Employee Benefits & Healthcare - Essay Example

Information Employee Benefits & Healthcare Overview of Employee Benefits The employee benefits package is a combination of group and individual benefits that provide security for an employee on the job and during a time of crisis, such as unemployment, death, illness, or injury. The employer provides this package by consulting vendors who specialize in specific benefits in the benefits package, such as a retirement plan, life insurance, long term and short term disability coverage, and healthcare plan. The individual plans collectively form the employee benefits package. An employee relies on a quality benefits package for security, and an employer competes to provide a quality package to attract qualified employees. Salaries are competitive, and many employees rely on competitive salaries. However, the employee benefits package creates value for the employer’s job offers. Therefore, the benefits package is beneficial for the potential employee’s decision to accept the employer’s job offer. The employee benefits package is typically defined as those benefits that provide wage-less compensation packages in exchange for monetary payments. The employee benefits package is designed to increase the employee’s economic security in times of unemployment or illness. Most employee benefits coincide with the employee’s assigned hourly wages or salaries and the number of years worked for the employer. The benefits are provided when an employee pays a particular group or individual rate to participate in the provided employee benefit, depending on the type of benefit plans The type of benefits that the employer provides depend on the employer’s available employee benefits package. Each employee’s package is unique and, therefore, determined by the employee’s particular needs. The employee has an opportunity to purchase additional benefit plans based on the individual’s needs. A few benefits provided through vendors include healthcare, dental plans, life insurance, disability income protection, retirement benefits, daycare assistance, tuition reimbursements, sick leave, paid or unpaid vacation packages, social security plans, profit sharing, education funding, and numerous specialized benefits to meet the employee’s needs. However, the main concern that many employees question is the employer’s healthcare benefits package. Employee Benefits in the United States Employee benefits in the United States consists of a range of benefits plans. A few of these packages may include medical prescription, vision, dental plans, relocation assistance, retirement plans, pension, group-term life, long-term care insurance, childcare, wellness programs, and healthcare plans. A majority of these employee benefits are excluded from an employee’s gross income and are not subject to the United States federal income tax. Some examples of excluded federal tax benefits include group-term life insurance coverage with a maximum coverage of $50,000, accident plans, and healthcare plans. These plans are designated as a tax relief for many Americans. Employee benefits were considered an instrument for employers to attract and keep qualified employees, allowing these benefits to increase the value of an employee’s hourly wage or salary. The rates for employee benefits range depending on the employee’s job classification and number of years worked. The advantage of providing employee benefits is to provide the employer with a tax-deduction and a non-tax for their employees. However, the employer and employee are responsible for paying the Federal Insurance Contributions Act (FICA) tax. The FICA tax is the United States payroll or employment tax. This tax is a requirement of the federal government for employers and employees. The tax funds Social Security and Medicare. These programs provide assistance for retired individuals, disabled individuals, and children of deceased employees. Social Security benefits include elderly individuals, survivors, and disability insurance. Medicare provides hospital insurance. The amount that an individual earns from these two benefits is directly related to the amount an individual pays in payroll taxes throughout their working career. Overview of the Healthcare System The healthcare system for many Americans is designed to provide healthcare benefits to employees with long-term or short-term illness, job related injures, or to promote preventive healthcare treatments. Many employees purchase individual and family healthcare plans to provide financial relief in a case where the individual or family member has a medical emergency, resulting in hospitalization, clinical visits, or for purchasing prescription medications. Healthcare is a type of employee benefit that is designed for providing prevention, treatment, and care for illnesses for employees. Many healthcare providers focus on providing the employee with wellness benefits and preventative care. The use of this benefit reduces the chances for the employee to suffer from a major illness or job loss due to the employee’s illness. Services offered for healthcare include medical, nursing, and associated health professionals. Healthcare professionals provide goods and services, such as preventive, curative, and palliative care. Formation of the Healthcare System In 1847, the first healthcare plan was created in Boston during the Civil War. This plan covered travel related accidents by boat or train. This healthcare plan covered a higher portion of medical expenses for illnesses and hospital visits. In 1929, a more modern healthcare plan was proposed. In 1929, a group of teachers proposed a healthcare plan at Baylor Hospital in Dallas, Texas. They offered to pay a monthly fee to live in the hospital’s facility and access its medical care. After this proposal, life insurance companies searched for prospective buyers to provide healthcare insurance in concurrence with their life insurance plans. Blue Cross and Blue Shield was one of the earlier healthcare providers who proposed their policy plan with healthcare workers and healthcare facilities, providing discounted healthcare services. Blue Cross agreed to pay the greater portion of the medical expenses, while the healthcare facilities and healthcare professionals were discounted. The healthcare industry found this proposal beneficial; it allowed them to receive their funds at a reasonable timeframe and increase their client database. The downside of forming this new healthcare plan was that a number of individuals were unable to pay for the costs of healthcare. Many individuals were unable to work to receive their healthcare benefits. Elderly and disabled individuals were unable to pay the rising costs of healthcare. However, the federal government recognized this dilemma and established the Medicare program to provide health insurance for retired individuals exceeding the age of sixty-five. This program was established by collecting money from salaries of working individuals who received their benefits after retirement. While discussing the history of healthcare in the United States, it is critical to recognize that the federal government had to create a plan to provide health insurance to disabled and poverty stricken individuals. The Medicare system provided health coverage for individuals who were unable to work due to a disability, regardless of the individual’s age. In addition, a new program was established, Medicaid, which provided healthcare services or healthcare insurance to individuals who were unable to pay for health insurance. However, the healthcare system is in need of a healthcare reform as many fear that the quality of this system is beginning to decline. Healthcare in the United States The healthcare system in the United States has many Americans concerned and in fear. For many years, individuals and families have purchased quality healthcare plans to shelter them in times of sickness. Healthcare policy holders fear the worst for the healthcare system. Americans speculate that healthcare will cease. Employers struggle with providing premier employee benefits for employees, but the healthcare crisis has forced many employers to search for inexpensive plans. The price of healthcare has risen incredibly, and as families attempt to manage their financial obligations, the costs of healthcare have made it difficult. The healthcare system in the United States is designed to provide health insurance for employees. These benefits are provided for each employee based on the employee’s needs. The healthcare plan is available for current employees. The healthcare system in the United States has experienced tremendous costs associated with an employer providing healthcare insurance to their employees. However, there are a number of healthcare plans available to provide assistance for employers’ costs of obtaining quality health insurance for their employees. There are two basic health plans: group and individual. Group plans are the least expensive option. Individual plans are offered through private companies and can cost more than a group plan because there is no group discount. Healthcare service plans require a fee for healthcare coverage. These are the most common and traditional form of health coverage. The employee covered under a fee service plan has many choices of doctors and hospitals. This insurance plan requires the health insurance provider to pay a portion of the health costs and the employee pays a fee. A monthly fee is deducted from employees’ pay wages. A fee is also required when healthcare services are provided. Healthcare Plans Group plans Group plan benefits are provided through the employee’s employer. These plans are relative inexpensive. The costs of participating in the group plan depend on the number of employees enrolled. The more employees enrolled in the plan the cheaper the group plan. Employers tend to enroll many employees for the group plan, thus reducing the costs. The group plan provides more benefits for the employee. The costs of prescription drugs are cheaper, the types of benefits provided in the group plan, and the overall costs of the plan. The plan is cheaper and therefore balanced if more individuals who have less health issues enroll. Individual Plans An individual plan is usually provided through a private company. In this case, the employer may have several health insurance providers speak with their employees. The individual plans