Healthcare Human Resource Management Flynn Mathis Jackson Langan The Management of Benefits and Variable Pay in Healthcare Chapter 13 PowerPoint Presentation by Tonya L. Elliott, PHR

After you have read this chapter, you should be able to: Learning Objectives After you have read this chapter, you should be able to: Describe the challenges that confront healthcare employees in providing benefits and variable pay programs Discuss why healthcare employers must offer competitive benefits programs to their employees Identify various types of benefits Explain the role that healthcare HR professionals must play in administering benefits Compare and contrast individual and team-based incentives

Benefits Needs Analysis Goals for Benefits Benefit An indirect reward given to an employee as part of an organizational membership, regardless of performance Benefits Needs Analysis A comprehensive look at all aspects of benefits in an organization Should consider what the employees want Should determine if the mix of benefits is accomplishing what it should

Typical Benefit Dollar Spending Figure 13-1

Government-Mandated Benefits Types of Benefits Government-Mandated Benefits Mandated benefits that employers in the United States must provide to employees by law Voluntary Benefits Benefits that employers voluntarily offer to compete and retain employees

Types of Benefits Figure 13-2

Workers’ Compensation Unemployment Compensation Security Benefits Workers’ Compensation Provides benefits to persons injured on the job Unemployment Compensation A tax paid by the employer to state and federal unemployment compensation funds Percentage paid by employers determined by experience rates (# claims filed by people who leave) Severance Pay A benefit voluntarily offered by employers to some employees who lose their jobs

Retirement Security Benefits Retirement Benefits & Age Discrimination Age Discrimination in Employment Act (ADEA) prohibits forcing employees to retire as a specific age Early Retirement Older Workers Benefit Protection Act (OWBPA) requires early retirement be offered on voluntary basis only Phased Retirement Program designed to help employees retire in stages Options such as reduced work hours / a different job

The Social Security Act of 1935 Established a system providing: Old age benefits Survivor benefits Disability benefits Retirement benefits Employers and employees share the cost through taxes on employees’ wages or salaries Administrator Social Security Administration

Employee Retirement Income Security Act (ERISA) Pension Plans Pension Plans Retirement benefits established and funded by employers and employees Not a required benefit Employee Retirement Income Security Act (ERISA) Passed in 1974, regulates private pension plans

Traditional Pension Plans Types of Pension Plans Traditional Pension Plans Defined-benefit plans Employees’ contributions based on actuarial calculations that consider the benefits to be received, and the methods used to determine such benefits Defined-contribution plans Employer makes annual payment to employee’s pension account Cash Balance Plans A hybrid based on ideas from both defined-benefit and defined-contributions plans; a hypothetical account balance

Pension Terms & Concepts Contributory Plan Both employee and employer pay in money Non-Contributory Plan Employer provides all the funds Vesting Assurance that employees have worked the minimum number of years to qualify Portability The ability to move pension benefits from one employer to another

Individual Retirement Options Individual Retirement Accounts (IRAs) A special account in which an employee can set aside funds that will not be taxed until the employee retires 401(k), 403(b), and 457 Plans Plans that allow the employee to reduce their current pay by a certain percentage, which is then used to fund a retirement plan Available for both non-profit and for-profit organizations

Healthcare Benefits Common Plans Offered Plans Offered to: Medical Dental Prescription drug Vision Plans Offered to: Employees Dependents

Controlling Healthcare Benefit Costs Co-Payment Employees pay a portion of both insurance premiums and medical care Defined-Contribution Plans for Health Benefits Employer provides a defined contribution for employees use in selecting offered benefit plans

Increases in Healthcare Benefits Costs to Employers Figure 13-3

Controlling Healthcare Benefits Costs (cont’d) Managed Care Approaches that monitor and reduce medical costs through restrictions and market-system alternatives Preferred Provider Organization (PPO) A healthcare provider that contracts with an employer or an employer group to provide healthcare services to employees at a competitive rate Health Maintenance Organizations (HMO) Provides services for a fixed period on a prepaid basis Emphasizes both prevention and correction

Controlling Healthcare Benefits Costs (cont’d) Utilization Review A review and audit of medical work, possibly including a second option, review of procedures used, or review of charges for procedures done Wellness Programs Programs designed to maintain or improve employee health before problems arise by encouraging personal lifestyle changes

Healthcare Legislation Consolidated Omnibus Budget Reconciliation Act (COBRA) Former employees and/or their spouses and qualified dependents eligible for continuing coverage for 18 to 36 months Employer may charge no more than 102% of the premium costs to insure a similarly covered employee Health Insurance Portability & Accountability Act (HIPAA) Allows employees to switch their health insurance plan from one employer to another, regardless of pre-existing health conditions

Financial, Insurance, & Other Benefits Life/Disability Insurance Educational Benefits Other Benefits Social & Recreational Benefits Family-Oriented Benefits

Family and Medical Leave Act (FMLA) Covered Employees: Those that worked at least 12 months and 1,250 hours in the previous year Eligibility: Employees allowed 12 weeks’ leave per year for: Birth adoption, or foster-care placement of a child Caring for a spouse, child, or parent with a serious health condition Serious health condition of the employee Employees must be able to return to the same job or a job of equivalent status or pay

Family Care Benefits Family Care Benefits Adoption Benefits Child Care Elder Care

Benefits for Domestic Partners & Spousal Equivalents Data shows: Increasing number of non-traditional families Significant percentage of domestic partners live together before marriage Gays and lesbians are more open about their lifestyle

Time-Off Benefits Holiday Pay Vacation Pay Paid Time-Off (PTO) Leaves of Absence Personal Medical (FMLA) Military leave Election leave Jury leave Funeral/bereavement leave

Benefits Administration Benefits Communication Benefits Statements A personal statement of benefits that translates benefits into dollar amounts HRIS and Benefits Communication Employee self-service kiosks allow employees to obtain benefits information online

Flexible Benefits Plan “flex” or “cafeteria plan” Allows employees to select benefits they prefer from groups of benefits established by the employer Flexible Spending Accounts Allows employees to contribute pretax dollars to buy additional benefits Additional health care (including deductibles) Life insurance Disability insurance Dependent care benefits

Benefits in the Future Continuing change More complex More outsourced Internet-based

Types of Variable Pay Plans in Healthcare Figure 13-5

Individual Incentives Bonus A one-time payment Does not become part of the employee’s base pay Special Incentive Programs Special awards Recognition awards Service awards

Group/Team-Based Variable Pay Award Distribution Same size award for each team member (equally) -- vs. -- Difference size award for each team member (equitable) Problems With Team-Based Incentives Distributed equally -- perceived as unfair to those who work harder, have more capabilities, or perform more difficult jobs Distributed equitably -- relatively low level of satisfaction with rewards that are same for all Successful Team Incentives Consider history of the group/team Consider size of team

Organizational Incentives Basic Concept Overall results depend on organizational cooperation Purpose To produce better results be rewarding cooperation throughout the organization Effectiveness Should include all employees (non-exempt employees, managers, and executives)