Category: 2012

Fair Labor Standards Act (FLSA)

Does the Fair Labor Standards Act (FLSA) affect me? What effect does it have on state and federal labor laws? What aspects of the FLSA should I pay extra attention to?

The FLSA applies only to enterprises that:

  • Have two or more employees engaged in commerce or in the production of goods for commerce, or have employees handling, selling or otherwise working on goods or materials that have been moved in or produced for commerce by any person
  • Have a gross annual volume of sales of at least $500,000, unless working in an enterprise not subject to the dollar value test (according to 29 U.S.C. §203(r)(1), §203(s)(1))

Most employers in today’s market are considered covered enterprises, so be sure to find out whether or not your business is one.

State labor laws take precedence over the FLSA only when they are more favorable to the employees. State laws that create more generous wage and hour benefits for employees or more strict requirements of employers than the FLSA are acceptable. Certain state laws include exceptions stating that they apply only if the FLSA does not already apply.

Some common mistakes employers make regarding the FLSA include:

  • Taking incorrect deductions from exempt employees’ salaries (ex.: if the weather is so bad a place of employment closes for the day, the employer cannot deduct the day’s pay from the employee’s salary, but if the company stays open in the bad weather and the employee doesn’t make it into work, the day’s pay can be deducted from the employee’s salary)
  • Not paying employees for job-related tasks completed before and after their shifts (ex.: time spent clocking in should be paid)
  • Only rounding down when employees clock in and out—if you are rounding at all, you must round both up and down
  • Not reviewing and updating the exempt status of employees

Follow up by researching the FLSA and how it applies to you so you are not caught off-guard.

Health Care Reform Pay or Play Calculator

BCS has tools which can help you get an estimate on how paying or playing may affect your bottom line! Call us today and lets get started!

Pricing for this service is $350 for tool or $500-$1500 for BCS to prepare, analyze and deliver results.

Beginning in 2014, employers with more than 50 full-time equivalent employees may be subject to a penalty tax if they do not offer health care coverage to all full-time employees. These employers can also be subject to a penalty if they offer coverage to all full-time employees, but the coverage is unaffordable or does not provide minimum value. Coverage is unaffordable if it costs the employee more than 9.5% of household income and it does not provide minimum value if the plan’s share of the total allowed cost of benefits is less than 60%. However, recent guidance from the IRS allows employers to calculate affordability based on the cost of single coverage and W-2 income, rather than household income. The penalty will apply if any full-time employee is certified to the employer as having purchased health insurance through an exchange and received a tax credit or cost-sharing reduction related to the coverage.

BCS has a new calculator which can be used to help our clients or prospective clients determine what their penalties could be if they either:

  1. (a) Do not provide coverage to all full-time employees,
  2. (b) Provide coverage that is unaffordable for some or all employees, or
  3. (c) Provide coverage that is not of “minimum value.”

To begin, BCS will need to have the following data available.

  • Rate and census information including:*
  • Employer’s marginal tax rate
  • Plan enrollment count (by coverage tier)
  • Plan rate (by coverage tier)
  • Employee cost (by coverage tier)
  • Employee identifier (name, ID, etc.)
  • Employee W2 income

Plan information including

  • Deductibles
  • Copays
  • Coinsurance
  • Out-of-pocket maximums

This calculator is for use by large employers with 50 full-time equivalent employees.

Disclaimer: This calculator is intended to provide estimates of possible penalties under current information available regarding the health care reform requirements. Results are dependent on entry of accurate plan and employee data and may change based on guidance issued by various regulatory agencies. Nothing in this calculator should be considered legal or tax advice.

Call us today and let’s get started! 281-333-2255 or email: paulac@bcspec.com

Social Media Policies: Dos and Don’ts

With the advent of social networking, it is absolutely critical that your organization has a solid social media policy. Here are a few things your policy should and shouldn’t do.

Dos

  • Your policy should plainly state what is appropriate social networking behavior, what can and can’t be shared and why.
  • The policy should also explicitly lay out the consequences of violating the policy. Different degrees of violation require different punishments.

Don’ts

  • Your policy shouldn’t be over intrusive. This could be a huge turnoff for employees, and possibly cause legal concerns if personal information is used when making a hiring decision.
  • Don’t prohibit your employees from discussing your organization. As long as they know what topics are appropriate, your employees can serve as great ambassadors of your brand.

Health Care Costs and Your Employee Health Plan

Health care costs, and consequently employee health benefits costs, have been increasing at an alarming rate for nearly a decade. Avoiding rising health care costs is nearly impossible, but you can learn about why they continue to rise and what you can do to manage costs for your organization and your employees.

To assist you, the following pages provide factors leading to unprecedented rate hikes, the latest health care cost figures and strategies that firms around the United States are implementing to help manage costs.

Factors Leading to Increased Health Care Costs

Why are U.S. health care costs skyrocketing? Several market conditions have led to a decade of unrelenting increases. Factors that have contributed to climbing health care costs over the past decade include:

  • Demographics
  • Expansion of health care providers
  • Consolidation of managed care companies
  • Political environment/government regulation
  • Increased utilization and consumer demand
  • New medical technology
  • Weakening of managed care system
  • Health care spending and medical cost inflation
  • Increased prescription drug costs

The following are two factors that are also contributing to current and projected health care costs.

