For Love or Money


An overview of staff benefit plans and what to offer

Do your employees adore you? Are they happy with how much you pay them and the extras they get -- like vacation time, health insurance, and other perks? Or are they disgruntled and hard to replace when they quit?

In the healthcare labor market, competition to hire and retain skilled and competent workers is already fairly intense. Without an attractive compensation and benefits package, your practice could become the employer of last resort in your community -- and maybe even serve as an example to other practices of what not to do.

The time to act is now. Just five years ago, the U.S. Department of Health and Human Services estimated there was already a shortage of approximately 110,000 nurses (6 percent of the estimated number needed), and predicted this number of "missing" nurses would reach 275,000 by the end of the decade. And we all know how hard it is to locate and retain other workers, such as front-desk staff and billing personnel. It is estimated that 9 percent of crucial billing jobs, for example, are unfilled.

Chances are you already offer some benefits to your workers. But how well does your benefits package do what you need it to do -- help you hire and keep high-quality workers? To determine the most appropriate benefit strategy for your practice, you should:

Understand your place in the labor market. Where does your best talent come from? What is it about your practice that would attract employees?

Consider how cash compensation and benefits work together. The demographics of your workforce may determine the need for more compensation versus more benefits.

Question your employees. Conduct exit interviews, opinion surveys, or just hold a meeting to discuss the value of your current benefit offerings.

Categories of benefits

As you are considering whether to change your benefit offerings, it's useful to review the types of plans that are available:

Disability benefits offer protection against loss of income due to a non-occupational illness or injury. These plans include sick leave and short- and long-term disability insurance.

Paid time off plans include vacation, sabbaticals, and any other form of paid time off. You may include in this category "work/life" programs such as flex-time, four-day workweek schedules, job sharing, family sick leave, and domestic partner benefits.

Optional employee funded plans include pre-paid legal, dependent life insurance, and Section 125 (medical and dependent care reimbursement accounts).

Welfare benefit plans provide health, dental, vision, life, accidental death and dismemberment policies, disability plans, and retirement programs such as 401k, 403b, or 457 plans.

Medical coverage is the benefit that grabs most of the attention, for a variety of reasons, including rising costs. If your practice is like other businesses, spiraling healthcare expenditures top the list of trends affecting you this year. And the situation has gotten worse over time. Statistics from the Federal Bureau of Labor indicate that from 1994 to 2004, wages and salaries for private industry increased 2.6 percent, while benefits costs outpaced them, with an increase of 6.8 percent.

Because healthcare costs are likely to consume the biggest chunk of your benefits dollars, it is important to balance these expenses against your total package, including nonmonetary perks you might offer.

Bigger practice, more options

The size of your practice will determine the number of healthcare options available to your workers. A common option for employers with fewer than 50 workers is the individual plan. These plans offer limited coverage and are not "guarantee issued," meaning there will be a waiting period for pre-existing conditions. The employer may contribute toward this employee-"owned" plan. Individual plans can be purchased directly by the employee by contacting a health insurance broker.

The second option, which you may be more familiar with, is the small business plan. These are "community-rated" by employees' location, age, and gender when allowed by state law. Premiums are set by age category as opposed to applying a blended rate to a specific coverage. The small business plan tends to be the most expensive option.

Once your practice exceeds 50 employees, healthcare plan options improve. At this size you can take advantage of a large group plan. A small employer can have access to such a plan in two ways. You could join an association that offers health insurance coverage to its members. The membership is treated as a large group, and therefore rates are set in accordance with location, age, and gender mix of the group. Future rates are determined by the association's utilization experience. While association health plans are not operational in all states, Congress has been considering legislation that would set a federal standard for such plans, which could then also operate across state lines.

Small and medium-size practices can also access a large group plan through a Professional Employer Organization (PEO). Unlike an association plan, a PEO's large group plans are composed of companies from many other industries as opposed to a single industry. These may be a good bet; some PEOs have seen premium increases as low as 6.4 percent compared to the national average of 12 percent for 2005.

However, beware of PEOs that push inexpensive benefits. The main value of a PEO is that it will assist you with the responsibility for complying with various laws, or at a minimum share that responsibility with you.

Regardless of how you access health insurance plans, it is useful to know generally which type employees tend to prefer. According to a recent survey, the most popular types of plans were PPOs, with 63 percent of surveyed employees enrolled, followed by HMOs, with 23 percent, POS, with 10 percent, and indemnity plans, with 3 percent.

In addition to health coverage, you could augment your benefits package with vision and dental plans. It is not uncommon for these plans to be employee-funded, particularly for vision care.

You may also consider adding retirement plans to your benefits package. These include 401k, 403b, and 527 plans. Typically sponsored by the employer, these plans are generally funded by the employee, although you may provide some level of matching funding. The employer carries fiduciary responsibility for IRS compliance and appropriate administration.

Time away from the office

Sick-leave benefits provide paid time off (PTO) for employees who miss work temporarily because of a non-work-related illness or injury. Commonly, employers pay for a set number of sick days per year. To aid in retaining long-time employees, increase the number of days with seniority, such as offering six days after one year of service and 10 days after five years, and allow a few days to be carried over.

The trend is for companies to combine sick leave and vacation days. For example, if you grant 10 vacation days and five sick-leave days, under a PTO policy you would grant a total of 15 days that an employee can use for any reason.

Short-term disability benefits are used to fill in the gap between sick leave and a long-term disability plan's waiting period. These plans provide a percentage of the employee's salary earnings, or a flat dollar amount.

For employees who, due to an illness, will need to miss work for an extended period of time, long-term disability benefits can provide a monthly cash amount, usually paid as a fixed percent, such as 60 percent of pre-disability earnings up to age 65, or until the employee returns to work.

As you are reviewing the competitiveness of your benefits package, keep in mind that you must compete with large practices for the best talent. Typically, large practices and hospitals invest generously in a wide range of attractive benefits.

Your challenge, then, is to create the right combination of compensation, benefits, and perks. Turn to your current employees to learn what they like, and conduct exit interviews to discover any problems related to staff turnover.

Bob Vidal is chief operating officer of Employer Services Group, a human resources consulting firm based in Denver. He can be reached at (720) 506-4090, at,

Perks That Perk Workers Up

Get creative as you develop your benefits strategy, and build in special nonmonetary perks that remind employees how much you value them. These can also help build your image in the community as a great place to work, which could help in recruiting employees.

Offer facials, massages, or trips to a salon for workers who have improved their performance in some way, or just to celebrate a birthday or anniversary date.

Have a pizza lunch in the office or treat the employees to lunch at a restaurant on a regular basis.

Consider using a credit card that earns frequent flyer miles - and assign the free ticket to a deserving employee.

Surprise a staff member with flowers and a hand-written thank-you note for a job well done.

This articel originally appeared in the April 2005 issue of Physicians Practice.




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