Indirect Compensation: Benefits

Human Resource ManagementHuman Resource Management

Benefits: Indirect Compensation

Health care insuranceHealth care insurance MedicalMedical DentalDental VisionVision

Life insuranceLife insurance Disability insuranceDisability insurance

Retirement plansRetirement plans Defined benefitDefined benefit Defined contributionDefined contribution

Protection ProgramsProtection Programs

Government Mandated Benefits

Social Security Social Security RetirementRetirement SurvivorSurvivor Disability benefitsDisability benefits

Unemployment compensation Unemployment compensation Workers CompensationWorkers Compensation

No fault conceptNo fault concept

"Health and Welfare" Plans

Health careHealth care Medical careMedical care

Costs controlled through controlling utilizationCosts controlled through controlling utilization• This is what “managed health care” doesThis is what “managed health care” does

Also include dental, vision care and Also include dental, vision care and prescription drugs prescription drugs

Disability insuranceDisability insurance Survivor benefitsSurvivor benefits

Basic Major Medical Model

These plans have significantly decreased in These plans have significantly decreased in numbernumber

Also known as “indemnity plans”Also known as “indemnity plans” Full coverage on first dollar spentFull coverage on first dollar spent Deductible typically $100Deductible typically $100 Co-pay (co-insurance) 80-20Co-pay (co-insurance) 80-20

Managed Care Continuum

Basic Medical Basic Medical PPOPPO POSPOS HMOHMO

ModelModel

Freedom of choiceFreedom of choice Limited choice Limited choice

High CostHigh Cost Lower cost Lower cost

Managed Care Plans

PPO (Preferred provider organization)PPO (Preferred provider organization) Choose health care providers from a “network”Choose health care providers from a “network” Cheaper for patient if health care provider is in Cheaper for patient if health care provider is in

the networkthe network Can go outside the network, but it will cost Can go outside the network, but it will cost

them morethem more

Managed Care Plans

POS (Point of service plan)POS (Point of service plan) Very similar to preferred provider plans, but Very similar to preferred provider plans, but

must choose a primary care physician for a must choose a primary care physician for a “gatekeeper” within the network“gatekeeper” within the network

Patient makes choice at the “point of service”Patient makes choice at the “point of service” More limited choice within the network More limited choice within the network

because of PCPbecause of PCP

Managed Care Plans

HMO: (Health maintenance organization)HMO: (Health maintenance organization) Limited choice; network onlyLimited choice; network only Doctor is "primary gatekeeper" Doctor is "primary gatekeeper" HMO's lower costs by negotiating with HMO's lower costs by negotiating with

providers providers Capitalizes on volumeCapitalizes on volume

Retirement: Defined Benefit Plan Benefit is defined; cost is unknownBenefit is defined; cost is unknown Company pays whatever it takes to provide Company pays whatever it takes to provide

the benefitthe benefit Requires actuarial serviceRequires actuarial service Financial risk is on the employerFinancial risk is on the employer General higher benefits for career General higher benefits for career

employeesemployees

Retirement: Defined Contribution Plan Employee and company contributions are Employee and company contributions are

defined/known; benefit is unknowndefined/known; benefit is unknown Pension equals whatever the total amount in Pension equals whatever the total amount in

the fund will providethe fund will provide Financial risk is on the employee Financial risk is on the employee Can provide substantial benefit to shorter Can provide substantial benefit to shorter

career employeescareer employees Does not require actuarial servicesDoes not require actuarial services

Regulation of Pension Plans

ERISAERISA Plan participation rulesPlan participation rules VestingVesting Nondiscrimination RulesNondiscrimination Rules Fiduciary standardsFiduciary standards Reporting and disclosureReporting and disclosure Plan termination insurance (PBGC)Plan termination insurance (PBGC)

Benefits: Indirect Compensation

At workAt work Changing timeChanging time BreaksBreaks

Not at workNot at work Vacation Vacation HolidaysHolidays Personal daysPersonal days

Pay for Time Not WorkedPay for Time Not Worked

Benefits:Indirect Compensation

GeneralGeneral Subsidized parkingSubsidized parking Subsidized lunch roomSubsidized lunch room

LimitedLimited ExecutiveExecutive

Company carCompany car Country club membershipCountry club membership Company-paid physicalCompany-paid physical First-class flights First-class flights

PerformancePerformance Employee of the month Employee of the month

parkingparking

Employee PerquisitesEmployee Perquisites

Flexible Benefits?

Each employee's needs are Each employee's needs are uniqueunique

Changing employee Changing employee demographics:demographics: More womenMore women More "two pay-check" More "two pay-check"

householdshouseholds Increased number of Increased number of

younger workersyounger workers Growth of age 65-69 and Growth of age 65-69 and

older populationolder population More single parentsMore single parents

Maximize employee Maximize employee perception of benefits perception of benefits programprogram

Better manage employee Better manage employee expensesexpenses

Tax effective (Section Tax effective (Section 125)125)

Provide additional Provide additional benefitsbenefits

Encourage employee Encourage employee long-term savingslong-term savings