Exhibit L - 2024 Wage Life Equity Analysis Report.pdf

7/29/2024

Wage & Life Equity Analysis Report Background The City of Madison has provided life insurance for employees since 1976 and wage insurance since 1970. These benefits have helped numerous employees, and their families pay for life essentials and funeral costs. In 2023, the total amount that employees paid in premiums for life insurance was $1,059,880.08 and retirees paid $295,633.69.

Employees paid $632,037.51 for wage insurance and the City paid $1,689,635.24 in premiums. The Hartford Life Insurance paid out $689,750 to retiree families and $111,250 to active employee families. For wage insurance The Hartford paid out $256,116.31.

Life Insurance Program Information Life insurance currently allows employees three (3) supplemental coverage levels in addition to the basic coverage amount. Options of coverage also include dependent coverage. Our coverage levels are as follows:

• Employee coverage available in four levels o Basic (highest annual earnings rounded up) o Basic + 50% Supplemental (1.5 X highest earnings) o Basic + 100% Supplemental (2 X highest earnings) o Basic + 200% Supplemental (3 X highest earnings)

• Dependent coverage available in two levels o 1 unit ($5,000 per child and $10,000 for spouse) o 2 units ($10,000 per child and $20,000 for spouse)

Dependent Coverage is: Dependent children until the age of 21 (or age 25 if enrolled as a full-time student in an accredited school and/or employee’s spouse to age 65. Enrollment is allowed within 31 calendar days of the date of hire. Enrollment after 31 days requires a qualifying event or under writing. Our policy also allows for coverage to be reduced or cancelled at any time.

The life insurance premium is based on an employee’s age and coverage selection. These premiums are inexpensive and gradually increase over time. Employees who are working over age 69 pay no premium, basic coverage only.

Payments of premiums continue into an employee’s retirement.

Age Group Cost per $1000 Coverage Under 25 .05

25-29 .06 30-34 .08 35-39 .09 40-44 .10 45-49 .15 50-54 .23 55-59 .43 60-64 .57

65-69* .57 Over 69* Free - basic coverage only

Under our life insurance plan employees are also eligible to receive the following assistance:

Exhibit L

• Estate Guidance Will Services

• Travel Assistance and Identity Theft Support Services

• Ability Assist Counseling Services

• Beneficiary Assist Counseling Service, legal, financial planning & emotional counseling for up to one year from date claim filed.

• Funeral Concierge Services

Income Continuation Insurance Program Information (Wage Insurance) Through our wage (disability) insurance provider The Harford employees who enroll are insured up to 65 percent of their regular salary with $1,875 cap on a weekly benefit. These benefits cover non-work-related injury or illness on a short-term basis (3-years) and long-term benefits (up to retirement.) Enrollment is within 31 calendar days from date of hire. If employee wants to enroll outside of this 31-day period they must undergo underwriting. There is no opportunity to enroll with a qualifying event.

The wage insurance premium calculation structure was established in 1970 by the City of Madison and is not the industry standard. The calculations are based on a combination of bi-weekly wages, accumulated sick leave, and sick leave used/accrued per annual tracking period This is adjusted annually. New employees pay 80 percent of the monthly premium until the annual recalculation. Employees must be employed for 6 months as of the recalculation date in order to be eligible for a premium change. The premium is paid by the City of Madison if employee accumulated sick leave is 100 or greater. This is dependent upon handbook and contractual agreements.

Cost of the premium is calculated based on combination of employee’s base pay and employee’s use of sick leave in the preceding September – August (12-month calculation period).

Sick Leave Used Employee Pays

0.00 – 3.00 days 0%

3.01 – 4.00 days 20%

4.01 – 5.00 days 40%

5.01 – 6.00 days 60%

6.01 – 7.00 days 80%

7.01+ days 100% If employee’s accumulated sick leave balance is 100 days or greater at the time premium is calculated, the full premium will be paid by the City regardless of the amount of sick leave used during the 12 month calculation period.

The portion of premium payment made by the City and by the Employee determines whether the benefit is taxed. If the Employee pays the full premium, the benefit is not taxable. If the City pays the full premium, the benefit is fully taxable.

Currently the City of Madison is reviewing our wage and life insurance policies and is in and has encouraged insurance vendors to submit proposals to a competitive RFP process.