An Aging Population

Slower hiring rates have resulted in older employees in the workforce. Because older workers are more prone to health problems, companies are seeing a rise in chronic conditions, costly medical problems and the use of prescription drugs, and an increase in the amount and frequency of catastrophic claims.

Poor General Health

Poorer health among Americans has also contributed to health care cost increases. Preventable risk factors such as obesity and high blood pressure have led to increases in chronic health conditions such as diabetes and heart disease – illnesses that are long-term and extremely costly. Unhealthy lifestyles can be addressed through wellness programs to improve employee health and reduce costs, but most savings are seen in the long term. To combat the continuing short-term increases, employers are passing more and more costs to employees through higher deductibles, copays and out-of-pocket maximum amounts.

Understanding why your annual health plan renewal rates may be significantly higher than the previous year is the key to forming alternatives and solutions to your particular plan’s challenges. It is also important for educating your employees about the reasons behind any plan or contribution changes you may decide to introduce.

What Can Employers Do?

Employers are struggling to contain accelerating health plan costs. After trying to absorb most of the costs because of hiring and retention issues, many firms are attacking the root causes of rising costs with sustained, systemic changes. With the growing epidemic of poor health and the uncertain overall impact of health care reform, many employers are looking at both short- and long-term strategies to manage costs.

Using Health Care Data to Drive Strategy

A Hewitt Associates survey found that employers cite using health care data to make strategic health plan decisions as their top cost-cutting strategy. However, the survey also discussed the importance of going beyond accessing data, and understanding how to apply it to make decisions and implement strategic changes.

Greater Emphasis on Consumer-Driven Plans

An increasingly popular option in the health care industry is the adoption of consumer-driven health plans, typically involving a health reimbursement account (HRA) or health savings account (HSA). These plans offer cost-savings for the employer, but also benefit the employee. With proper education, employees can become smarter health care consumers, which can save both parties money.

Promoting Employee Health and Wellness

Health and wellness initiatives have become another popular health care cost management strategy, and remain one of employers’ top cost containment strategies. As more and more employers are realizing, improving employee health and wellness can effectively lower health care costs and increase productivity. Many employers are creating more comprehensive programs, targeting specific diseases and including dependents in the initiatives.

Incentives for participation are growing in popularity as well (including incentives for dependents), but it is important to use effective incentives. Rewarding employees for participating in a program or meeting a health goal is much more effective than creating incentives, things like the completion of a health risk assessment. Many employers are also instituting penalties for non-participation or unhealthy behaviors, often in the form of higher premiums or additional employee cost-sharing. It is important to note that successful wellness and disease management initiatives are dependent on quality employee education and communication techniques.

Increased Employee Cost-Sharing

Many employers are choosing to pass more costs to employees to handle tough increases; they are also choosing to restructure their health plan to incentivize lower-cost options. These are a few strategies employers are using:

  • Moving from fixed dollar copayments to a coinsurance model (employee pays a percentage of costs for each health care service)
  • Increasing deductibles and out-of-pocket maximums
  • Increasing employee cost-sharing for non-network providers
  • Increasing employee cost-sharing for brand name prescription drugs to incentivize use of generics
  • Offering consumer-driven plans, either as an option along with a traditional plan or as a total replacement

Dependent Management Strategies

Employers are finding huge cost-saving opportunities by changing the way they manage dependents. Dependent eligibility audits can save companies substantial amounts of money: Studies show that, on average, 5 to 15 percent of dependents are actually not eligible to be on the health plan. Many companies are also shifting to a per-member premium structure, rather than just “individual” and “family.” Another emerging trend is requiring spouses to pay more in premium or assessing a surcharge, to encourage spouses to enroll in their own employers’ plans.

Strategic Vendor Management

A recent movement involves companies aggressively evaluating their vendor relationships and replacing or eliminating those vendors that do not produce measurable results. Employers are also looking for opportunities to consolidate vendor relationships to get the most for their money.

Long-Term Solutions vs. Short-Term Fixes

Due to the financial pressure many employers are under, short-term tactics like employee cost-sharing are still prevalent. However, employers are exploring multi-year plans and longer-term initiatives to improve overall employee health and strategically manage costs in the future. Particularly in the wake of health care reform, many employers are becoming more concerned with developing strategies that are sustainable in keeping costs down.

Which Solution is Right for You?

Should you pass costs on to employees? Or should you try to manage costs in some of the other ways discussed in this article? Ultimately, it is a decision that you need to come to through thoughtful and detailed analysis of your plans and with the advice of your broker or consultant.

Below are some questions you can address in order to begin developing an effective strategy that is right for your organization.

