789,000 $1,606,000 $1,342,000 $3,304,000
Income 25K 30K 35K 45K 50K 60K 70K 75K 85K 100K 140K Total
PPO Blue
Employee Only
-$1,393,000.00 $4,697,000.00
360,000
Employee + Spouse 888,000
Employee + Child(ren) 195,000
Family 1,861,000
Subtotal (139,000) (209,000) (622,000) (271,000) (152,000) 245,000 206,000 509,000 789,000 1,606,000 1,342,000 3,304,000
RECOMMENDATIONS 4: EQUITABLE COMPENSATION
INCREASES DID INDEED EXCEED DECREASES IN PPO BLUE
• HR confirmed that in 2014, the University raised rates in the PPO Blue plan by $3.3 million.

11. Income 25K 30K 35K 45K 50K 60K 70K 75K 85K 100K 140K Total
PPO Blue
Employee Only
-$1,393,000.00 $4,697,000.00
360,000
Employee + Spouse 888,000
Employee + Child(ren) 195,000
Family 1,861,000
Subtotal (139,000) (209,000) (622,000) (271,000) (152,000) 245,000 206,000 509,000 789,000 1,606,000 1,342,000 3,304,000
RECOMMENDATIONS 4: EQUITABLE COMPENSATION
WHERE DID THE MONEY GO?
PPO Savings
Employee Only
-$760,000.00 -$2,310,000.00
(503,000)
Employee + Spouse (416,000)
Employee + Child(ren) (172,000)
Family (1,979,000)
Subtotal (36,000) (63,000) (234,000) (151,000) (276,000) (318,000) (176,000) (318,000) (376,000) (651,000) (471,000) (3,070,000)
Total (175,000) (272,000) (856,000) (422,000) (428,000) (73,000) 30,000 191,000 413,000 955,000 871,000 234,000
• The $3.3 million in new contributions was offset by $3 million in cuts to those in the new PPO Savings Plan.

12. Roughly $3 million in higher premiums paid by most PPO Blue members is effectively subsidizing
(with artificially low contribution rates) the 17% of university employees in the PPO Savings plan.
PPO Blue
Traditional
Insurance
83%*
PPO
Savings
High
Deductible
Insurance
17%*
RECOMMENDATIONS 4: EQUITABLE COMPENSATION
THE IMPACT OF THE COST SHIFTING
$
*Approximate percentage of employees in each health insurance system.

13. Employees Earning $140k PSU Employee
Plan Type True Cost Contribution Contribution
Individual only $515.04 $310.87 $204.17
Two Person $1,159.25 $663.42 $495.83
Parent/Child(ren) $1,115.78 $656.11 $459.67
Family $1,494.18 $860.68 $633.50
CALCULATING PENN STATE’S TRUE CONTRIBUTION
True Cost = $515.04 per month
Employee Contribution = $204.17 per month
PSU’s Contribution = $310.87 per month
• To assess the cost shifting, the committee calculated the university’s per person contribution by subtracting
the employee contribution from the true cost of the insurance.

14. PROVIDING FOR EQUITABLE COMPENSATION
Plan by Income Bracket
Employees Earning $25,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $60,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $100,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $478.58 $36.46 7.1%
$1,159.25 $1,070.71 $88.54 7.6%
$1,115.78 $1,033.70 $82.08 7.4%
$1,494.18 $1,381.05 $113.13 7.6%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $427.54 $87.50 17.0%
$1,159.25 $946.75 $212.50 18.3%
$1,115.78 $918.78 $197.00 17.7%
$1,494.18 $1,222.68 $271.50 18.2%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $369.21 $145.83 28.3%
$1,159.25 $805.08 $354.17 30.6%
$1,115.78 $787.45 $328.33 29.4%
$1,494.18 $1,041.68 $452.50 30.3%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $310.87 $204.17 39.6%
$1,159.25 $663.42 $495.83 42.8%
$1,115.78 $656.11 $459.67 41.2%
$1,494.18 $860.68 $633.50 42.4%
PPO Blue (Current)
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $451.20 $10.42 2.3%
$1,030.67 $1,005.46 $25.21 2.4%
$994.52 $971.19 $23.33 2.3%
$1,309.18 $1,276.89 $32.29 2.5%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $436.62 $25.00 5.4%
$1,030.67 $970.17 $60.50 5.9%
$994.52 $938.52 $56.00 5.6%
$1,309.18 $1,231.68 $77.50 5.9%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $419.95 $41.67 9.0%
$1,030.67 $929.84 $100.83 9.8%
$994.52 $901.19 $93.33 9.4%
$1,309.18 $1,180.01 $129.17 9.9%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $403.29 $58.33 12.6%
$1,030.67 $859.50 $171.17 16.6%
$994.52 $863.85 $130.67 13.1%
$1,309.18 $1,128.35 $180.83 13.8%
PPO Savings (Current)
• Looking at employees
at the same income
level, the committee
compared the
university’s insurance
contribution between
the two plans.
• From $25k-$60k there
is relatively little
difference.
• Over $60k, the
university is providing
extra support for those
enrolled in the PPO
Savings plan.