In the Spring of 2024 the Disability Resource Group, LGBTQ+ Affinity Group, and Women’s Initiatives Committee formally requested an equity analysis of the wage insurance program be conducted. They felt it was essential in order for the City to adequately prepare for the RFP process to look at the polices through an equity lens. These groups expressed specific concerns related to the wage insurance premium calculation structure. Human Resources was in support of their request and opted to include life insurance in the equity analysis. A diverse group of employees participated in the equity analysis which included both employees who were impacted by the policy and staff involved with benefit processing. Participants also included representation from the Disability Resource Group, Women’s

Initiatives Committee, MEPSEA, and Local 6000. Specific departmental participation included the Police, Metro Transit, Engineering, Finance, Human Resources, Building Inspection, and Water Utility.

Data Analysis As part of the equity analysis the team reviewed data and data analysis provided by Payroll, Human Resources (HR) Data Analyst, The Harford, a survey conducted of 2023 wage insurance claim participants, and other wage and life insurance benefit polices. Internally we looked at demographic data in relation to wage insurance participation, employee paid wage insurance premium percentage, and sick leave use. This analysis found the following:

• Men have signed up for wage insurance at a higher rate than women.

• Women typically pay nearly 8% more of the wage insurance premiums then men.

• 64% of men did not have to pay for wage insurance and 24% paid 100% of their wage insurance premiums. In comparison, 55% of women did not have to pay wage insurance premiums and 30% paid the entire premium.

• Most ethnic groups signed up at a rate above 90 percent except for Hispanic employees. Hispanic employees’ participation at 84 percent also had a statistically significant difference from Caucasian employees at 93 percent.

• Caucasian employees typically paid the lowest percentage of wage insurance premiums (29%), African American staff members tended to pay the most (49%).

• There is a wide variation between what the average employee pays in different compensation groups.

Supervisory employees in Police and Fire (CG 12, 14) paying the least with a mean payment of less than 10% of the premium. Library staff in Compensation Groups 32 & 33 pay the highest percentage of the premiums, averaging more than 50%.

• In regard to, sick leave use men on average used more sick leave than women and there was a statistical difference between sick leave use of Caucasian employees compared to Black employees. Sick leave use based on the employee compensation groups indicated a wide variation in sick leave use, not only between different compensation groups but also within individual compensation groups.

The Equity Analysis team also reviewed retiree sick leave data from 2012 to 2022 that was analyzed in partnership with the UW-Madison Business School. Their work found that there is a statistically significant difference in average total hours remaining between males and females. Men are 69% more likely to be in the top 50% of sick hours remaining compared to women. There was also a statistical difference between the total average hours of White employees in comparison to Black employees. It is important to note that this data did not take into account how long a retiree was employed with the city, departmental impacts on sick leave use, or positional impacts on sick leave use.

The equity analysis team identified there was a lack of demographic data non-binary employees, and disabled employees. City demographic data does not track this information so it could not be included in the analysis. The group also identified there was a lack of information related to age band. Additionally, the group felt more should be explored regarding office staff in comparison to field staff as it was generally viewed there is often more flexibility related to office work which could impact sick leave use.

Our current insurance provider, The Hartford also provided data that the equity analysis team reviewed. A topic of discussion was waiting periods for wage insurance benefits. Our wage insurance plan currently allows for no waiting period to be eligible for benefits once an employee enroll. According to The Harford’s 2023 Annual Review approximately 18 percent of the industry has no waiting period. There are rules in our plan related to when benefits can commence otherwise known as the elimination period. Through our wage insurance plan and employee can receive a benefit payout after claim acceptance:

• Disability caused by Injury: Begins on the 1st day of Total Disability after all accumulated sick leave has been exhausted.

• Disability caused by Sickness: Begins on the 8th day of Total Disability after all accumulated sick leave has been exhausted.

• For hospital confinements requiring admission, or for an Outpatient Surgical Procedure which necessitates a Total Disability period of 24 hours or more after surgery: Begins on the first day of hospital confinement; or on the date of the outpatient surgical procedure.

Based upon several benchmark services and The Hartford’s own book of business, approximately 213 employers have higher elimination periods. The 1st day of hospital or out of patient surgery stipulation is even less common.