  • Is our program structure, plan design and pricing appropriate?
  • Do we have the right vendors, services, contracting and funding in place?
  • Are our employee communication efforts appropriate and effective, especially regarding employee health and wellness and/or consumerism?
  • Do we have effective disease management and wellness programs for our employees?
  • Do our pricing and plan design features encourage cost-conscious behavior on the part of our employees?
  • Are we thinking about long-term solutions rather than quick fixes for this year?

What Should I Tell My Employees?

It’s a fact: health care costs and health benefit costs continue to increase at exceptionally high rates from year to year. You want to continue to offer valuable health benefits to your current employees, and you want those benefits to help you attract and retain quality employees. However, you also need to consider the cost-effectiveness of those benefits at a time when hefty rate hikes are the norm.

The information contained in this article is designed to help you understand why your renewal rates may have increased, and to help you educate your employees about the reasons for any plan or contribution changes you may have to make. If your employees understand current trends in the health care industry, they will be more supportive of changes and will appreciate the resources necessary to provide them with their health care benefits.

National Health Care Cost and Renewal Rate Projections

Overall national health care costs have been skyrocketing for over a decade. Exhibit 1A, right, depicts the percent change in average annual health care cost increases from 2004 to 2012. Cost increases have remained steady or grown since 2006, but the 2011 Hewitt Health Value Initiative survey predicted a lower rate of increase for 2011-2012 (7 percent, down from 7.5 percent in 2010-2011).

Experts expect significant annual increases in health care costs to continue. According to the Hewitt Health Value Initiative, the average cost of health care benefits for each active employee rose to $9,792 per year in 2011 and is expected to grow to $10,475 in 2012 (Exhibit 1B, right). Employers are also passing more of these costs onto employees, as the percentage that employees are asked to pay is also increasing. In 2011 employees paid an annual average of $2,084 (21.3 percent of the total cost of their coverage); this figure is projected to grow to $2,306 in 2012 (22 percent of the total cost if coverage).

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Federal Court Temporarily Blocks Contraceptive Mandate

On July 27, 2012, the U.S. District Court for Colorado temporarily blocked the enforcement of a health care reform rule requiring certain health plans to cover contraceptives without copays or other cost-sharing. This ruling applies only to the specific business involved in the lawsuit and does not stop the rule from going into effect. However, it is only one of many lawsuits challenging the mandate and could signal the beginning of an extended period of litigation.

Employers should be aware of potential changes to the contraceptive rule that could result from these lawsuits. Benefit & Compensation Specialists, PLLC will monitor any legal actions and rulings related to this issue.

History and Background

The health care reform law requires non-grandfathered health plans to cover preventive health services without imposing cost-sharing requirements. This mandate generally became effective for plan years beginning on or after Sept. 23, 2010. The preventive care services that must be covered are described in a series of guidelines.

On Aug. 1, 2012, additional preventive care guidelines for women will go into effect for the first time. These additional guidelines, which are generally effective for plan years beginning on or after Aug. 1, 2012, require non-grandfathered health plans to cover women’s preventive health services, including contraceptives, without charging a copayment, a deductible or coinsurance.

Under the guidelines, plans must cover all Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity. According to the Department of Health and Human Services (HHS), the recommendations do not include abortifacient drugs.

Contraceptive Services and Religious Employers

Group health plans sponsored by certain religious employers such as churches, and group health insurance coverage in connection with these plans, are exempt from the requirement to cover contraceptive services. A religious employer is one that: (1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets; and (4) is a nonprofit organization under Internal Revenue Code section 6033(a)(1) and section 6033(a)(3)(A)(i) or (iii).

This exemption does not extend to nonprofit employers (such as universities, hospitals and charities) that do not qualify as religious employers under this definition. It also does not apply to private employers that simply object to providing contraceptive coverage on a religious basis (or for any other reason). HHS has announced a one-year delay in the application of the rule for these nonprofit employers while a compromise is explored. However, no such delay is available for private employers.

The Court’s Ruling

There are 24 reported lawsuits that have been filed attempting to strike down the contraceptive mandate. Many of these suits involve nonprofit employers that are affiliated with a religious organization. This particular case—Hercules Industries, Inc. v. Sebelius—involves a private business, a Colorado HVAC company owned by a Catholic family.

The owners of Hercules Industries stated that their religious beliefs prohibit the use of contraceptives and that they seek to run their business in a manner that reflects those beliefs. They argued that the birth control mandate violates their First Amendment rights by interfering with their ability to freely practice their religion.

The judge did not rule on the merits of the case. He has not yet determined whether the contraceptive requirement is in fact a violation of the First Amendment. However, the judge found that the rule should not apply to Hercules Industries while the case is being decided and granted a temporary injunction to keep the rule from being enforced. The judge concluded that the possible harm to Hercules Industries in having to implement the rule far outweighed the potential harm of temporarily blocking the requirement.

The judge also made clear that his ruling applies only to Hercules Industries and not to any other case or employer. He stated that the injunction does not relate to any other party’s free exercise of religion and does not affect enforcement of the preventive care mandate against any other party.

MORE INFORMATION

Please contact Benefit & Compensation Specialists, PLLC for more information on coverage of preventive care services required by health care reform or see one of the following resources: