The Next Innovation In Controlling Healthcare Costs
As healthcare costs continually increase, understanding where the cost come from and how to manage them is critical. Bruce Barr gives a great editorial on why new trends are essential in controlling costs.
Original post from EmployeeBenefitAdviser.com on August 1, 2016.
Four decades ago, PPOs were hailed as the “silver bullet” to control healthcare costs. Participating providers were contractually obligated to accept discounted fees, which seemed like an obvious solution to out-of-control increases in healthcare costs. Self-funded plan sponsors readily adopted this approach to gain access to network discounts and lower their healthcare costs. In fact, some self-funded plan sponsors still periodically conduct a re-pricing analysis or another method of comparing which PPO yields the best discounts for their specific group.
However, as provider contacts expired, they were renegotiated at higher rates for providers and higher costs for plan sponsors. In addition, hospital charge-masters have increased at an exorbitant pace and have largely gone unregulated and uncontrolled. As a result, the significant discounts once achieved by PPOs no longer deliver the true savings that were seen in the 1980s and 1990s.
For example, a 60% discount on a $1,000 “oral cleansing device” (more commonly referred to as a toothbrush) clearly does not deliver value for the plan sponsor or member and is indicative of some of the billing practices that go undetected. The same could be said of a $150,000 knee replacement. Using a PPO for its discounted fees is somewhat analogous to buying a car by negotiating a discount off the list or sticker price.
As employers gain a better understanding of the questionable value of PPO discounts and pricing optics, reference based pricing (RBP) and reference based reimbursement (RBR) provide possible solutions by addressing the demand for:
· Price transparency,
· Benchmarking the cost of claims,
· Eliminating inappropriate charges, and
· A fiduciary or co-fiduciary serving on behalf of the plan sponsor.
With RBP, the plan specifies the amount that will be allowed for certain common procedures such as MRIs or knee replacements based on prevailing charges. Covered members have access to a list of participating providers who have agreed to accept these payments. Should the member choose a higher-priced provider, he or she may be responsible for the balance of the payment.
RBR uses a common “pricing reference” — often tied to the Medicare allowance and the actual cost for a specific service – and then reimburses the hospital or facility an additional 20-80%, allowing for the provider to make a “fair and reasonable” profit. For context, many PPO discounts result in net payments equal 250% or more of the Medicare allowance.
There are different ways this strategy can be implemented. Some employers begin using RBR exclusively for out-of-network claims. In other cases, RBR is used for all facility claims in conjunction with a PPO network for physician claims or an accountable care organization.
While used successfully by many employers, RBR can be disruptive for some employees when a provider attempts to “balance bill” patients for the difference between the set plan allowance and the provider’s billed charges. In the overwhelming majority of cases, however, these issues are quickly and easily resolved in favor of the plan sponsor and member. Rarely does a discrepancy like this lead to legal action.
Employers who decide to implement a RBR strategy need to carefully select a partner with expertise in communicating and educating employees about how these arrangements work and what to do should they receive a balance bill. The RBR partner should also have expertise in negotiating pricing discrepancies with providers, providing employee advocacy, indemnifying the plan and its members, and modifying the language in the plan document.
Many early adopters of this approach were often those who were subject to extreme increases in healthcare costs and who saw RBP and RBR as a last ditch effort that would enable them to continue to provide medical benefits for their employees. We’re now beginning to see more employers adopt this approach as a way to more effectively determine and control the cost of healthcare.
See Original Post Here.
Source:
Barr, B.F., (2016, August 1). The next innovation in controlling healthcare costs [Web log post]. Retrieved from https://www.employeebenefitadviser.com/opinion/the-next-innovation-in-controlling-healthcare-costs
Is There Really A Five-Second Rule About Food On The Floor?
Are your employees being break-room conscious about food safety? The article below gives more insight on the "five-second" rule and how it may effect your employees safety.
Original Post from CNN.com on June 15, 2016
When you drop a piece of food on the floor, is it really OK to eat if you pick up within five seconds? This urban food myth contends that if food spends just a few seconds on the floor, dirt and germs won't have much of a chance to contaminate it. Research in my lab has focused on how food and food contact surfaces become contaminated, and we've done some work on this particular piece of wisdom.
