MODULE 4: Employment Benefits

Healthcare Benefits

            National healthcare law received a major overhaul in 2010 with the passage of the Patient Protection and Affordable Care Act,[1] a law also known by its nickname, “Obamacare.”  Since the passage of this law, individuals must procure health insurance coverage either through publicly-funded Medicaid or Medicare, employer-sponsored group healthcare plans, or purchase health insurance in the marketplace.  While the law does not require all employers to provide healthcare benefits, it has pushed employer-sponsored health insurance into the spotlight as an increasingly significant form of employment compensation.  The following narrative discusses the Affordable Care Act and other federal laws affecting employees’ rights and liabilities with respect to employer-provided healthcare coverage.

Patient Protection and Affordable Care Act (ACA) of 2010

The passage of the Patient Protection and Affordable Care Act (ACA) of 2010 caused a substantial expansion in access to healthcare among working Americans.  The ACA was passed to bolster employee rights under employment-based group health plans.  The law extended worker healthcare coverage to dependents until age 26, prohibited preexisting condition exclusions from insurance coverage, and mandated that companies provide simple summaries of all health plans’ cost and coverage.  In some circumstances, the ACA requires employers to provide coverage for specified preventative services such as medical screenings, well-baby and well-child visits, and vaccinations without cost to employees.  The ACA also requires employee health insurance to cover the cost of emergency services in a hospital outside of the plan’s coverage network without prior approval.  The ACA also prohibits employers from retaliating against workers for reporting violations of the law’s health insurance requirements.

Not everyone has access to healthcare through their employer.  As an alternative to an employment-based group healthcare plan, the ACA created the health insurance marketplace in which insurance companies can offer competitive coverage plans. These plans must be easy to understand and presented to consumers in a way that allows for an apples-to-apples comparison.[2]

In 2006, the Bureau of Labor Statistics found that approximately 71% of workers employed in private industries had access to employer-sponsored healthcare plans, and among these workers only 52% participated in these programs. Full-time workers who earned more than $15 per hour were more likely to receive healthcare benefits from their employers, though benefits vary by location and industry.[3]   Overall, before the Affordable Care Act’s mandatory healthcare policies came into effect, up to 18% of the U.S. population lived without health insurance.  By early 2016, the uninsured rate dropped to 11%, as 20 million previously-uninsured Americans gained health insurance coverage after the law was passed.  Most agree that ensuring all Americans affordable and quality healthcare is a positive aspiration.  Unfortunately, however, the cost of the average employer-sponsored healthcare plan has increased substantially since the law was passed.  The cost of a family healthcare plan increased nearly 50% between 2008 and 2016, and workers are bearing much of this additional expense.  While it is unclear whether this increased cost is due to new requirements imposed by the change in law or whether it can be attributed to the rising cost of healthcare nationwide, rising health insurance premiums are a substantial challenge to low and medium-income workers.[4]

Mental Health Parity and Addiction Equity Act of 2008

The Mental Health Parity and Addiction Equity Act requires all group health plans that include benefits for mental health or substance abuse to cover these health issues in a manner that is equivalent to the major requirements and limitations applied to all other medical coverage.  The law applies to employers with more than 50 employees, and while it does not guarantee mental health and substance abuse disorder coverage in an employee health plan, it does ensure that when such coverage is available it is at least as generous as coverage available for other medical issues.  So, for example, if an employer-sponsored healthcare plan includes mental health and addiction services, the plan cannot include a dollar limit on these benefits that is any more restrictive than other covered healthcare.[5]

Women’s Health and Cancer Rights Act of 1998

The Women’s Health and Cancer Rights Act (WHCRA) was passed in 1998 to provide additional rights and protections to patients who undergo mastectomy procedures and reconstruction following a breast cancer diagnosis.  Under the WHCRA, employer-sponsored group healthcare plans that offer coverage for mastectomies must also cover other services related to the procedure, including reconstruction, prosthesis, and treatment of any complications.  The specific requirements under the law vary based upon the type of insurance provided by the employer, so workers affected by breast cancer should contact their employer’s healthcare plan administrator to clarify the extent of WHCRA-mandated coverage.[6]

Voluntary Benefits

Employers commonly offer benefits to their employees voluntarily in order to encourage worker morale, productivity, and retention.  In 1981, the majority of full-time workers at medium or large companies received paid leave for funerals and military service, education assistance, and, if necessary, relocation expenses or severance pay from their employers.  Unfortunately, data collected in 2008 showed that each of these benefits was becoming less and less common, and employers nationwide were reducing the number of voluntary benefits available to their workers.[7]  Several forms of compensation are offered by employers voluntarily, and certain common voluntary wage and non-wage benefits are described below.

Severance

In some cases, employers offer payments to employees who are terminated or laid off.  Severance is a voluntary benefit that some employers offer to employees at the end of the employment relationship, often in exchange for an agreement that the termination will not be challenged.  Severance pay is commonly calculated based on an employee’s time working at the company, but some employers offer a fixed sum.  Once an employee accepts a severance payment, he or she is commonly asked to sign a legal release of liability for the employer and the two parties go their separate ways. 

