Let’s Have a Party!

I bet you didn’t even know that today is a holiday – it’s not on the Hallmark calendar and the Post Office is open.  Today is National Employee Benefits Day – as proclaimed by the International Foundation of Employee Benefits Plans.  Have a party, eat some cake, and thank your local benefits professional.

Benefits are a challenging area for HR.  They can be expensive, but some are legally required and some are demanded if you want to be competitive in the labor market.  A solid benefit program also should improve employee satisfaction and loyalty, thereby reduce turnover.

Benefits can be expensive.  There are more benefits than ever to manage: Health and welfare benefits (medical, dental, vision and life insurance); Income Continuation Benefits (short and long term disability, unemployment, and workers’ compensation); Retirement Benefits (401k, pensions, and ESOPs), and Employee Assistance Plans.  All of these benefits have a direct cost to the organization that typically ranges from 5-15% of payroll depending on how the organization shares costs with employees. 

Time off benefits (holidays, vacation, sick time, bereavement pay, jury duty, and voting time) are also in the mix and must be administered. While most of these are non-incremental costs (if I was going to pay Susie $30,000 per year to do her job, I don’t have to pay more when she’s on vacation, I just don’t get any work done) they still have a value that typically runs between 10% and 25% of payroll.  Don’t forget payroll taxes, which while not really an “employee benefit” still cost the company 7-10% of payroll.

You can also throw some less traditional benefits into the mix like cancer insurance, long term care, accident protection (aka Aflac),and prepaid legal.  Then add in paid parking, a company cafeteria, discounted bus passes, wellness programs, an onsite medical clinic, and discounts to area venues and health clubs.  Don’t forget tuition reimbursement, adoption assistance, employee discounts on merchandise, and maybe a summer picnic and a winter holiday party.

The role of a benefits manager is often much more diverse than simply coordinating an annual open enrollment meeting. A comprehensive benefit package can easily cost upwards of 35% of payroll and can be both a competitive advantage, and liability.  A good manager should be working constantly to assess the effectiveness of your benefits plans – are they meeting the needs of both the employees and the organization?

So, buy your benefits manager a cake today and have a party – but keep it short because they’ve got a lot of work to do.

Next Up – Non-Discrimination Testing



Settle in, because we’ll be talking about Healthcare Reform for the next 4 years – if not longer. Not only are the Republicans in Congress trying to un-ring the bell, but new provisions are rolling out – often faster than the associated regulations.

One of the most recent changes (effective September 23^rd) is the requirement that non-grandfathered fully-insured plans not discriminate in favor of Highly Compensated Employees (HCEs). This is another rule that on the face of it seems to make common sense and is viewed favorably by most people. But, the proof is in the pudding and the pudding is still in the oven.

Before I get into what you can or cannot do – let me clarify who an HCE is. For these purposes an HCE is either a) one of the five highest-paid officers, or b) any 10 percent owner or, c) one of the highest-paid 25% of all employees.   So, if you have a 100 person organization, you have at least 25 HCEs under this definition, and maybe more.

There are two forms of discrimination that are prohibited – Eligibility and Benefits. Eligibility basically says that you can’t offer better plans to the HCEs than you offer to other full time employees. (BTW – the rules for defining full time are shifting and will probably settle at anyone working 30 or more hours per week). While that is pretty straight forward, there are a number of small businesses who might have been offering something to a small group of key employees that they couldn’t afford to offer everyone – they can’t do that anymore.

There are different tests to determine eligibility discrimination. All are fairly complicated and yet to be fully defined. I won’t try to explain them here other than to suggest that your best bet is probably to simply offer the same plan to all full time employees.

