Wednesday, November 19, 2008

Tip of the Day

Submit your comments on draft legislation that would require employers to disclose the amount they pay toward an employee’s health benefits on the employee’s W-2.

According to a group of lawmakers on the Senate Finance Committee, such a directive would "provide for greater disclosure of health insurance costs to workers. Better informing workers about what they pay for health care and how much costs are increasing year after year is a way to begin to help to control health care costs."

What do you think? I personally don't read my W-2 very closely, rather just pass it along to my accountant. So, I'm inclined to agree with a recent WorldatWork membership poll that finds (62%) favor total rewards statement as the best way to communicate the true cost of health benefits, compared to 8% for the W-2 tax form.

“While transparency of employer-provided health-care costs is always a good idea, the W-2 does not give a complete picture,” said Rose Stanley, WorldatWork's benefits practice leader. “Our studies show that total reward statements are truly the best vehicle for communicating with employees as they include income from all compensation sources as well as the cash value of all benefits. However, reward statements are not provided with every paycheck, are not submitted to government and are not consistent in format. As an alternative, we encourage the U.S. Senate Finance Committee to explore creating a federal standard of total reward statements for tax-exempt benefit communications.”

The committee is accepting comments until Dec. 31. E-mail


Anonymous said...

The W-2 reporting will be another layer of government red tape on business. It will require software modifications to tract and capture the required information on each employee at a cost to companies. In the current economic climate any added cost is a burden. We are a small business of 160 employees and it is a strugle to survive in the current economy. Our elected representatives once again are making it more difficult and costly to operate in a competative world economy.

Anonymous said...

I think this is a positive idea. Employees should be aware of this cost as it impacts all decisions and the high cost seriously impacts financial capacity of employers to use resources for progressive change.
Also, the employer is paying medical workers instead of their resources being provided to their employees directly.

Anonymous said...

This sounds like the first step in making benefits taxable. While it's time for a lusty debate on that subject, Congress should be straight with the public about this matter.

Anonymous said...

I agree to an extent that it would actually disclose to the employee how much the employer is contributing and therefore they would understand that benefits paid is part of the overall package that is offered. They only take into account how much they take home.

On the other hand I also agree with the comment said before on the fact that this could also be a way to tax since it would appear as some type of earnings.

Anonymous said...

I think the government should stop and think about all the laws they enact on a business and how it needs to be reported. Do they think that it is just a simple process to make a change and businesses can make the change on a whim. Most accounting software that is utilized would have to be modified, and each state that is worked in has a different way on how to report. This makes it a nightmare to track and adds additional cost to the business who in today's economy is struggling. Also, any business should be communicating this information to it's employees in some form. Why does it need reported to the government? So the government can see the tax dollars they can possibly receive if changes are made??? Are we trying close the door on small business??

Anonymous said...

Why the W2? Yes, it's a summary of taxable wages, but unless company healthcare contributions become, in fact, taxable aren't we just confusing the employee? So, you put a number in one of the W2's numbered boxes, and then leave the employee to decipher it, etc.?

Most employers looking to inform and create positive employee relations around the money that's spend on benefits just clearly and straightforwardly communicate about it; employees share, company share and so on. I think the W2 idea is certainly more costly to employers, and in the end is a pretty lame, ineffective communications vehicle.

Anonymous said...

Think it is a move in a positive direction. Most employees have no idea what employers pay for Health insurance. Question is the amount for just the employers contribution or the total cost; the employer plus employee contribution for coverage?

Anonymous said...

The government DOES NOT need to micro mananage rate disclosure. Instead of telling employers HOW to disclose, why not just require the disclosure. We already publish the full rate, the employer share and employee shares for people to see. We actually built out a worksheet so they can "do the math". This is obviously crafted by people who don't know our business.

Anonymous said...

The W-2 is required by law to be furnished to every employee, (by even the smallest business) no later the January 31st, many employers work hard to get it out in the first week so employee can get their tax refund faster. This will slow down the process, and there is no way you can explain all the different cafeteria plan elections in one box on a W-2. This will simply create more bureaucratic red tape at the worst possible time of the year.

Ninety percent of the workforce is NOT stupid. Whenever people have the luxury of shopping more then one potential employer, (rapidly disappearing in this job market) they always ask more questions about the benefits then the pay scale. You heard many people complain about being "married to their job" because of the benefits, that's why they can't afford to freelance on their own, or switch to a "more fun" job that had less benefits. They already understand the value. They do not understand their W-2. This serves no useful purpose to the employees; it's just a power play of some legislator who wants to stroke his own ego.

