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Overtime Pay Regulation Can Impact Employee Benefits

Cat and Mouse GameSir Isaac Newton’s third law of motion may apply to the latest final rule issued on May 18 by the Department of Labor (DOL) regarding overtime pay. The rule will significantly alter employee pay structures, which will consequently push employers to evaluate their ‘total awards’ approach to the workplace. Newton’s third law is simply:

For every action, there is an equal and opposite reaction.

This third law can also be analogous to a ‘cat and mouse game,’ whereby, the ‘cat,’ in this case, the DOL, is attempting to secure a definitive victory over the ‘mouse,’ played routinely (and reluctantly) by employers, both small and large. As the game is generally told, the cat attempts to catch the mouse, while the mouse runs away to avoid capture (and become a meal!). The mouse is usually unable to defeat the cat, but is able to find ways to ‘survive’ and live for another day. In fact, in most cases, the contest is never-ending – and often futile for both. Most everyone will acknowledge this game is a huge drain on energy and resources for both players. Nonetheless, the game is played.

The DOL’s intent to raise workers’ earnings will assuredly cause many employers to react differently than intended by the DOL. One logical ‘survival’ method for employers is to lower base salaries to help offset the potential cost of having to pay overtime to certain employees. Another reaction is to reclassify salaried workers to become hourly, or preclude newly nonexempt salaried employees from working over 40 hours per week to avoid paying overtime. The compensation system for white-collar employees may require a complete overhaul, with employees having to learn to record their time. Employers, like mice, look to find survival methods to escape the next regulatory ‘pounce.’

Are employee benefits immune from this new regulation? We are too early in the game to know for sure. However, we can surmise that previously-exempt employees who are converted to nonexempt status may possibly lose additional benefits that are only reserved for exempt employees. Eligibility for benefits such as medical, dental and vision, which typically flow through a Section 125 cafeteria plan, would most likely not affect employees who are nonexempt (hourly) or exempt (salaried), due largely to nondiscrimination rules. Qualified retirement plans also have stringent nondiscrimination testing requirements.

With other benefit offerings, however, it may get very interesting. Some organizations offer additional benefits to salaried and exempt employees, such as richer paid-time-off (PTO) days, including vacation. Under this scenario, it may be advisable to offer paid leave components on the basis of tenure and job level – rather than using exempt and nonexempt status. Seeking legal council is advisable.

As we have observed through our annual Iowa Employer Benefits Study©, certain budget-challenged industries (e.g. construction, hospitality and retail, etc.) may likely offer employer-paid group life and disability coverages only to salaried employees. Employees that lose salaried status could very well lose eligibility for these types of benefits. Another possibility is that such benefits may no longer be employer-paid, but rather, become completely voluntary benefits (employee pays all).

Similar to the mouse, employers must find new approaches to comply with the game dictated by the cat. Balancing the cost component of pay and benefits against reduced morale and high turnover is very delicate, and making this new transition will require newly-considered approaches with a different mindset.

What is your culture and how can it be leveraged in the future? In addition to avoiding the cat, watch out for any traps around the corner!

To stay abreast of employee benefits and other tangential issues, we invite you to subscribe to this blog.

Heartland Health Research Institute
‘Pivoting’ Forward

HHRI-215For those of you who are not familiar with my past, I have spent over 30 years in the employee benefits arena, specifically concentrating on employer-sponsored health coverage. A good portion of that time, from 1995 – 2011, I owned and operated a benefits consulting organization designed to educate and assist employers in making benefits decisions based on their workplace culture (and budget). In 1999, we began our annual “Iowa Employer Benefits Study©,” which is now entering its 18th year.

Due primarily to its impact on employer-sponsored health coverage, I developed a great deal of interest in learning more about the many aspects of our healthcare ‘system,’ – the good, the bad, and, well you know, the ugly. You might say that I fell into a ‘deep well’ of curiosity and continue my descent to the endless unknown. If there is one constant artifact that I can humbly share, at least in the healthcare realm, the more I learn, it seems THE LESS I KNOW!

Healthcare is a labyrinth of human behaviors at many levels and is extremely complex at any given level. In fact, when politicians, media and others talk about ‘healthcare,’ what level are they actually addressing? Are they referring to having access to various health services? Obtaining health insurance coverage? Physically interacting with medical providers? Maybe it’s our diet, or whether we engage in physical activities, such as exercise? One word can mean different things. And, so it is with ‘healthcare.’

Regardless of how we might personally feel about the Affordable Care Act (ACA), it is here to stay. Or at least, it has forced this country to develop new ‘dialogues’ about how our healthcare ‘system’ must look and behave in the future. This dialogue, as difficult and messy as it is, will hopefully provide promising results in the years ahead. Have no doubt, it will be a slow and arduous process.

With this in mind, I have gradually pivoted into healthcare-related research. With this latest pivot, Heartland Health Research Institute (HHRI), an organization we started in 2012, has now become a non-profit organization with the vision to advance the transparency of facts through objective research. In short, HHRI’s intent is to help transform healthcare into high-value care, specifically from the patient’s perspective regarding their confidence and trust in the healthcare system today and into the future.

