1. 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

2. 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

3. 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

4. Typical Benefit Dollar Spending
Figure 13-1

5. 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

6. Types of Benefits
Figure 13-2

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

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

15. 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

16. Increases in Healthcare Benefits Costs to Employers
Figure 13-3

17. 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

18. 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

19. 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

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

21. 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

22. Family Care Benefits Family Care Benefits Adoption Benefits Child Care
Elder Care

23. 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

24. 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

25. 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

26. 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

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

28. Types of Variable Pay Plans in Healthcare
Figure 13-5

29. 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

30. 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

31. 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)