The second set of testing revolves around benefits. The bottom line is that all benefits provided to highly compensated employees must be provided to all other participants. Where that might cause some confusion is in premium rates. You will need to have one formula for employer contributions for all plan participants (either as a percentage or a flat-dollar amount) per category of coverage. So, if you offer two plans (e.g. an HMO and a PPO) and you choose to pay $100 per month for employee only coverage on the HMO, you must also pay $100 per month for the PPO. You can pay different amounts for different levels of coverage (employee only vs. employee and spouse or family), but you must be consistent by levels of coverage.

To get more up to speed on this subject I looked at almost a dozen internet sites and talked with some brokers. The best resource I found for this post was a bulletin from Jenkins Insurance Group in Concord, CA written by Alfred B. Fowler, Attorney at Law. I’ve provided a link for your reading pleasure.

Bottom line – healthcare reform is coming and we’ll have to learn to be flexible. For now, here are Mr. Fowler’s suggestions to reduce your risk of running afoul of the discrimination tests: 

1.       Have one waiting period for eligibility applicable to all eligible full‐time employees (e.g. 30 hours per week; first of the month following 30 days);

2.       Have one set of employer contributions for all plan participants (either as a percentage or flat dollar amount) per insurance contract;

3.       Do not have an executive type supplemental plan; and,

4.       Make all group health plans available to all eligible full time employees.

 

Have a wonderful Open Enrollment season.

 

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Does Wellness Pay?

Wellness is an interesting issue in HR circles.  In the early ‘80’s (if not before) corporations discovered that healthy employees were more productive that unhealthy employees. Also, benefits like on-site workout programs helped companies to attract and retain young, healthy workers.  From that point wellness has gone up and down in popularity.  Those on-site gyms might have been a positive employee benefit, but they were expensive, had surprising high liability costs, and more than once spawned new areas for sexual harassment to fester.

Wellness moved from on-site gyms to discounts at local gyms.  Cafeterias sprouted salad bars and healthy food choices.  Wellness fairs with cholesterol and bone density testing became popular.  Brown-bag lunch-and-learns allowed employees to learn about how walking or stair climbing could reduce their risk of heart disease.  Online health assessments followed with new tools to let employees know how out of shape they really were.

While this was going on the accountants were in the back room asking – is this a good use of money? Do these programs pay for themselves?  Conceptually it’s easy to see that healthier employees will use fewer medical services and save everyone money.  But does that really work? 

In the June issue of Human Resources Executive, Lin Grensing-Pophal  does an excellent job of questioning the financial viability of wellness programs.  Several studies are quoted that say the answer is no – wellness is not a cost-effective Human Resources program.  But (there is always a “but” isn’t there?) there seem to be just as many studies that say yes, you can calculate a positive ROI. The Alliance for Wellness ROI is an organization of companies formed to clarify how to calculate ROI believing that it wellness programs are good investments.

So, like so many issues we face, there is no clear answer.  As such, implementing a wellness program needs to be more about corporate culture than financial return.  Does a wellness initiative support your overall health and welfare benefits package?  Does implementing a wellness program encourage you employees to take better care of themselves?    Have you implemented an HSA or HRA plan – and if so can you show employees the link between their personal health and their medical premiums?

Once you’ve reached the conclusion that a wellness program makes sense for your organization, you need to fully understand what you’re getting yourself into.  Wellness programs, like many other benefits programs are not simple start-and-walk-away programs.  Wellness requires constancy and communications.  You’ll need to find new ways to communicate with employee and keep the program top-of-mind.

Wellness programs can be powerful motivators for positive behavioral change.  They may not, however, be strong financial investments.  Before you decide to implement a wellness program understand both the upside and the costs – but don’t let ROI overwhelm the decision.  Let your corporate culture be your guide.

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Changes to W-2s Delayed

As predicted, as some of the phases of the Patient Protection and Affordable Care Act (PPACA) start to roll out, there are some bumps in the road.  On October 12^th the IRS announced a delay in one of the early provisions.  Effective 2011 companies were to be required to report the amount paid by the company for health insurance on the employee’s W-2. The amounts were not to be taxed – just reported.