are designed for each employee, and the employee chooses to enroll in the individual plans based on his or her needs. These plans are usually higher than the group plans because these plans are not based on an employer group rate. Individual plans include life insurance, long term disability, short-term disability, dental plans, and vision plans. Healthcare Maintenance Organizations (HMO’s) An HMO plan charges a monthly fee and requires the employee to use a designated doctor who enrolls with an HMO provider. Along with the monthly fee, the employee is required to pay a co-payment fee, which usually ranges depending on the healthcare insurance provider. The cost for healthcare services is determined by the doctor and the HMO’s, allowing the cost for medical attention to be cheaper. Preferred Provider Organization (PPO’s) A PPO plan includes a fee-based plan and an HMO plan. This type of plan limits the employee’s selection of doctors and hospitals. The individual has a co-payment and possibly a plan deductible. If the individual does not prefer the listed doctors provided with this program, he or she may select a doctor not covered by the PPO. However, the risk associated with an employee choosing an out-of-network doctor is paying a larger fee for the doctor’s healthcare services. It is usually beneficial to choose a doctor in the plan’s network because the costs associated with choosing an out-of-network doctor is quite expensive for the employee. Medicare Medicare is a form of healthcare insurance that provides assistance to individuals above the age of sixty-five. It also covers individuals with disabilities below the age of sixty-five, individuals of any age with End-Stage Renal Diseases, people on dialysis with permanent treated kidney failure, or people with a transplant. There are two types of Medicare plans. The initial Medicare plan is a fee-based service. This plan covers several healthcare services and specific prescription drugs. Medicare covers certain doctors. The Medicare policy holder is responsible for their coinsurance, copayments, and deductibles. If the individual plans to avoid these fees, he or she must purchase a Medigap policy, which covers any additional fees, such as coinsurance, copayments, and deductibles. Another alternative Medicare plan is the Medicare Advantage Plan. This plan covers Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), Private Fee-for-Service Plans, Medicare Special Needs Plans, and Medicare Medical Savings Account Plans (MSA). Medicaid Medicaid provides assistance to individuals with low income levels and limited resources. It is funded by the state and federal government, and it is a need basis program. Individuals covered under the Medicaid program are low-income households, children, seniors, and individuals with disabilities. This program is the largest sector for providing assistance relating to medical and health issues. However, poverty stricken individuals do not solely qualify for assistance based on poverty status. Issues faced nationally regarding healthcare Healthcare is a growing crisis in our nation. The costs of healthcare benefits have increased drastically. With the stagnant economy, rising unemployment percentages, rising healthcare costs, and reduced healthcare benefits, healthcare has become almost extinct. As a result, the healthcare system greatly needs a major revision plan. The costs of healthcare benefits in the United States have increased tremendously. Healthcare has contributed to the hugest costs-associated with directly affecting an employee’s net wages. Studies indicate that the cost of purchasing quality healthcare has risen at a considerable amount. According to the National Coalition on Health Care (NCHC), healthcare costs are rising at the fastest rate in our history with national healthcare expenditures rising 7.9% in 2004 and totaling to $1.9 trillion. Due to the impact of rising healthcare costs, economists have predicted that the cost of healthcare will continue to rise. If this pattern continues, Americans can expect the healthcare costs to approach four trillion by 2015. The impact of the rising costs in healthcare in our nation is contributed to several factors. The American people practice unhealthy lifestyles, which results in frequent hospital visits and expensive medical treatment costs. The benefits package for healthcare has risen. As a result, many employers have increased the amount an employee must pay from their wages to keep their health insurance coverage. Prescription drug companies spend billions of dollars to experiment on creating new marketable, life-saving medicines that have caused the employee to spend more money to purchase. There are countless ways to spend less money for healthcare coverage. One way to manage the rising healthcare crisis is to reallocate change to employees. Employers should provide informative meetings for their employees. This will reduce the employer’s healthcare plan risks and ultimately reduce costs. The employer should provide Consumer Driven Healthcare Plans (CDHP). This healthcare plan is directly associated with the consumers, rather than the company or insurance providers. The consumers determine the location and method