Where did the five-second rule come from?
Five seconds is all it takes
Should you eat food that's fallen on the floor?
Workers Overwhelmed by Health Care Decisions
Employees are feeling the stress of healthcare costs. In the article below by Jack Craver, he provides insight as to the pressures workers are currently dealing with in todays healthcare marketplace.
Original Post from BenefitsPro.com on July 29, 2016
In case you haven’t noticed, Americans are in a tough spot on health care.
For one, their health care costs far more than that in any other country. Even worse, perhaps, they increasingly have many more decisions to make about how to pay for that care.
A new report demonstrates the frustration and hopelessness that grips so many in the face of health care decisions.
The study by Alegeus, the benefit account platform, surveyed 4,000 adults about their health care choices. It showed that there are seldom health or insurance-related choices that Americans make with relative ease or comfort.
There are no health care finance decisions, for instance, that a majority of Americans don’t find challenging. At the top of the list was “planning for out-of-pocket costs,” which two-thirds of respondents say they found either challenging or very challenging. Fifty-five percent say the same about choosing health care benefits.
Fifty-two percent said they found “maintaining health and wellness” challenging. If respondents are being completely honest with themselves (and the pollster), that figure would probably be much higher, considering that three-quarters of Americans are overweight or obese, and a certain percentage of those who aren’t still engage in unhealthy habits, such as problem drinking, substance abuse, or smoking.
One of the reasons health care is so expensive, many argue, is that for so long, Americans have been shielded from the true cost of care by generous employer-based insurance policies. As employers increasingly shift to high-deductible plans or consumer-driven health plans, millions of Americans are for the first time confronting decisions that in the past were left to higher-ups.
Alegeus CEO Steve Auerbach explained the shifting dynamics of health care shopping to BenefitsPRO.
“In the past, with health plans paying for the majority of health care costs, consumers have been conditioned to be disengaged,” he says. “This shift to consumer directed health care represents a complete paradigm shift in how consumers will need to manage their healthcare going forward — and there is a sizeable percentage of consumers who are resistant to this change. It is definitely going to take time for consumers to acclimate, build confidence, and rise to the occasion.”
He noted, however, that a similar “paradigm shift” took place with retirement benefits two decades ago, as many companies moved from defined-benefit pensions to 401(k)s.
“The infrastructure for education and support had to be built, and consumers had to adapt,” he says. “But now 401(k)s have become ubiquitous.”
See the original article here.
Source:
Craver, J. (2016, July 29). Workers overwhelmed by health care decisions [Web log post]. Retreived from https://www.benefitspro.com/2016/07/29/workers-overwhelmed-by-health-care-decisions?kw=Workers%20overwhelmed%20by%20health%20care%20decisions&cn=20160801&pt=Daily&src=EMC-Email&et=editorial&bu=BenefitsPRO&slreturn=1470060827
Rising Health Care Costs: Driving Factor Causing Changes to Employer Health Plans, SHRM Survey Finds
Get the latest trends in healthcare benefits in the survey conducted by SHRM.
Original Post from SHRM.org on July 13, 2016
- Ninety-six percent of organizations offered some type of health care plan to their employees.
- Mail order prescriptions have gone down by 6 percent over the past five years.
- Eighty-five percent of organizations offer mental health coverage, compared to 91 percent just last year.
- Organizations were evenly split as to whether they offered coverage to spouses who had access to health care coverage through another employer, or if there was a spousal surcharge for health care coverage.
- Several new health-related items added to the survey this year: health care services such as diagnosis, treatment or prescriptions provided by photo or video (23 percent), high deductible health plan not linked to an HSA or a health reimbursement account (HRA) (17 percent), genetic testing coverage for diseases such as cancer (12 percent) and a smoking surcharge for health care plans (20 percent).
Do companies really need a culture of health in the office?
Great article by Henry Albrect on how to have an effective wellness program that truly impacts your bottom line. To many time we focus on one aspect and not the whole picture of creating an effective wellness program.
Original Post from EmployeeBenefitAdviser.com on July 28, 2016.