With this announcement, the IRS has agreed not to enforce this provision for 2011 and allow employers and payroll companies more time to put the systems in place to collect and report the information.  The information may be reported in 2011, and will now be required to be reported in 2012.

So, a few steps forward in late-September, one step back in early-October.  Clearly, the PPACA will have a significant impact on the healthcare system and on just about all businesses.  It’s just as clear that implementing such a complicated piece of legislation will not always go smoothly.  Stay tuned …

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Healthcare Reform – The Needle Has Begun to Move

Today’s the day – September 23, 2010 – the first impacts of the Patient Protection and Affordable Care Act (PPACA) begin to take effect.  As of today group health plans may not have lifetime maximums, must cover children up to age 26, cannot deny coverage to children with pre-existing conditions and cannot cancel coverage due to technical mistakes on an insurance application.  These are changes that most people feel are positive.  The downside is that these changes are estimated to increase premiums for small businesses an average of 3% in 2011 (Mercer Survey on Healthcare Reform – Getting Ready for 2011).

More changes are coming in the next few years and those changes will likely bring more increases in premiums.  Small businesses – particularly in this difficult economy – often cannot absorb these increases so they are forced to take one of several paths. They can reduce the benefits provided (increasing deductibles, co-pays, etc.), they can increase the premiums they charge employees, or they can do both.  None of these options really reduces the cost of health care – they simply shift the costs. (These changes may also result in losing “grandfathered” status, but personally I think that whole conversation was much ado about nothing.  No small business with a fully-insured plan was going to meet the grandfathering regulations anyway.)

So what can small businesses do to control their healthcare expense? At a recent forum OMNI Employment Management Services sponsored for our clients there were several suggestions.

Manage your workforce.  There continues to be support to not require companies to provide healthcare to part time workers.  The “standard” for defining part time seems to be closing in on those who work less than 30 hours per week.  So, having a larger percentage of your employees working less than 30 hours per week will reduce the effects of healthcare reform on your business.

Be aware that while many changes in the PPACA might be seen as “bad” from a business owner’s perspective, those same changes may be “good” from your employee’s perspectives.  Who can argue, from a humanitarian perspective, that the changes effective today aren’t “good” – providing more and better coverage to more people?  On the flip side,  these changes increase costs and increase the government’s involvement in healthcare.  Our recommendation is to be careful how you discuss healthcare reform with your employees.  Be sensitive that while these changes may be increasing costs, they may be improving people’s lives. That doesn’t mean that you both aren’t right – you just want to take care in how you discuss the impacts.

Look closely at high-deductible plans associated with Healthcare Spending Accounts (HSAs) and Health Reimbursement Accounts (HRAs).  Both offer the employee and company some interesting options that could have a substantial impact on your monthly premiums as well as your risk management.  Both also require much more communication to implement them effectively.

Be patient.  There is a strong likelihood that the regulations that ultimately are implemented as part of “healthcare reform” will be substantially different than those that were passed in the PPACA.  Many lawmakers are working to repeal all or parts of the Act while others are trying to strengthen what has already been approved.  By the time the final regulations are written and implemented over the next three years I can almost guarantee things will be different than they look today.

The real tip for business owners – get educated.  Talk to your broker, your carrier or an HR consultant.  Times are changing and you need to know what your options are so you can be prepared.  2014 isn’t that far away.

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Don’t Beat The Sheep

I’m a big fan of leadership books.  Two of my favorite authors, John Maxwell and Bill Hybels, come from a ministry background.  Both do an excellent job of breaking down complex leadership strategies into understandable bites and then using short stories as examples.

In Hybels’ book Ax·i·om he provides 76 bits of wisdom – each just 2-3 pages long – that cover all aspect of church leadership.  Thankfully, most of them also have a strong corollary in the secular world.

