IPPTChap 012

Chapter 12
The Benefit Determination

Process
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may
not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Learning Objectives
• Why the growth in employee benefits?
• The value of employee benefits
• Key issues in benefit planning, design, and
administration
• Components of a benefit plan
• Administering the benefit program
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may 12-0
What are Employee Benefits?
• Part of the total compensation package, other
than:
• Pay for time worked, provided to employees in
whole or in part by employer payments
Why the Growth in Employee Benefits?
• Wage and price controls
• Unions
• Employer impetus
• Cost effectiveness of benefits
• Government impetus
The Value of Employee Benefits
• Research suggests that stating employment
benefits in job ads:
• Leads to applicants’ focusing and relying more
heavily on it in job choice
• Plan and design effective benefit programs
• Communicate the value of benefit programs to
the employees
Exhibit 12.2 - Ranking of Employee
Benefits
Note: X = indicates a benefit that was not rated in this study.
Key Issues in Benefit Planning, Design,
and Administration
• Determine how to:
• Attract good employees
• Deal with undesirable turnover
• Integrate benefits with other compensation
components
• Design strategies to ensure:
• External competitiveness
• Adequacy of benefits
• Design cost effective employee benefits
and Administration
• Benefit administration issues
• Who should be protected or benefited
• How much choice should employees have among
an array of benefits?
• Standard benefit package
• Cafeteria-style or flexible benefit plans
• Market-based or customer-driven health care
and Administration
• Consume-driven health care
• Full-defined contribution
• Employee is responsible for finding and purchasing
individual medical cover
• Employer provides funding
• Tiered networks: Employer offers a choice of
medical plans
• Menu-driven
• Employers provide online information to help
employees customize their own benefit plan
and Administration
• Managed competition
• Employer provides a subsidized basic medical plan with
buy-up options
• Health savings accounts: Fund created by the
employer, employee, or jointly to:
• Pay the first x dollars of health care expenses
Exhibit 12.3 - Possible Options in
Flexible Benefit Package
Exhibit 12.4 - Advantages and Disadvantages of
Flexible Benefit Programs
and Administration
• How should benefits be financed?
• Noncontributory
• Contributory
• Employee financed
• Are your benefits legally defensible?
Exhibit 12.5 - Factors Influencing Choice of
Benefit Package
Exhibit 12.6 - Impact of Legislation
on Selected Benefits
Administering the Benefits Program
• Communicating about the benefits program
• Claims processing
• Cost containment
Communicating the Benefits Program
• Effective communications package must:
• Spell out its benefit objectives
• Match the message with the appropriate medium
• Use of intranet
• Use of the employee benefit handbook
Claims Processing
• Arises when an employee:
• Asserts that a specific event has occurred
• Demands that the employer fulfill promise of
payment
• The claims processor must:
• Determine whether the act has occurred
• Determine if the employee is eligible for the
benefit
• Calculate the payment level
Cost Containment
• Prevalent practices include:
• Probationary periods:
• Excluding new employees from benefit coverage till
specific period of time
• Benefit limitations
• Limit the coverage to a certain fixed amount
• Copay: Employees pay a fixed or percentage
amount for coverage
• Administrative cost containment
• Controlling costs through policies
Exhibit 12.10 - Basic Primer of Cost
Containment Terminology

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Chapter 12

The Benefit Determination

Note: X = indicates a benefit that was not rated in this study.

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