The Harford’s Annual Review that was conduct June 5, 2024, also provided data on City of Madison claims from 2021 to 2023. A complete view of the data related to the Annual Review will be included in the appendix. From 2021 there was an increase in claims submitted with 2,654 claims submitted in 2021 and 2,704 claims submitted in 2023. The approval rate for claims during this time span was an average of 91 percent. The average approval rate of City of Madison was higher than the 86% result from industry peers. Incomplete claim submissions were the leading cause of claim denial. Approved claims are broken down into the following categories: musculoskeletal, behavioral health, accident injury, infectious/parasitic, and digestive. Musculoskeletal was the leading reason for claim submission all three years. Behavioral Health became the seconding leading reason for claim submission in 2023 for the first time in at least 3 years. The average duration for City of Madison was higher than industry peers by 6 days for a total of 74 calendar days. In 2023 Behavioral health claims had the highest claim duration at 91 days. Demographically the age band of 50-59 years old, those who worked 10 or more years, those who make $60,000 to $80,000 and men submitted the highest number of claims. For demographic information it is important to note The Harford only captures Man and Woman and their data does not capture racial demographics.

The Harford Annual Review also captured data related to life insurance claims from 2021 to 2023. There have been 15 approved life insurance claims since 2021 with cancer being the leading cause of death leading to a life insurance claim. The bulk of paid out claims are in the age band of 60 to 69 years old. No other demographic data was included for life insurance claims.

As part of the equity analysis, we did ask The Harford if they have any current customer service survey data. The Hartford indicated they have an extremely low response rate in relation to their customer service surveys and as a result could not give us any quantifiable data. Human Resources did conduct a short virtual survey that was directed at 2023 City of Madison wage insurance participants and experienced similar response issues. Out of 32 employees surveyed only 6 responded. The survey questions and data related to the survey is included in the appendix.

Recommendations and Rationale:

The equity analysis team was provided a hand-written ledger of the original manual calculations which were created in 1970 (attached) by our business agent. The Hartford indicated this is not industry standard. Central Payroll has also indicated we do not charge the EE’s premiums based on how we’re charged by the vendor. Instead, we rely on the decades old formula noted above. The Hartford actually charges us a rate times earnings and it has no bearing on what the employee has for a sick bank or time used. While there are good intentions of rewarding those who have accumulated sick leave by reducing premiums, it is quite complicated to administer, to communicate about, and difficult for employees to understand. Based upon industry benchmarks and The Hartford data, more than 50% of short-term disability plans are non-contributory (employer paid). Additionally, the team discussed that a formula in the 70’s had a high probability of not taking into account the needs of women workers due to the demographics in the workforce at the time, has a disproportionate impact on people with disabilities, and can negatively impact black employees. There was also concern expressed that this formula contributes to stigma for those who need to use sick time and may encourage employees to come to work sick.

While there are a few recommendations related to life insurance many of the recommendations outlined below centers on wage insurance and changing the premium calculation to remove the sick leave component. All recommendations from the equity analysis team are included and are as follows:

1) Create an Employer Paid Wage Insurance Program. This would allow 100% eligible employees participate.

With employer paid premium, taxes will be taken from employee wage insurance payment. The team discussed this is easy to communicate and would reduce disproportionate impacts. The team also discussed this would increase costs for the City and may upset employees who don’t currently pay premiums.

2) Create an Employee Paid Wage Insurance Program. With this plan any percentage of the premium paid by the employee makes paid benefits non-taxable for that respective percentage. The team discussed this would be affordable for the City but could create affordability concerns for employees. Disproportionate impacts for some groups would be reduced due to sick leave calculation removal. This would also be easy to communicate but unions/associations may not support this. The group also discussed the possibility that employees may be less likely to enroll.

3) Extend Paid Parental to universal leave. Employees on leave can use paid time from the 6 weeks of paid leave provided by the City of Madison while away. Using leave in this way would benefit all employees and lessen the need for employees in higher impacted groups; disabilities, parents, and immunocompromised employees to use less of their sick leave balances.

4) Base premiums on time employed with City on tier level instead of sick leave usage. This could be more complicated to understand and administer but would reduce the disproportionate impacts on the groups outlined above. Depending on how the tier system is designed it would have different impacts on employees during various stages of their career. There is a lack of data for the group to review to determine if this is used in the insurance industry.