Hazard Pay

Some jobs require duties which are dangerous or otherwise involve physical discomfort or hardship.  Working conditions may be uncomfortably hot, cold, loud, or otherwise hazardous in some way, and employers may wish to encourage employees to stay at their jobs by offering additional compensation for the discomfort naturally associated with performing certain jobs.  There are no federal laws mandating additional wages for jobs deemed to impose a physical hardship, but hazard pay is very common for some of the more dangerous jobs in industries such as manufacturing, oil and gas refining, or mining.  Once an employer voluntarily offers hazard pay for recruitment or retention purposes, this additional pay is treated just like normal wages and employers must include hazard pay in calculating overtime.[8] 

Raises & Bonuses

Increases in wages, bonuses, or other incentives paid based on employee retention or performance are not required under federal employment laws.  Employers often have criteria in place, including periodic employee reviews and merit-based incentives, through which they may offer bonuses or increases in pay for an employee’s performance during a specific period.  Bonuses are a common type of supplemental pay, with about 40% of the U.S. workforce receiving cash bonuses for performance or retention.  Altogether, bonus payments make up nearly 3% of all compensation paid to U.S. workers, with management and financial professionals receiving more bonuses than workers in any other sector.[9] 

Child Care Assistance

Employers are not required to provide child care assistance beyond the minimum unpaid leave requirements of the Family and Medical Leave Act.   Unfortunately, childcare can be a major challenge for working parents.  A study by an economist at the Bureau of Labor Statistics in 1991 estimated that over 1 million young mothers were out of the labor force due to challenges in finding adequate child care.  What’s more, low income mothers who worked and paid for child care out of their wages spent more than 26 percent of their weekly income on child care.  The expense of quality child care can create a catch-22 situation for many working parents; either continue working and forfeit a substantial amount of income to child care, or leave the workforce.[10]

Fortunately for working parents, there are several state and local government programs that provide childcare assistance.  While employers are not required to provide childcare assistance, the Child and Dependent Care Tax Credit is a federal incentive program that helps many working parents offset some of the costs of childcare associated with maintaining employment.  This tax credit has been expanded over time to provide more assistance to low- and medium-income families.  Less than half of the low-income working parents eligible for assistance under federal or state childcare assistance programs actually enroll, meaning that most of these families do not receive the assistance to which they may be entitled.  Employees with children should be aware of the federal, state, and local assistance available to working parents in their area, as ensuring professional success for poor and medium-income working families is important for the overall health of the American economy.[11]

Retirement

Employers or employee organizations can establish and maintain funds that provide retirement income for workers who are at the end of their careers.  These funds can include traditional pensions, individually-owned retirement accounts, or 401(k) plans. 

Paid Leave

There is no federal requirement that employers provide their employees with paid time off.  However, many employees voluntarily offer paid sick leave because paid leave benefits have been shown to increase workplace health and productivity.  As of 2009, 73% of all American workers had paid sick leave benefits.  Employers typically offer sick leave on an as-needed basis or on an accumulating basis.  For example, an employee may get 1 sick day for every month worked that rolls over each month up to a specified maximum.  Some employers offer sick days as part of a “consolidated leave plan” in which vacation, sick days, and personal days are all combined into one plan and workers can use their paid leave as they choose.[12]

Unlike paid sick leave, which only applies in circumstances of physical or mental illness, paid vacation is a common voluntary employee benefit that allows workers to take time off from work in blocks of days or weeks.  Employees receiving paid vacation can typically select whichever days they wish to take off, although employers typically retain rights to review and approve vacation requests.  Employees may be prohibited from taking vacation days during a specific period of time if doing so would unreasonably disrupt workplace function.  However, while vacations may be delayed for business purposes, employees cannot be prevented entirely from taking vacation days to which they are entitled.

A third type of paid leave is personal leave, which is paid time off available to employees regardless of the circumstances of their absence.  Among all types of paid leave, personal leave is relatively rare.  While about 70% of all workers enjoy sick leave, holiday pay, and vacation benefits, only about 40% of employers offer paid leave.  Employees with personal leave may typically take time off for any purpose at their discretion.  However, employers may be more accommodating in offering leave for certain major life events.  While less than half of all employers offer general personal leave, the vast majority allow personal leave for death, bereavement, or funerary services of a close friend or family member.[13]

Conclusion

 Employers pay wages and overtime as required by federal law, and they also commonly offer additional benefits voluntarily in order to boost employee morale, productivity, and retention.  Compensation can be anything that has current or future economic value, but the amount of compensation paid must meet federal, state, and local minimum wage requirements.  In addition to wages, employees may be entitled to any number of voluntary benefits, including bonuses, paid time off, health insurance, and other common types of non-wage-based compensation.  Compensation and benefits are regulated by a number of laws, and employees should be aware of the compensation entitlements provided to workers in their jurisdiction.