of expenditures towards their healthcare portion. This plan is designed to improve the quality of healthcare for Americans and reduce the rising costs. The risk associated with the individual choosing the Consumer Driven Healthcare Plan is the employees’ resistance to the plan. The plan is designed for the employee to take an active approach in managing their healthcare plan. The employee must understand the premiums, co-pays, open enrollment decisions, vendors, processing claims, and training tools. To avoid such resistance to this plan, the plan provider should provide a detailed explanation of the employee benefits. Another way to reduce the costs of healthcare is for Americans to consider opening a Health Savings Account. Health Savings Accounts are 100% tax-deductible. The individual with a Health Savings Account can withdraw money with a check or debit card to cover medical expenses. The benefit of having a Health Savings Account is that this account is similar to an Individual Retirement Account (IRA), which draws interest towards retirement. In addition, the individual can choose the doctor of his or her preference. In order to qualify for a Health Savings Account, the individual must have a low-cost, high deductible health insurance plan that pays for the larger portion of incurred medical expenses. However, less than 20% of the American people incur these types of medical expenses. Issues employers face with rising healthcare costs An employer’s competitive healthcare package for employees is a tool for employers to attract the best potential employees for employment. However, employers struggle with providing the best healthcare package available due to the rising cost of healthcare. Many employers are focusing on ways to manage the rising costs of healthcare insurance. Employers aim at making a difference by proposing their concerns to the federal government. However, employers are battling with the issue of taking part blame in the cause of rising healthcare costs because of their working relationships with health insurance companies, healthcare vendors, healthcare providers, pharmaceutical or biotechnology companies, government, and employee plan participants. Therefore, employers’ ultimate route is to manage healthcare change with their employees, rather than focusing on change with the United States healthcare administration. The rising costs of healthcare have forced employers to compare several healthcare plans and determine which plan is beneficial for their employees. According to an article from The Source, “Despite rapidly healthcare costs, an overwhelming majority of companies say they have no plans to cut or eliminate coverage for their employees.” In a survey in 2001 by Watson Wyatt Worldwide, the Washington Business Group on Health, and the Healthcare Financial Management Association, a group of three-hundred and sixty employers’ reports that the overall costs of healthcare insurance have increased by 10.3 percent. The costs of prescription medication have increased by 14.6 percent. In a survey completed in 2008, it compares the cost of healthcare from 2003 to 2008. According to this survey, the employers’ healthcare costs increased from $5,100 to $7,080, and the employees’ healthcare costs increased from $1,284 to $2,064. The figures below provide a visual demonstration of the impact of healthcare in our society. The previous surveys demonstrate the impact of the rising costs of healthcare in the United States. However, employers cited a number of reasons for why they continue to provide healthcare insurance for their employees. The employers concluded that good and capable employees with chronic illnesses typically require intensive or special care regularly to stay productive. These employees decline as productive employees if they can not afford to pay for needed medical attention. Employers state that there is still a tight labor market in many sectors. Therefore, providing employee benefits is a major key to attracting and retaining good employees. In addition, there is a cost of replacing an employee and added risks involved. Since new employees are considered an investment, keeping them healthy can help ensure a good return in this investment. Conclusion Employee benefits associated with healthcare contribute a huge impact on an employee’s decision to consider an employer’s request for employment. Many employers compete with providing the best healthcare system available. This strategy determines the extent of hiring productive employees. With the rising costs of healthcare, employers struggle to ensure that current and future employees will have a good healthcare benefits package. However, although this nation’s healthcare costs have risen, there are several ways to reduce the cost of healthcare in our society. As an employer and employee, both must decide what is considered medical costs, and it is critically important that we revise the way the healthcare program is administered. The state of the healthcare system is determined by both the employer and employee who should take an active approach in changing the structure of healthcare. The costs of healthcare will continue to rise unless this nation develops a plan for change