5) Translation of the life/wage policies and information in different languages and ensure information is in plain language. There was a great deal of discussion within the team regarding the complexity of the language.

The group also noted that there is lower enrollment amongst Hispanic employees.

6) Establish a self-insured wage insurance program that the City administers. The team discussed this would be a benefit as it would allow for a design and customer service that is tailored to the City. The downside of this the team discussed would be the cost, staffing, and program development.

7) Explain the underwriting process in orientation and on the benefits web page. Also provide the underwriting form on the web page. It is important to note underwriting is currently being explained in orientation.

8) Remove the requirement to use all sick leave before beginning wage insurance. The group discussed this would allow available sick time for appointments and other needs when an employee returns.

9) Create a progressive insurance payout depending on wages with those who earn the least receiving the highest payout percentage. The team discussed this would assist employees who are at the lower end of the compensation scale. We also discussed the legalities surrounding this would need to be explored further.

10) Increase the wage insurance payout of claims to be higher than 65 percent of an employee’s salary. There was a discussion that this is provided in other businesses. The team discussed how many household budgets are not designed of a reduction of salary to this level.

11) Design and insurance system where employees are automatically enrolled and need to manual opt out.

The team discussed this would increase enrollment. We also discussed this system would be difficult for life insurance based on the enrollment options unless specifying that all would be enrolled at the base level and would need to opt in manually for other levels.

12) Choose an insurance vendor who is timely and doesn’t add extra barriers for those with mental health insurance conditions. The team discussed feedback in the survey related to this and The Hartford data related to mental health.

13) Conduct a survey or focus groups of insurance participants during the provider review period. The team discussed the lack of customer service data from our current vendor. We also discussed the importance of hearing from those who are directly impacted by services when making vendor choices and to improve overall customer service.

I. Additionally, while outside the analysis’s scope there was a recommendation to explore the possibility of changing the benefit calculation at time of retirement from the balance of sick leave to some factor of accrued sick leave accounting for years of service.

Appendix begins on next page.

Want to Learn More about Wage & Life Insurance?

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Appendix Guide

Wage & Life Equity Analysis Report Appendix

Summary of Wage Insurance and Sick Leave Use Analysis

Analysis of Wage Insurance

Analysis of 2023 Sick Leave Usage

The Hartford Short Term Disability & Life Insurance Data

Short Term Disability

Executive Dashboard

Initial Claim Decision Summary

Incidence

Durations

Diagnostic Summary

Demographic Summary

Basic Life

Activity by Cause of Death

Aggregate Activity by Coverage Type and Cause of Death

Aggregate Activity by Coverage Type and Age Band

Life (Active & Retirees) – Aggregate Activity by Coverage Type & Age Band

Wage & Life Equity Analysis Report Appendix

Summary of Wage Insurance and Sick Leave Use Analysis The following analysis was derived by using gender and ethnicity data from MUNIS with supplementary data obtained from NEOGOV in instances where MUNIS data was not available. Demographic data was paired with the 2023 Wage Insurance and Sick Leave usage data provided by staff in the Employee & Labor Relations unit.

Analysis of Wage Insurance Based on the list of active employees as of April 15th, 2024; Men have signed up for Wage Insurance at a higher rate than Women.

By Gender Active Emp as of 4- 15-24

Employees Signed up for Wage Ins

% Signed up

Men 2109 1963 93% Women 865 780 90% Total 2975 2743 92%

Looking at the same employee data focused on ethnicity, participation within most groups is consistent above 90%.

However, Hispanic participation was approximately 84%, this represented a statistically significant difference from Caucasians but not from African American staff.

By Ethnicity Active Emp as of 4-

15-24 Employees Signed up for Wage Ins % Signed up

Native American 17 16 94% Asian 88 80 91% Black 272 249 92% Caucasian 2307 2147 93% Hispanic 189 159 84% Other 81 76 94% Unknown 1 1 100% Blank 20 15 75% Total 2975 2743 92%

Wage insurance is funded by amounts from the City and from individual employees. There is a wide variation between what the average employee pays in different compensation groups. Supervisory employees in Police and Fire (CG 12,

14) tend to pay the least with a mean payment of less than 10% of the premium. Library staff in comp groups 32 & 33 tend to pay the highest percentage of the premiums, averaging more than 50%. The wide variation was found to be statistically significant in single factor Anova testing and backed up using Bonferroni correction with 91 paired T-Tests.

More than 20% of the paired T-Tests indicated statistically significant differences. The groups most often indicating statistical significance were comp groups 11, 12, 13, and 18.

GROUP

Mean % Paid by

Employee Std. Dev.

1111 0.2936 0.4156 1113 0.2250 0.3934

1212 0.0432 0.1867 1214 0.0833 0.2763 3023 0.2800 0.3919 5015 0.4122 0.4575 6316 0.4121 0.4685

6320-17 0.4320 0.4668 6432 0.5280 0.4556 6433 0.5943 0.4597 7071 0.3167 0.4278 8618 0.2332 0.3933 8719 0.1200 0.2993 8721 0.1652 0.3618

Differences in the percentage of Wage Insurance premiums paid by employees were also seen when comparisons were made between ethnic groups. Caucasian employees typically paid the lowest percentage of premiums (29%), African American staff members tended to pay the most (49%). When paired T-Tests were performed to determine statistical significance only two relationships were found to be statistically significant, Caucasian and African American staff, and Caucasian versus “Other/Multi Racial” staff. 13 additional paired tests did not produce significant results.

GROUP Mean % Paid by Employee

Std. Dev.

Native Amer. 0.3143 0.3980 Asian 0.4000 0.4487 Black 0.4935 0.4648

Caucasian 0.2937 0.4281 Hispanic 0.4055 0.4537

Other 0.4750 0.4576

Finally, single factor ANOVA tests to examine the difference in the percentage of Wage Insurance premiums paid by Women and Men indicated a statistically significant difference was present between the two groups with Women typically paying nearly 8% more of the premiums then Men.

GROUP

Mean % Paid by

Employee Women 0.3733

Men 0.2975

Analysis of 2023 Sick Leave Usage Examining gender as a factor in sick leave usage single factor ANOVA testing indicated a statistically significant difference between Men and Women’s sick leave usage at the 0.05 level. As displayed on the table below Men, on average, used more hours than Women and also had a wider variation in the number of hours they used.

GROUP Mean Median Std. Dev.

Women 60.95 45.75 62.28181

Men 68.31 49.00 77.32984

Investigating sick leave usage by employee ethnic groups indicated some variation in usage between ethnicities, however the only difference which indicated statistical significance was the difference between African American and Caucasian staff. None of the other differences displayed below met significance at the 0.05 threshold.

GROUP Mean Median Std. Dev.

Native American 91.85 40.00 99.2712

Asian 63.35 40.00 67.7652 Black 79.67 69.75 77.0168

Caucasian 63.51 47.00 72.1036 Hispanic 67.69 56.00 64.1840

Other 68.26 48.75 86.8106

Exploration of sick leave usage based on the employee compensation groups indicated a wide variation in sick leave use, not only between groups but also within individual groups the table below displays the mean, median, and standard deviation of sick leave usage for selected compensation groups.

1111 1113 1212 1214 3023 4841 4842 5015 6316

Mean 52.20 91.39 37.97 100.11 53.33 79.54 70.34 64.79 67.77 Median 32.00 59.50 38.50 34.00 34.38 84.00 64.08 48.00 51.00

SDEV 62.8120 110.2181 16.6799 107.9450 49.2798 60.8315 49.0383 86.3781 70.5654

6320 6432 6433 7071 8543 8618 8644 8719 8721 Mean 61.61 61.03 72.67 36.85 92.25 46.65 42.58 117.02 50.76

Median 42.67 62.12 66.13 16.00 92.25 26.63 28.75 25.25 18.25

SDEV 65.4750 38.4588 53.1267 32.6142 19.7500 49.4310 36.4920 190.7785 82.7320

1111 = Police Officers 1113 = Fire 1212 = Police Supervisors, Lt. & Above 1214 = Fire Leadership 3023 = Attorney’s Office 4841 = Metro Transit Operators, Mechanics, Service Works 4842 = Metro, Office support staff 5015 = Street Machine Operators, Construction Inspectors, Maintenance Workers 6316 = Parking Cashiers, Custodian Workers, Non-sworn Police staff, Parking Enforcement Officers (technical staff) 6320 = Office Support Staff…Admin Clerks, Program Assistants, Municipal Clerks, Police Report Typist 6432 = Library support staff 6433 = Librarians 7071 = Trades, Electricians, plumbers, painters, forepersons 8543 = Metro – Metro HR assistants 8618 = Comp group 18, professional and supervisors 8644 = Metro = Planners, finance, supervisors, managers 8719 = Common Council, Mayor’s Office, supported workers, sales from Monona Terrace, Municipal Court (non-civil service positions) 8721 = Department Heads and Metro Chiefs.

The analysis does account for their being more men than women. There was a statistically significant difference in the average amount paid. Some additional data, from the 2023 information - 64% of Men did not have to pay for wage insurance. 24% paid 100% of their wage insurance premiums. 55% of women did not have to pay wage insurance premiums. 30% paid the entire premium.

The Hartford Short Term Disability & Life Insurance Data

Short Term Disability Executive Dashboard

The Hartford internal data as of May 30, 2024

Initial Claim Decision Summary

• There have been 289 claims approved since 2021, resulting in an approval rate of 91%

• The average approval rate of City of Madison was higher than the 86% result from industry peers

• Proof of Loss has been the leading cause of claim denials since 2021

• Proof of Loss denials denote incomplete claim submissions

• Infectious/Parasitic was the leading diagnostic category for denied claims

The Hartford Book of Business, 2021, 2022, 2023 STD Activity, Public Administration (SIC 91-99) Peers

Incidence

• Aggregate incidence since 2021 was 36.1 claims per 1,000 covered lives, compared to IBI industry peers at 34.0

• As injury/illness incidence excludes Pregnancy and COVID-19 activity, reviewing outcomes in this manner may offer a different perspective

• For City of Madison, 10% of total incidence was attributed to Pregnancy and COVID-19

• Overall, incidence shifts were generally traced to the top two diagnoses

• Annual diagnostic changes may be indicative of natural volatility as opposed to an emerging pattern

The Hartford Book of Business, 2021, 2022, 2023 STD Activity, Public Administration (SIC 91-99) Peers

Durations

• The average duration for City of Madison was 74 calendar days, while industry peers averaged 68 calendar days

• By excluding pregnancy and COVID-19, the average increased by 6%, to an average of 78 calendar days

• Consistent with incidence, the top two diagnoses had the greatest impact on durations

• Volatility within each diagnostic category is natural and expected

The Hartford Book of Business, 2021, 2022, 2023 STD Activity, Public Administration (SIC 91-99) Peers

Diagnostic Summary

• Understanding approved claim activity by diagnostic category provides context to changes in key metrics

• The top five diagnostic categories account for 75% of approved claims and 74% of durations

The Hartford Book of Business, 2021, 2022, 2023 STD Activity, Public Administration (SIC 91-99) Peers

Demographic Summary

The Hartford Book of Business, 2021, 2022, 2023 STD Activity, Public Administration (SIC 91-99) Peers

Basic Life Activity by Cause of Death

• There have been 15 approved claims since 2021

• The Hartford documents the cause of death based on the primary reason indicated on the death certificate, which may not capture immediate or co-morbid death reasons

• Other Diseases and Disorders includes all other death reasons not captured in cause of death categories, which may include natural causes, acute respiratory failure, sepsis, dementia-related disorders, COVID-19, etc.

The Hartford internal data as of June 1, 2024

Hartford Book of Business, 2021, 2022, 2023 Life Activity, Public Administration (SIC 91-99) Peers, Excludes Retirees (Employees >=70) Life reporting is provided on an Accident Year Basis

Aggregate Activity by Coverage Type and Cause of Death

Aggregate Activity by Coverage Type and Age Band

Hartford Book of Business, 2021, 2022, 2023 Life Activity, Public Administration (SIC 91-99) Peers, Excludes Retirees (Employees >=70)

Life (Active & Retirees) – Aggregate Activity by Coverage Type & Age Band

Hartford Book of Business, 2021, 2022, 2023 Life Activity, All Industries Peers