You’ve probably heard that a “culture of health” is the best way to see success with your wellness program.
I disagree.
A successful wellness program should align with an employer’s strategy and culture above all else. The further you get from these, the more likely your program will be “a little HR thing” — and not a vibrant part of your workplace. Frankly, and with the notable exception of healthcare companies, health isn’t a top concern for most organizations.
Align any health and well-being programs with your business goals
Investing a few million in feel-good programs is easy. But investing in anything off-strategy is always a risk. If you are in the manufacturing business, wellness strategies should reinforce readiness, safety, discipline and musculoskeletal health. In retail, they should support energy levels, having infectious positive energy that helps customers enjoy buying your products. In healthcare, mindfulness and resilience play a strong role.
Do it in a way that fits with your culture
The true definition of company culture has gotten lost along the way.
Your company culture is the backdrop for everything that happens within your organization. It determines workplace norms, values and beliefs. It rules employee behaviors and experiences.
Well-being, broadly defined, is a key element of all great company cultures. Wellness programs should fit into and reinforce your culture — but they aren’t the point of your culture.
Why? Because, above all else, your business goals should define your company culture. The two have to align.
According to a Willis Towers Watson report, 67% employers say developing a workplace culture of health is a top priority.
But company culture and strategy can’t exist separately. And health isn’t at the heart of the business goals for every organization. Retailers might prioritize customer service while tech companies thrive on innovation. Company culture needs to support the main mission and goals.
When culture and strategy align, businesses are successful, a study published in April 2015 in the Journal of Organizational Behavior suggests.
Researchers collected data from 95 car dealerships over six years and found that when companies had a culture that engaged and motivated employees, they had higher ratings of customer satisfaction and vehicle sales. When employers neglected their culture, their performance declined over time.
What about health and wellness?
Businesses can embrace well-being and invest in employee health even if it doesn’t define the company culture. And they should.
A 2015 survey published by Quantum Workplace and my company, Limeade found that respondents were 38% more engaged and 18% more likely to go the extra mile when they felt their employers cared about their well-being.
Use that power to build a wellness program that supports your authentic culture and achieves business objectives. Don’t worry about developing a culture of health. Well-being initiatives in the workplace should align with the culture — not the other way around.
Determine why you want a wellness program. What are the goals, and why are they important to the business? If you want to improve customer satisfaction, what programs can you use to make employees more chipper? If you’re focused on innovation, how can you inspire creativity?
These specific goals should guide which programs and initiatives are right for the company. Then, connect it back to your culture.
If your culture values teamwork, bring employees together in sports games and competitions around the office. If you value community involvement, give employees time to volunteer or participate in a local charity walk. Every company’s wellness initiative will look different.
Building a culture of health might be great for some hospitals, but it isn’t right for every organization. Focus on bringing your authentic culture to life through a program that aligns with your business goals. Winning in business helps you win with well-being, and vice versa.
Does your wellness program connect to business goals?
See The Full Article Here.
Source:
Albrecht, H (2016, July 28). Do companies really need a culture of health in the office? [Web log post]. Retrieved from https://www.employeebenefitadviser.com/opinion/do-companies-really-need-a-culture-of-health-in-the-office
How On-the-Job Training can Solve Your Pipeline Problems
Great article by Paul Wolfe on employee development as an investment to your company.
Original Post from SHRM.org on July 27, 2016
On-the-job training was popular a generation ago but has been steadily declining in the U.S. for decades. Companies expect candidates who are armed with a degree or certification and relevant work experience, which is discounting a large pool of the American workforce.
This model worked for companies when there were more qualified people than jobs available, but today’s labor market paints a different picture. Now we are seeing a lot more demand for specialized talent than there are qualified candidates. And though we have seen strong hiring, wage growth has been stagnate, leaving many workers frustrated with the lack of progress in their careers. In fact, only 15% of the job force are currently in fields that are experiencing wage growth and competitive salaries, which are the “opportunity” jobs, according to a new report released by Indeed’s research team Hiring Lab.