I recently heard an HR manager rant “These *?!*# employees just don’t understand their benefits”.  Employees were going to the emergency room for non-emergencies.  They were taking brand name drugs instead of generics. They were not challenging their doctors about if an MRI was really necessary.  They were – in short – being employees and not benefits experts.  Granted, their actions will likely result in increases in premiums, but at the time of service they were focused on getting well, not on saving money.

Hybels has an axiom he calls “Don’t Beat The Sheep”.  In his words he tells of an associate pastor complaining that the congregation didn’t support a particular initiative.  Hybels points out that maybe the lack of support really came from a lack of understanding.  Possibly the ministry team had not done an adequate job of communicating the program and did not give the congregation enough notice. While the congregation might have been more responsive, maybe the real “blame” lived with the shepherds, not the sheep.

For years we’ve talked that the salvation to our heath care plans would be Consumer Driven plans.  Plans with high deductibles and employees with HSA’s or HRA’s.  While I believe these plans can work (for now) they only work with massive amounts of communications. These are complex plans and they are dramatically different than the medical plans we’ve been offering employees for decades.  We simply can’t expect people to attend a 1 hour benefits orientation and then go out and be sophisticated consumers of health care.

We’ve all heard that to get a message across you have to say it multiple times in multiple ways.  This is even more important with complex messages like implementing a Consumer Driven plan.  You should plan on multiple meetings, giving employees written (easy to read) documents, having one-on-one discussions and posting information on your Intranet.  Communicate this message until you start saying it in your sleep – and then do it some more. 

If employees understand, they will make this work.  If they don’t understand, don’t beat the sheep.  It’s not their fault.

Sick at Work

I’m sitting at my desk trying to come up with a witty and interesting treatise on the wonderful world of human resources but I’m struggling.  Not that there aren’t great and fascinating things to talk about, but because I’m sick.  Not really sick – I’ve got a cold – but I’m not my usual perky self.

But as I ponder my sniffles I’ve been thinking about others I know who are much sicker, but are still working.  A friend’s wife has brain cancer, but is still a top performing sales person.  I have two former coworkers who had breast cancer, and hardly missed a day of work.  A former boss of mine mightily battled bone cancer and ultimately lost, but even through the surgeries, chemo, etc. he was always more interested in taking care of others than in complaining about his growing limitations.

And all this leads my clouded mind into the current healthcare debate.  Yesterday several states filed a suit to block the enforcement of many of the provisions of the recently passed healthcare legislation.  (Legal experts predict the suit will not be successful.)  Lots of other folks are crowing about the success of this bill and how it will revolutionize healthcare.  Just as many are crying gloom-and-doom about how it will cripple our government.  Who knows how it will really play out?

The answer to that question is no one.  Clearly healthcare is a critical issue for America – and the world.  Costs are increasing faster than we can keep up and too many people are un (or under) insured.  While this new legislation has many wonderful benefits, we can also rest assured that for most employee provided plans the premiums will continue to rise.  It is a safe bet that this will cause employers to: a) shift a larger percentage of the premiums to workers;  b) shift benefit dollars away from other plans like 401ks to offset these increases, c) shift their workforce to more part-time workers to avoid having to offer insurance; and d) raise prices to cover their increasing costs.

While none of those options are good – are they better than where we are today with huge numbers of uninsured Americans, exclusions for pre-existing conditions, and with overall too many people unable to purchase insurance – even if they want to?  I honestly don’t know – and I also expect very few others do also.

What I can predict with a high level of certainty is that this issue will continue to evolve.  Before many of the recently approved provisions can be rolled out, Congress will change them.  We’ll amend this section, replace that one, and possibly have another ruled unconstitutional.  My advice, from my “sick bed” is to take everything you hear with a large grain of salt.  The recent legislation will neither save us nor destroy us.  The situation will continue to evolve and when we look upon this period of time 50 years from now we will recognize it as a watershed in our healthcare history.  Hopefully a positive one, but only time will tell.