Statistics show that forty-five million Americans currently lack health insurance and most of them come from households where there is at least one earning member (Collins et al., 2004). Nearly 70 percent of insured Americans obtain their health insurances through their employers or employer of their family member. This system seems to be collapsing as between 2000 and 2004 there has been a steep decline in employer-sponsored health insurance – which fell from 68% to 64% for adults in the United States and from 61% to 58% in California (Dube et al. 2005). Moreover, studies show that the worst impacted by lack of health insurance are workers with minimum skills and low wagers (Paringer, 2007). Large firms choose to ignore the low income workers when it comes to giving them employee benefits; in fact, only 67 percent of low-income workers in large firms get health insurance compared to 89 percent of mid and high-income workers. In a study by Paringer (2007), it has been found that Hispanics are particularly prone to be denied health insurances by their employers as they are generally of low education and earnings level. There are antidiscrimination rules for employee benefits. The Internal Revenue code and regulations contain strict antidiscrimination rules that forbid companies from treating their employees partially and favoring the higher income group with fringe benefits (Mancuso, 2007). Background to the issue The health insurance concept helped to bring many employees under one contract during the period after the industrial revolution. While the wages could not be increased, the benefits remained flexible and could be increased.
This resulted in a major expansion of employee benefits to include health insurance after the two war periods. The introduction of the group approach to certain employee benefits helped the expansion of the employee benefit system. The group technique allowed many types of insurance programs to be written as employee benefit plans (Rosenbloom, 2005). Advantages of Employee Benefits Health insurance form a large portion of the total compensation paid by a company to its employees. From being considered as a fringe benefit long time ago, they are today considered as a major part of financial security for the employees. They are beneficial to both the employers and the employees. From the employer point of view, they help to attract and hold capable employees (Rosenbloom, 2005). Moreover, employers hope that such health insurance plans can motivate employees towards greater efficiency, productivity and higher morale. Apart from ulterior motives, employers also offer health insurance out of genuine concern for the employees and society at large (Rosenbloom 2005). SHRM's 2009 Employee Benefits Survey Report 1). Employee health insurance are becoming nearly half the percentage of a person’s compensation package mainly because of the rising cost of health insurance. Moreover, with the Congress considering expansion of the Family Medical Leave Act and health-care reform legislation the future of employee benefits appears to be costlier (George Allen, 2009).
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Employers are therefore beginning to evaluate employee benefits based on costs and their value in providing competitive advantage. This anxiety has been further increased due to the recent recession which has lead to a shaky job market. As a result, many organizations are resorting to cost cutting measures, one of which is reduction of employee health insurance. Health care and welfare benefits and family friendly benefits such as elder care referral services and adoption assistance have declined this year. While there was more mental health coverage in 2009 than 2008, there has been an overall decline in healthcare and welfare benefits, especially in eight categories that included contraceptive coverage; HMO; life insurance for dependents, etc. Taxes and Employee health insurance Though companies are forced to spend a lot of money in providing employee health insurance, federal law allows them to deduct the cost of many employee health insurance as a business expense. Some of the employee health insurance that incur tax benefits are “health and dental coverage, term life insurance and disability insurance (Steingold and Schroeder, 2007, p. 84). But if a health insurance plan is manipulated so that it favors either the employees or the employers, then, the plan may be considered ineligible for tax deductions. Healthcare coverage is one of the most common among employee benefits. As medical treatment is very expensive in these days, it is definitely a huge asset to the employee if his employer foots the entire bill for his medical expenses or even if he pays just a part of it. By law, it is not mandatory on a company to provide healthcare coverage except in Hawaii where the government requires employers to provide benefit to all employees earning above a certain minimum standard. Perrin et al (2007), note that 13–15 percent of U.S. children have special health care needs and in their study they have found that employers in the United States do realize that providing benefits for employees with children with chronic condition will help in improving the company’s overall productivity and workforce efficiency (Perrin et al, 2007). Traditionally, healthcare coverage has been offered through an indemnity or reimbursement plan (Repa, 2007). But an increasing number of employers today provide coverage through the alternatives of health maintenance organization (HMO) or a preferred provider organization (PMO). A HMO refers to a group of hospitals and doctors who can provide medical treatment to the employees for a fixed monthly fee (Repa, 2007). A PPO on the other hand is a network of hospitals and doctors who are often put together by an insurance company that also administers the program and they too offer similar services to the employees. In the case of the PPO, employees may go to doctors outside of the network for a higher fee. It is also possible for a company to offer copayments where the employee shoulders some part of his medical expenses. A federal law called the Consolidated Omnibus Budget Reconciliation Act or COBRA is applicable for businesses with 20 or more employees.
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