Over the last number of years, I have identified a need for an independent organization that will strictly function in an objective and unbiased manner and not as an advocate or opponent of any position. HHRI is organized as a public benefit 501(c)(3) corporation that seeks grant-based awards from public and private foundations to conduct research to serve the public on health-related topics. To help fulfill our vision, HHRI desires to collaborate with other organizations to coordinate our efforts.

Topics addressed by HHRI in the future may include the following:

  • Community-Focused Health Projects
  • Healthcare Quality and Safety
  • Patient Engagement & Activation
  • End-of-Life Care
  • Employment-Based Health Benefits & the Value of Coverage
  • Population-based Health and Environmental Issues
  • Attitudes toward Healthcare Reform
  • Other Tangential Issues

So what is HHRI’s newest healthcare-related project? Last week, we unveiled a family of ‘Silently Harmed’ white papers for Iowa and each of its six neighboring states along with our new HHRI website. We look forward to taking this new pivot into the vast unknown!

To stay abreast of employee benefits and other tangential issues, we invite you to subscribe to our blog.

The ‘Cost’ Diversion
Stuck in the Middle

Clowns to our leftRecently a song came on the radio that I have heard countless times in the past. But this time, it struck me in an odd sort of way. The song, ‘Stuck in the Middle with You,’ was a 1972 classic written and performed by Gerry Rafferty and his group, Stealers Wheel. The lyrics that jumped out at me?

….Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.

So what does this have to do with employee benefits? Well, most likely, not a darn thing!

However, when I think about our continued healthcare woes in this country, the song clearly resonates in the right side of my brain.

We are stuck in the middle of the same confusion eminating from the past. In my view, very little seems to change in healthcare. We appear to only re-label past concepts and initiatives and masquerade this as ‘progress.’

So what are these concepts and initiatives?

Managed care, integrated care, bundled payment for care, value-based care, accountable care, patient-centered care – get the picture? If these concepts are so important, and I believe they are, WHY weren’t they emphasized decades ago? Have we erroneously assumed that we were ALREADY receiving these wonderful ‘care’ packages from the bloated premiums (and taxes) we have been historically paying? In one word, yes!

We often confuse action with progress. The busier we appear to be can only indicate that meaningful improvement is being made, right? But if we are making progress in receiving quality care at an affordable cost, many national experts would agree this progress is glacial at best.

As a country, we remain so fixated on cost and coverage issues – necessary components to be sure – but we lose sight when these issues are most divisive with policymakers, political parties and the general public. This ‘diversion’ will only result in political gridlock. Gridlock is a great friend to the status quo, in addition to those who stand to prosper while little is accomplished. Obamacare has polarized the political process to the point that little can be accomplished in Washington due to a healthy dose of gridlock – a battle that has, at best, reached a stalemate.

Self admittedly, I also perpetuate this focus on cost by keeping it a focal point in many of my blogs – using our annual study results as the crutch. By taking our focus away from the real drivers of cost – unhealthy lifestyles, lack of accountability, poor care coordination, little transparency in cost and medical outcomes, patient harm due to preventable medical mistakes, healthcare waste – we allow the diversionary tactics to succeed at keeping the status quo intact for the foreseeable future. We are led to believe that to ‘fix’ our healthcare system, we must address cost, coverage and compliance components through insurance (and create mythical faceless villains to advance agendas) – all reliant on the political process – and gridlock.

Republicans want to repeal and replace Obamacare, yet offer few realistic specifics. Democrats appear to protect and defend Obamacare, and hint that “some changes need to be made,” – but what are they? Both parties are unwilling to address the key drivers because the huge elephant in the room continues to underwrite the cost of the status quo. Since 1998, four of the top seven spending lobby organizations represent the healthcare industry. Between the four, almost $1.2 billion has been spent ‘educating’ those who are elected. Gridlock causes uncertainty, but not for those who gain from this uncertainty.

The masquerade of containing medical costs has successfully distracted meaningful focus from the value we should be receiving in healthcare. Our country continues to play a high-stakes game of Poker, but in doing so, the deck has been stacked in favor of those players who control the game. We know healthcare is big business, and key players obviously feel entitled to our premiums and tax dollars.

In his televised farewell speech to the nation in January 1961, President Eisenhower openly argued that our country has a looming ‘military industrial complex’ that will suck up our money and resources if we fail to contain it. The same can now be said about our medical infrastructure – except this is so much bigger – and infinitely more serious.

We must reach beyond the endless discussion and distractions we have about who pays and how much. The cost, compliance, coverage and political discussions are no doubt important, but these are inextricably linked to the quality and safety of medical care we expect to receive, but in too many cases, do not. Cost is not the problem, it is merely the undesired outcome of the issues that we do not have the political courage to solve. By not having the public outcry for these changes to be made, we can only expect to receive the same pitiful results.

The national fixation on cost and coverage is perhaps the most successful diversional tactic used in our card game by the clowns on the left and the jokers to the right.

So here we are, stuck in the middle with each other.

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