The upside is that 35% of all job postings on Indeed are these opportunity jobs, which are in the fields of healthcare, management, technology, business and finance and engineering. There are a lot of talented workers out there, employed or not, that have transferable skills that would be interested in moving into a role with steady wage growth and competitive salaries.
That’s why I think it's important for companies to consider investing in employee development to fill roles within their organization. Investing in training helps workers get into a high-growth career and enables companies to build its own pipeline of talent.
Employee development can look very different depending on your company or industry. For example, at Indeed we bring in about 80 university graduates from around the world to our Austin technology office for a summer program called Indeed Universtiy. We train these new hires on Indeed’s data-driven development process and give them the freedom to develop new product ideas. This is helping us to fill our most in-demand jobs - software engineers - while training them to contribute right away and offer innovative ideas for our company to test. Finding a software engineer who already has 3-5 years of experience is extremely competitive, so as a company we made the decision to invest in new college grads to help fill this need.
Offering development to your employees is an investment, but for those companies who are struggling to fill roles in these highly competitive and specialized fields, it can help close the gap of of the mismatch we are seeing in the labor market.
See the original article here.
Source:
Wolfe, P. (2016, July 27). How on-the-job training can solve your pipeline problems [Web log post]. Retrieved from https://blog.shrm.org/blog/how-on-the-job-training-can-solve-your-pipeline-problems
New Workers Are at Highest Risk for Heat-Related Death
Did you know new employees or workers coming back from an extended break are at more risk of heat stroke? It is important to make sure these workers review safety procedures and gradually build up their tolerance to the heat. See the article by Dana Wilkie below and make sure your new workers are safe.
Original Post from SHRM.org
Who would you guess is most at risk for heat-related death while on the job?
It’s not necessarily older workers, first responders or those who toil outside all day.
Instead, the majority of recent heat-related deaths investigated by federal authorities involved workers who’d been on the job for three days or less.
That finding by the Occupational Safety and Health Administration (OSHA) highlights how important it is for employers to ensure that new workers—and returning employees who have been back to the job for a week or less—are prepared to protect themselves, OSHA authorities said.
With weather forecasters calling for above-average temperatures across much of the country this summer, the standard precautions—drink lots of water, take frequent breaks and spend time in the shade—may seem obvious. Yet those precautions may not be enough for new workers or employees returning to the job after extended time away. OSHA recommends allowing new or returning workers to gradually increase their workload and take more frequent breaks as they build up a tolerance for working in the heat.
Prevention
Construction workers make up about one-third of heat-related worker deaths, but employees who work outdoors across many industries—agriculture, landscaping, transportation, utilities, grounds maintenance, emergency response, and oil and gas operations—are at risk when temperatures go up. Additionally, indoor employees who do strenuous work or wear bulky, protective clothing and use heavy equipment are also at risk. High humidity increases the chances of heat-related maladies such as heat exhaustion or heat stroke.
In 2014, 2,630 workers suffered from heat illness, and 18 died from heat stroke and related causes on the job, according to OSHA.
Under the general duty clause of the Occupational Safety and Health Act, employers are responsible for protecting workers from hazards on the job, including extreme heat. To prevent heat-related illness and fatalities, OSHA offers these suggestions:
- Prepare a heat acclimatization plan and medical monitoring program. Closely supervise new employees, including those who are temporary workers or returning seasonal workers, for the first 14 days on the job—or until they acclimate to the heat. Though most heat-related worker deaths occur in the first three days on the job, more than one-third occur on the first day. If someone has not worked in hot weather for at least a week, his or her body needs time to adjust.
- Encourage workers to drink about one cup of water every 15-20 minutes, even if they say they’re not thirsty. During prolonged sweating lasting several hours, they should drink sports beverages containing electrolytes.
- Provide shaded or air-conditioned rest areas for cooling down, and encourage workers to use them.
- Provide workers with protective equipment and clothing, such as hats, light-colored clothing, water-cooled garments, air-cooled garments, ice-packet vests, wetted overgarments, and heat-reflective aprons or suits.
- Be familiar with heat illness signs and symptoms, and make sure employees are, too. Some heat exhaustion signs are dizziness, headache, cramps, sweaty skin, nausea and vomiting, weakness, and a fast heartbeat. Heat stroke symptoms include: red, hot, dry skin; convulsions; fainting; and confusion. In general, any time a worker has fainted or demonstrates confusion, this represents an emergency situation.
- Tell workers to notify a supervisor or to call 911 if they or their co-workers show signs of heat illness. Implement a buddy system where workers observe each other for early signs and symptoms of heat intolerance. Have someone stay with a worker who is suffering from the heat until help arrives.
- Encourage supervisors and workers to download OSHA’s Heat Safety Tool on their iPhone or Android device. [https://www.osha.gov/SLTC/heatillness/heat_index/heat_app.html] This app calculates the heat index, a measurement of how hot it is when taking humidity into account. The app also has recommendations for preventing heat illness based on the estimated risk level where one is working.
Dana Wilkie is an online editor/manager for SHRM.
Read original article here.
Wilkie, D. (2016, June 6). New workers are at highest risk for heat-related death [Web log post]. Retrived from https://www.shrm.org/ResourcesAndTools/hr-topics/employee-relations/Pages/New-Workers-Are-at-Highest-Risk-for-Heat-Related-Death.aspx
The ACA’s uncertain lifespan following the Cadillac Tax delay
Are you questioning how the ACA will continue with the delay of the Cadillac Tax? Neil Model gives a breakdown of the "what-ifs" scenarios.
Original Post from BenefitsPro.com on July 26, 2016.
Since the delay of the Affordable Care Act’s (ACA) “Cadillac Tax” provision, which was passed on December 18, 2015, some may be wondering how the ACA will be funded until 2020. I do not believe we have been given the answer.
The Cadillac Tax was to be imposed as a means of funding the ACA by penalizing employers for offering high-cost employer sponsored health insurance plans to employees. One must take into consideration that with continued double-digit healthcare premium increases, the so-called “high cost” plans are not so far-fetched for many more employer sponsored plans in the future. The Cadillac tax was also to double as an incentive for plan sponsors to look at less expensive plan alternatives by the time the tax would be imposed, which is now 2020.
The tax, were it not delayed, would have assessed a penalty of 40 percent for plans costing an employee more than $10,200 annually, and family plans costing an employee $27,500 annually. I have little doubt that the craftsman of the ACA actuarially assumed there would be more employers subject to penalties in future years, despite most efforts to curb premiums.
But because the tax has been delayed, questions about how the ACA will be funded until 2020 have arisen. While still some plan sponsors speculate about whether the ACA will ultimately be repealed, others are still preparing for 2020 by attempting to provide affordable plan options for their employees. This is and will become increasingly more difficult due to spiraling health care costs and corresponding premiums. I have heard it asked many times: “How much more can I impose on my employees?” Add to that concern the even greater Rx inflation due to new and very expensive drugs coming to market for Hepatitis C, rheumatoid arthritis and cholesterol.
Though there have been no definitive plans announced to supplement the funding that would have resulted from the Cadillac Tax, other taxes and fees have been responsible for the partial funding of health care reform, some paid by individuals, others paid by employers, including numerous taxes on medical device manufacturers, indoor tanning services, charitable hospitals that fail to comply with Obamacare requirements, brand name drugs and health insurers. Other fundraising for the ACA comes through the elimination of tax deductions for certain drug coverage and tax increases for those with a certain income threshold.
Since the ACA’s emergence, we have read about failed state exchanges, bankrupt cooperatives, and the significant losses the major insurance carriers have incurred participating in the federal exchanges. We have also seen the failure of the government to pay the subsidies to insurance carriers in the timely fashion promised and expected. With the various delays and elimination of ACA funding clauses, we all must wonder where the money to pay for ACA will ultimately come from. Does everyone have a mirror?
According to an article by Reuters with information from the Congressional Budget Office, U.S. taxpayers will ultimately be responsible for $660 billion this year alone as a subsidy to those receiving health insurance under the age of 65. Those figures are expected to rise to $1.1 trillion over the next decade.
The burden will not only fall on the backs of the consumer, but on employers that want to help lift the burden of the high cost of health care. And, providing major medical insurance might not be enough in today’s environment. Ultimately, it will come down to employers educating themselves on the most effective strategies and seeking the guidance from benefits brokers to come up with creative, alternative solutions that will make it easier for employees to live healthy lives.
As the lifespan of the ACA remains undetermined, employers need to educate and prepare as best as possible. Uncertainty, especially with the election around the corner, will be a key theme the rest of this year, particularly in the health care realm.
So, the question remains: Will the ACA keep fighting the good fight going forward, or will it crumble under pressure?
Rethinking the Modern Accumulation of Technology
In an article from SHRM.org, Natalie Kroc addresses how technology is impacting security measures.
Original post from SHRM.org on June 16, 2016.
It wasn’t the latest gadget or platform or program that the speakers discussed at a recent conference session on how to keep teleworkers and remote workers connected. Instead, it was the most basic of modern technologies that kept being stressed:
E-mail. An Internet connection. Maybe a webcam (though this proved controversial).
“I am a Millennial, and I … primarily communicate through e-mail,” said Greg Caplan, founder and CEO of Remote Year, a year-old startup that has brought together a group of 75 people to travel the world while holding down various remote jobs. Caplan believes that, for work purposes, e-mail is still king.
The other panelists at the Telecommuting, Remote and Distributed (TRaD) Works Forum, held June 9-10 in Washington, D.C., agreed that the simplest of technologies can successfully keep offsite employees connected. TRaD refers to the different kinds of offsite employees: Telecommuters are those who work from home sometimes, remote workers do their entire jobs from home and a distributed workforce is when an organization doesn’t have a physical location so its employees all work remotely.
Employees who work offsite only need “an Internet connection. Anything else we can work around,” said Carol Cochran, director of people and culture for Boulder, Colo.-based FlexJobs, a job search site that focuses on telecommuting, part-time and other flexible work opportunities. FlexJobs was a co-host of the forum.
Organizations may want to consider providing their remote workers a cellphone with Internet capabilities as a backup. This all but guarantees that employees will be able to work—even if they are having difficulties with their home Internet connection.
A chat function can be useful as well, if the work that employees are doing would benefit from the ability to reach out and have real-time conversations.
Many organizations that employ remote workers have the routine of a “daily huddle” or something similar, wherein employees are expected to check in at the start of the day, whether in a brief meeting or by writing their day’s plans in a shared document.
When an organization’s workforce is made up of remote or teleworking employees, or a mix of offsite and onsite workers, it’s especially important to use the time when everyone gets together effectively. Meetings should be “30 minutes, if not 15 minutes, instead of an hour,” Cochran said. If certain employees are inclined to speak for long periods of time, establish a time limit—and then stick to it.
Video: Love It or Hate It
“I hate video,” Cochran said. “I’m really reluctant to put it on, it’s so awkward.” FlexJobs uses it only rarely, and even then it’s often for social occasions. Cochran said she has found that workers become preoccupied knowing they are being viewed on screen, and worry about their hair and clothes and background surroundings.
This was a point of fierce contention among the panelists and forum attendees alike, though. Some organizations believe that video is essential, and that any initial awkwardness that employees may feel will disappear with habitual use.
Alex Konanykhin, CEO of Transparent Business, a platform that aims to help companies that employ teleworkers and freelancers, offered a solution: Get the organization’s leaders to work from home—and to exercise right before the meeting. When they dial in, they should be in full post-workout gear, including messy hair or a baseball cap. “All it takes is one time” of seeing that, he said, to have a workforce that can be comfortable with being on screen.
Video is a way of giving voice to remote workers and “making them feel part of the organization,” he added.
For those organizations that decide to incorporate webcams into the remote-worker experience, the panelists had some advice:
- Don’t keep the webcams on all day—turn them on at specific times, such as for meetings or training sessions.
- Suggest to employees who express reluctance that they may want to purchase a simple screen or backdrop to place behind them so that their home surroundings will not be visible on screen. This also may help to convey a more-businesslike feel.
- Consider making video an option, not a requirement, for meetings.
- Finally, if the organization’s video capabilities prove to be less than ideal—and repeatedly involve technical snafus such as the video shutting off or freezing, then stop trying to make video happen.