in the healthcare sector. It is concluded that the hugest portion of the employees’ decision to consider an employer for employment is the employers’ benefits package, particularly the employers’ overall healthcare plan and providers. However, there are various approaches that the employee can take to better manage the healthcare crisis. Revising the healthcare strategy An important way for an employer and employee to evaluate the extent of their spending in healthcare is to effectively and efficiently analyze the impact of healthcare treatment costs associated with specific illness, disability absences from work, and the lost of productivity from an absent employee. A study done by the Integrated Benefits Institute, CORE INC, and The MEDSTAT Group contributed two and a half years analyzing three hundred and eight health insurance claims and thirty-two thousand short-term disability claims for a Midwest manufacturer, which employed seventy-two thousand employees. The research concluded that the manufacturer spent a total of $1.4 billion on treatment costs and associated healthcare costs. Medical treatment costs were less than 20% of the total costs that the manufacturer spent. However, the hugest costs were associated with the manufacturer’s lost in productivity at almost $1 billion of the total costs. The reports from this study concluded that to determine the actual costs of healthcare the company must analyze the total costs of treatment and disability. In order to determine this figure, a company should choose healthcare plans that accompany plans that coincide with specific diagnoses that require higher costs to obtain. This method allows the employer to link the event of a disability as a series of disabilities with associated costs rather than an individual cost, which is relatively expensive for the employer and a greater financial loss. Efficiently administering healthcare plans Employers who provide internet access for managing healthcare benefits reduce the costs of administering healthcare plans. This avenue allows the employee to access pertinent healthcare information when needed. The employer should place the healthcare insurance booklet online. If the employee has information regarding the healthcare plan, he or she can access this information via the internet. The employer should allow the employee to conduct transactions online. These transactions will include annual enrollment, renewals, payments, and claim processing. Finally, the employer should use the internet as a basis to promote better health. The employer should provide message alerts promoting health and wellness programs and should be designated by age, gender, and medical ailments. These message alerts should be designed according to the specific illnesses or diagnosis of the employee. Each employee can login and keep a record of the dates of specific procedures, such as annual exams. This database is beneficial to the employer because the employee will have a way of managing their health and have access to their healthcare information. The federal government has growing concerns about the state of the current healthcare system. Several United States Senators have joined together in an effort to create an alternate method for providing secure healthcare for our nation. As the price of healthcare continues to soar and families are faced with outrageous financial obligations, the federal government must quickly propose a solid healthcare plan. As many Americans continue to fear the nation’s healthcare crisis, Senators strive to ensure the American people that a solution to this crisis is proposed. On November 19, 2008, Members of the Senate and the Health Education Labor and Pensions (HELP) Committee worked early in the 111th Congress to pass a comprehensive healthcare reform. Members included the Finance Chairman Max Baucus and HELP Chairman Edward Kennedy. These two individuals met in the United States Capitol with Finance Ranking Member Chuck Grassley, HELP Ranking Member Mike Enzi, Finance Health Care Subcommittee Chairman Jay Rockefeller, Health Care Subcommittee Ranking Member Orrin Hatch, and HELP Children and Families Subcommittee Chairman Christopher Dodd. These Senators issued the following statement: “Today, millions of Americans live under the shadow of illness or financial strain without sufficient health coverage or any coverage at all in our broken system.  Our health care system, while excellent in many regards, falls short of providing the best value for the money we spend.  We agree that the members of the 111th Congress should seek to achieve comprehensive health care reform that includes access to effective coverage, quality care for all, and measures to control rising costs.  We intend to work together toward quality, affordable health coverage and care for every American.” Works Cited Catherine Wolpert and Rick Rothermel. “Balancing Employee Expectations and Healthcare’s Rising Costs: How Smart Employers Build Acceptance for Change.” Lamarch and associates, Inc. Copyright 2006. 24 Nov. 2008. . Ida L. Castro. The U.S. Equal Employment Opportunity Commission. EEOC COMPLIANCE MANUAL. 30 Oct. 2000. 23 Nov. 2008. . 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