15. INCENTIVIZING EMPLOYEES TO ABANDON TRADITIONAL HEALTH
INSURANCE
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
PSU Employee
True Cost Contribution Contribution
$515.04 $310.87 $204.17
$1,159.25 $663.42 $495.83
$1,115.78 $656.11 $459.67
$1,494.18 $860.68 $633.50
PSU Employee
True Cost Contribution Contribution
$461.62 $403.29 $58.33
$1,030.67 $859.50 $171.17
$994.52 $863.85 $130.67
$1,309.18 $1,128.35 $180.83
PSU Contribution PSU Contribution
Blue vs. Savings Blue vs. Savings
-$92.42 -$1,109.04
-$196.08 -$2,352.96
-$207.74 -$2,492.88
-$267.67 -$3,212.04
PPO Blue (Traditional) PPO Savings (High Deductible)
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
• The greatest gap falls at or
above the $140k level. The
university is providing an extra
$1100-$3200 compensation
for those enrolled in the PPO
Savings plan.
Diff Monthly Diff Yearly

16. PROVIDING FOR EQUITABLE COMPENSATION
4.3 Eliminating the Differences in Penn State Contributions by Health Plan and Income*
Plan by Income Bracket Monthly Difference Annual Difference
Employees Earning $25,000 PSU Employee PSU Employee PSU Contribution PSU Contribution
Plan Type True Cost Contribution Contribution Emp % True Cost Contribution Contribution Emp % Blue vs. Savings Blue vs. Savings
Individual only $515.04 $476.14 $38.90 7.6% $461.62 $476.14 -$14.52** -3.1% $0.00 $0.00
Two Person $1,159.25 $1,064.90 $94.35 8.1% $1,030.67 $1,064.90 -$34.23** -3.3% $0.00 $0.00
Parent/Child(ren) $1,115.78 $1,028.13 $87.65 7.9% $994.52 $1,028.13 -$33.61** -3.4% $0.00 $0.00
Family $1,494.18 $1,371.78 $122.40 8.2% $1,309.18 $1,371.78 -$62.60** -4.8% $0.00 $0.00
Employees Earning $60,000 PSU Employee PSU Employee PSU Contribution PSU Contribution
Plan Type True Cost Contribution Contribution Emp % True Cost Contribution Contribution Emp % Blue vs. Savings Blue vs. Savings
Individual only $515.04 $429.14 $85.90 16.7% $461.62 $429.14 $32.48 7.0% $0.00 $0.00
Two Person $1,159.25 $950.87 $208.38 18.0% $1,030.67 $950.87 $79.80 7.7% $0.00 $0.00
Parent/Child(ren) $1,115.78 $922.26 $193.52 17.3% $994.52 $922.26 $72.26 7.3% $0.00 $0.00
Family $1,494.18 $1,224.26 $269.92 18.1% $1,309.18 $1,224.26 $84.92 6.5% $0.00 $0.00
Employees Earning $100,000 PSU Employee PSU Employee PSU Contribution PSU Contribution
Plan Type True Cost Contribution Contribution Emp % True Cost Contribution Contribution Emp % Blue vs. Savings Blue vs. Savings
Individual only $515.04 $384.07 $130.97 25.4% $461.62 $384.07 $77.55 16.8% $0.00 $0.00
Two Person $1,159.25 $841.63 $317.62 27.4% $1,030.67 $841.63 $189.04 18.3% $0.00 $0.00
Parent/Child(ren) $1,115.78 $820.77 $295.01 26.4% $994.52 $820.77 $173.75 17.5% $0.00 $0.00
Family $1,494.18 $1,082.20 $411.98 27.6% $1,309.18 $1,082.20 $226.98 17.3% $0.00 $0.00
Employees Earning $140,000 PSU Employee PSU Employee PSU Contribution PSU Contribution
Plan Type True Cost Contribution Contribution Emp % True Cost Contribution Contribution Emp % Blue vs. Savings Blue vs. Savings
Individual only $515.04 $343.60 $171.44 33.3% $461.62 $343.60 $118.02 25.6% $0.00 $0.00
Two Person $1,159.25 $732.86 $426.39 36.8% $1,030.67 $732.86 $297.81 28.9% $0.00 $0.00
Parent/Child(ren) $1,115.78 $729.68 $386.10 34.6% $994.52 $729.68 $264.84 26.6% $0.00 $0.00
Family $1,494.18 $955.47 $538.71 36.1% $1,309.18 $955.47 $353.71 27.0% $0.00 $0.00
PPO Blue (Revised) PPO Savings (Revised) • Recommendation 4 proposes
that the university provide
equitable compensation to all
employees within the same
income bracket.
• Regardless of their chosen
plan, the university would
provide identical support for
employees at the same
income bracket.
• Table 4.3 estimates the impact
of ending the indirect subsidy
of the PPO Savings plan.

17. PSU Employee
True Cost Contribution Contribution
$515.04 $343.60 $171.44
$1,159.25 $732.86 $426.39
$1,115.78 $729.68 $386.10
$1,494.18 $955.47 $538.71
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
PSU Employee
True Cost Contribution Contribution
$461.62 $343.60 $118.02
$1,030.67 $732.86 $297.81
$994.52 $729.68 $264.84
$1,309.18 $955.47 $353.71
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
PSU Contribution PSU Contribution
Blue vs. Savings Blue vs. Savings
$0.00 $0.00
$0.00 $0.00
$0.00 $0.00
$0.00 $0.00
PPO Blue (Traditional) PPO Savings (High Deductible)
Diff Monthly Diff Yearly
• Ending the indirect subsidy of
the PPO Savings plan would
permit contributions to reflect
market prices.
• Without the subsidy, the PPO
Savings plan would increase in
price, but still remain less
expensive overall.
RECOMMENDATIONS 4: EQUITABLE COMPENSATION
ENDING COST SHIFTING BETWEEN PPO BLUE AND PPO SAVINGS

18. Plan by Income Bracket
Employees Earning $25,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $60,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $100,000
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
Employees Earning $140k
Plan Type
Individual only
Two Person
Parent/Child(ren)
Family
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $478.58 $36.46 7.1%
$1,159.25 $1,070.71 $88.54 7.6%
$1,115.78 $1,033.70 $82.08 7.4%
$1,494.18 $1,381.05 $113.13 7.6%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $427.54 $87.50 17.0%
$1,159.25 $946.75 $212.50 18.3%
$1,115.78 $918.78 $197.00 17.7%
$1,494.18 $1,222.68 $271.50 18.2%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $369.21 $145.83 28.3%
$1,159.25 $805.08 $354.17 30.6%
$1,115.78 $787.45 $328.33 29.4%
$1,494.18 $1,041.68 $452.50 30.3%
PSU Employee
True Cost Contribution Contribution Emp %
$515.04 $310.87 $204.17 39.6%
$1,159.25 $663.42 $495.83 42.8%
$1,115.78 $656.11 $459.67 41.2%
$1,494.18 $860.68 $633.50 42.4%
PPO Blue (Current)
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $451.20 $10.42 2.3%
$1,030.67 $1,005.46 $25.21 2.4%
$994.52 $971.19 $23.33 2.3%
$1,309.18 $1,276.89 $32.29 2.5%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $436.62 $25.00 5.4%
$1,030.67 $970.17 $60.50 5.9%
$994.52 $938.52 $56.00 5.6%
$1,309.18 $1,231.68 $77.50 5.9%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $419.95 $41.67 9.0%
$1,030.67 $929.84 $100.83 9.8%
$994.52 $901.19 $93.33 9.4%
$1,309.18 $1,180.01 $129.17 9.9%
PSU Employee
True Cost Contribution Contribution Emp %
$461.62 $403.29 $58.33 12.6%
$1,030.67 $859.50 $171.17 16.6%
$994.52 $863.85 $130.67 13.1%
$1,309.18 $1,128.35 $180.83 13.8%
PPO Savings (Current)
• Using the table (Left) as a
model, Recommendation 5
requires HR to provide an
annual report on the per
dollar support for health
insurance by income
bracket and by health plan.
• This creates transparency,
revealing if the university is
providing extra
compensation to
employees enrolled in a
favored insurance plan.
RECOMMENDATIONS 5: REPORTING REQUIREMENT
REQUIRES HR TO REPORT ON PER DOLLAR SUPPORT