Question

Spring 2020

Employee Benefits

General Instructions:  

Please respond to the following questions as completely as practicable. Please limit the total number of pages to no more than 2, typed, double-spaced. Focus on answering the question(s) drawing on the material covered in the text as well as the material covered during class. If you feel that you may need more facts to answer a question, please identify the different paths and as appropriate make presumptions and move forward. If you still have questions, please email me, and I will post an answer on Blackboard/via email.    Good luck!

You are the newly hired HR Director at a new replacement window company called Newsen Windows (Newsen). Newsen sells and installs replacement windows for home owners. Newsen was formally established last week when a much larger replacement window company (BigCo) spun off 5 of its 50 locations to Newsen. Newsen has no other locations beyond those 5. Over the last week the Newsen owner decided on which of the former BigCo employees she wanted to hire to be Newsen employees. That has been completed, and now she wants to focus on employee benefits. She hired you today and has asked that your first order of business be to handle this benefits project.

By way of background, BigCo is headquartered in Kansas, with locations nationwide. They offer a single PPO plan. Newsen is headquartered in Framingham, MA, with other locations in New Hampshire, Maine, Rhode Island, and California. They have 250 total employees today, evenly split across those locations. Average age is 37 yrs old, but ages span from mid 20’s to 50’s. Like BigCo, they employ window salespeople (telemarketers and door to door sales), and administration.   They work with outside contractors to do the installation work. The owner has some significant private investor backing, as well as aggressive business growth plans. They are planning to add about 500+ employees in two years. If business expands as planned, they intend to add staff through new hiring and will also look to potentially acquire more locations from BigCo.

Your first job is to brief the owner on whether they should offer a medical plan(s), with detailed reasoning. Then, assuming they offer a plan, please explain the difference between a HMO and a PPO plan, also identifying which you think might be a good fit for them, and why.   Finally, they have heard about Consumer Directed Health plans, with HRAs and HSAs.   Let them know if you think they might be a good fit here, with your reasoning.     

Answer 1

Answer
HMO is health maintenance organization. It is a network of Healthcare experts who provide this service at low price negotiated by an insurance company. The members in HMO choose doctor from a list of approved Healthcare providers. The specialist in HMO are cardiologist obstetrician etc. It may also cover health checkup and cancer screening. The benefits provided by an HMO can vary depending upon the company and the health care plan.
PPO is preferred provider organization. It is a network of Healthcare providers which provide its members with several choices of healthcare providers. It does not restrict its station to receive care in network. Patients can directly make appointment with the help providers and any type of reference is not required.
In general a PPO provides better services at low cost which can be availed from the network providers. which the covered persons is encouraged to use. However there is no boundation that the members are restricted to, use network health providers. They that can go for outside network health providers also but they have to pay for it.
Cost Analysis of both-
A PPO has freedom of choice and flexibility, But the premium is higher. An HMO offers no coverage outside the network but the patient have the benefit of enjoying low premium cost.
The best fit for the employees would be at PPO. This is because although it is a little bit expensive but there is more freedom in this. Even as per the details mentioned in the case study the company big Co was also offering and PPO plan for its employees. So the employees which have joint Newsen will be better suited for a PPO plan.
HRA health reimbursement agreement and HSA health savings account.
The key difference between an HRA and HSA is, HRA is owned by an employer on well as HSA is owned by an employee.
In an HSA the employee keeps the account with himself and can transfer it if he changes his job. The person holding the account can also invest their HSA funds once it reaches an certain level in terms of the balance in account.
After analyzing the difference between the two an HSA account will be better for the employees. From the point of view of employees the HSA account is better than HRM, as it has most freedom for them.

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