Adopt New Tools Cautiously
The speakers had their individual favorites among newer technologies, such as messaging app Slack, electronic signature platform DocuSign, Google Drawings for collaborating on charts and diagrams, and Zoom for streamlining remote communications. However, the panelists also derided many new offerings as being unnecessarily confusing and others for seeming to be more about entertainment than practical application.
Tools that are adopted by an organization need to be fully embraced by both remote and onsite workers, the speakers agreed. “When you take on a tool, you have to have a very clear expectation of how it is to be used,” Caplan said. “And that’s just culture.”
That said, it’s important for organizations to pick their tools wisely. Each new tool should represent an improvement from whatever employees were using before to accomplish a particular task. And while entertainment shouldn’t be a priority, each new tool should make employees’ jobs easier, the panelists said.
“Why do people love Facebook?” asked Konanykhin. “It’s instant gratification.” Employees expect the same ease of use and sense of satisfaction with the tools they use for work.
Natalie Kroc is a staff writer for SHRM.
See the original article here.
Source:
Kroc, N. (2016, June 16). Rethinking the modern accumulation of techonology [Web log post]. Retrieved from https://www.shrm.org/ResourcesAndTools/hr-topics/technology/Pages/Rethinking-the-Modern-Accumulation-of-Technology.aspx
Ninth Circuit Holds that Cash Payments Made in Lieu of Health Benefits Must Be Included in Regular Rate for Overtime Purposes Under FLSA
A ruling from the Ninth Circuit Court may impact your cash benefit offerings. See the article below for more insight.
Original Post from ThinkHR.com on July 7, 2016
On June 2, 2016, the Ninth Circuit Court of Appeals, in Flores v. City of San Gabriel, held that the City of San Gabriel willfully violated the Fair Labor Standards Act (FLSA) by failing to include cash payments to police officers for unused medical benefits allowances when calculating their regular rate of pay, which ultimately resulted in a lower overtime rate and an underpayment of overtime.
In Flores, the City provided a flexible benefits plan to its employees under which the City furnished a designated monetary amount to each employee to be used for purchasing medical, vision, and dental benefits. While employees were required to use a portion of these funds to purchase vision and dental insurance, employees with access to alternative medical coverage (for example, through a spouse) could decline to use the remaining benefits and opt for a cash payment instead. The cash payment would then be added to the employee’s regular paycheck. The City did not consider the value of that cash payment when calculating the employees’ regular rate of pay and resulting overtime rate. A group of current and former officers sued, claiming they were underpaid for overtime hours worked because the cash provided to employees in lieu of benefits should have been used in calculating their overtime rate.
The primary issue was whether the City’s cash-in-lieu payments were properly excluded from the employees’ regular rate of pay. The Ninth Circuit held that cash payments made to employees in lieu of health benefits must be included in the hourly “regular rate” used to compensate employees for overtime hours worked. The City argued that the cash-in-lieu payments were not payments made as compensation for hours of employment and were not tied to the amount of work performed for the employer, and therefore were excludable under 29 U.S.C. § 207(e)(2) from the regular rate of pay as are payments for leave, travel expenses, and other reimbursable expenses. The Ninth Circuit disagreed, finding the payments were “compensation for work” even if the payments were not specifically tied to time worked for the employer.
The Ninth Circuit also rejected the City’s argument that its cash in lieu of benefit payments were properly excluded pursuant to § 207(e)(4) because the payments were paid directly to employees. Section 207(e)(4) excludes from the regular rate of pay “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old age, retirement, life, accident, or health insurance or similar benefits for employees.”
Note: This decision only affects those employers located in the Ninth Circuit. The Ninth Circuit includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, and Guam.
See Original Article Here.
Source:
Unknown (2016, July 7). Ninth Circuit Holds that Cash Payments Made in Lieu of Health Benefits Must Be Included in Regular Rate for Overtime Purposes Under FLSA [Web log post]. Retrieved from https://www.thinkhr.com/blog/hr/ninth-circuit-holds-that-cash-payments-made-in-lieu-of-health-benefits-must-be-included-in-regular-rate-for-overtime-purposes-under-flsa/