Ninety nine percent of the employers are NOT stupid; they use benefits as the carrot to attract talent. Why would Congress have to mess with it?

Employers are struggling with the high cost of health benefits; more bureaucratic red tape will always cost more for small business then large businesses on both a per employee basis and on the ratio of revenue generation productivity vs. dead weight overhead costs such as those that are killing US auto companies. More small businesses that can’t afford the rising cost will simply drop the benefits. This is clearly another idea dreamed up by the employees of overstaffed government and or union departments, looking for something to do, so they can justify their existence. (More dead weight on America's productivity.)

Congress has done nothing yet to extend their fat benefits packages to the working class, (Including their own private retirement plan that makes Social Security look like the joke it is.) now they look like the fox trying to stalk Little Red Hen. If they ever find out what the total cost of tax-free healthcare in the US amounts to, they will never have the will power to resist taxing these billions of dollars of benefits. Warning; search out this mole and throw (s)he out of office before the whole US economy goes down the tube with Detroit.

It's far simpler to publish annual statements with the company’s total cost (not only of healthcare but the myriad of other benefits they offer) and average cost per employee, but to make it a legal document (such as a W-2) with audit implications, which will force companies to spent far more money splitting hair to determine each individual employee's cost. Furthermore it could create animosity among employees by showing the difference between the cost of a young single worker vs. the higher cost of a married or significant other with children. This stupid idea amounts to nothing more then inciting discrimination.

Anonymous said...

This is a very bad idea during the busy tax season and creates administrative problems for employers. Employees can be informed of the health care costs in numerous other ways. If the government is interested in learning more information about how employers handle healthcare and the cost paid for each employee, they can ask the questions on the 5500 Report. Once we product a few COBRA forms to our employees the "shop talk" begins to circulate in the company about the high costs of health insurance and concern for change.

Anonymous said...

Thsi is not the way to create better consumers. It appear the both the government and the companies that process payroll might benefit from the extra workload that this process would create. Business are not looking for ways to spend more on behalf of their employees in this economy.

Jack said...

What number should we show? One suggestion is the COBRA amount, or maybe a per capita amount? COBRA is an average for all individuals in that option. Wouldn't a more accurate number reflect more variables, age, location, etc.?

Obviously, the value received by any one individual does not equal the funding/premium - so, if improving understanding of the value of coverage is the goal, if we are trying to change behavior based on that information, perhaps we should show claims and administrative expenses - how about a rolling average over multiple years?

Cost varies dramatically based on age, location, vendor/insurer, gender, ... all of those variables, and more... If you have an HMO in 10 locations and the insured rate is blended across the country, do we show the same number for a 64 year old in New Jersey and a 24 year old in Oregon?

Let the feds show us how by starting with Medicare beneficiaries - a beneficiary with a $200/mo supplement gets you to $13,800 a year, per person. Of course that is a national average. Then, let the feds adjust for the value of the cost shift from RBRVS, DRG's, and Balance Billing limits, vary the amount by age, by location, by Medicare Advantage plan and PDP, etc. Gain some experience explaining the rate variations to those Americans who actually use the greatest amount of services... Once they have some success showing how behavior changes when you know the cost ...

They state they believe that once individuals know what something costs that they will try to control expense. Fact is, behavior is not likely to change until you must pay the costs directly, at point of purchase (this proposal is mostly focused on point of enrollment costs). But, few if any of the senate leaders pushing for W-2 reporting are interested in increasing point of purchase cost sharing.

If info is what they want to show, we already show associate deductions on the paycheck, why not simply mandate company financial support also be displayed? We've been doing that at my employer since 1997, and I can confirm, I know of no one who has changed their behavior just because we tell them 27 or 28 times a year what is paid for health coverage(each payday, and total rewards statement).

While some believe this may be a first step in taxing health coverage, that may not be first item on their agenda - other candidates:
(1) Change medical from pre-tax for FICA to post-tax (a la the change to 401(k) back in 1983),
(2) Impute as wages for highly compensated (similar to IRC 79 for life coverage), but, maybe it is needed for
(3) "Maintenance of effort" - some proposed "reform" efforts would require employer support be converted to wages; a la the 1988 Medicare Catastrophic Coverage Act.

Grassley's comment is on point - "... But once they realize they themselves are paying for it ..."

Finally, our Senators mistake averages as descriptive of the entire population - our associates are much more diverse. As a result, the number would understate the value for those using significant services. Those using few services might opt for less coverage or no coverage if they could get that value as compensation or other benefits (what the Senators state as the goal). However, employer spending would not necessarily decline because of the antiselection among those who continued coverage.