Health reforms might undercut employer-based system

Despite calls for Congress to protect the pillars of the employer-based health benefit system, House lawmakers are entertaining proposals that could make plan sponsorship more difficult, costly and complicated.

For example, a House tri-committee draft “appears to establish two different penalty regimes within the insurance exchanges” intended to make health plan comparison shopping easier, American Benefits Council President Jim Klein testified before the House Education and Labor Committee last week. “Inasmuch as employers will be permitted to obtain coverage through the exchanges, this will subject employers to expansive new liabilities,” Klein said.

Outside the exchange employers could self-insure their coverage under the ERISA framework. But inside the exchange coverage would be fully insured and subject to state law, opening up what some predict could be a Pandora’s box of litigation.

“The House bill changes the liability regime for plans inside the exchange and for the public plan option,” says ACM’s Senior Vice President of Health Care Reform Paul Dennett. “For coverage obtained inside the exchange, state law, private rights of action, and damages would apply. Outside of the exchange coverage would continue to be subject to ERISA’s federal law remedy scheme, and the public plan option that would be offered inside the exchange would be under a third body of law that applies to Medicare.”

The concern is that the scheme would create a crazy-quilt or regulation, most likely leading to uneven enforcement. Denied ERISA protection, a multi-state employer could face a rash of new compliance costs that might lead them to drop coverage.

“We think that many employers will choose to provide coverage outside the exchange, but one of the major concerns we have overall with the legislation is that it could become increasingly burdensome on employers to provide health coverage in the way that they traditionally have,” says Dennett. “Because the legislation significantly increases the requirements on employers that provide coverage to employees, in the future some employers may reach the conclusion that it’s both easier and lower cost to simply have the coverage provided to their employees through the exchange rather than attempt to do it themselves,” he adds.

Life without the ERISA shield might also lead to a host of new lawsuits, according to industry analysts.

“Because the liability in state courts is usually unlimited in punitive damages and compensatory damages, litigation costs would be significantly higher than what are typical under federal law. The overall cost to the health care system will increase because of the increased burden of higher liability, which is really going in the wrong direction. Health care reform should be trying to reign in costs due to excessive liability rather than expanding it,” says Dennett.

In its testimony, ABC urged lawmakers to steer clear of a public plan option that would destabilize the insurance market, instead ensuring protection of the employer-based system.

“The best reform options are those that preserve and strengthen the voluntary role employers play as the largest source of health coverage for most Americans. By keeping employers engaged as sponsors of health coverage, we also keep the innovation, expertise and commitment that employers bring to the table in the collective effort to achieve broad-based, practical health system reform,” Klein testified.

HR technology is the 'must-have' expense

Even though overall spending on HR technology has decreased in 2009 compared to 2008, the reductions are far less than forecasted, according to a recent Towers Perrin study

Surprisingly, 21% of respondents expect to increase their HR technology spending this year over last and only one in three companies (36%) expects to decrease spending year-over-year. The remainder (43%) was able to keep their annual HR technology budgets at a constant this year.

“As evidence, our study shows more and more companies view HR technologies and system budgets as ‘must have’ expenses that support both long-term objectives and short-term needs,” says Thomas Keebler, leader of Towers Perrin’s global HR function effectiveness practice. “The proven value of these technologies and systems has made them less a discretionary cost decision and more an imperative, even in tougher times,” he adds.

ccording to the survey, only 11% of the 332 organizations interviewed were driven to compress their 2009 HR technology budget by more than 20%, while 25% were compelled to cut spending by less than 20% for the year. Impressively, nearly two-thirds of companies polled (64%) maintained or increased their spending budgets year-over-year.

This is encouraging news for organizations with ongoing budget concerns, as strategic investments in HR technology can aid businesses in addressing immediate cost-cutting needs across the broader HR function and prepare the department for the economy’s upswing.

For many HR and HRIT executives, the overall cost of HR service delivery technology has risen to the top of their to-do lists. In 2008, a mere 9% of those questioned brought up cost as one of their top three HR service delivery issues, whereas in 2009 that percentage increased almost threefold, with 24% of those polled citing costs as one of their top three issues.

For the first time in the 12-year history of the survey, this issue has garnered the immediate attention of executives, many of whom are looking at spending on HR service delivery technology and judging it a significant issue.

“HR technology budgets have been fortunate in avoiding the more dramatic budget cuts we’re seeing across most other areas of business in 2009, including the broader HR function itself,” says Keebler. “When cost is an issue, it’s critical that HR and HRIT leaders work together to streamline processes and maximize resources.”

The top three HR service delivery issues besides cost are a new HR system (15%, up 5% from 2008) and systems integration (13%, up 4%).

Meanwhile, focus on talent and performance systems (35%, down 5% from 2008), increasing involvement in strategic business-driven issues (23%, down 7%), and the significance of recruiting and staffing services and systems (12%, down 20%) have waned.

“Investing strategically in HR technologies and service delivery systems now can dramatically help preserve a competitive advantage in the talent attraction and retention wars that are likely to arise when the economy turns,” says Keebler.

Employers are heeding this advice as a healthy 63% of organizations actively sought to increase the alignment of their HR strategy with their company’s overall business strategy in the last 18 months.

Of those who have for the most part completed this strategic alignment, 84% say their work met or exceeded expectations. Hence the need to integrate HR strategy within the company’s overall strategy, a goal that many forward-looking companies have adopted.

Pennsylvania passes mini-COBRA law

Pennsylvania Governor Edward G. Rendell recently signed into law four health-care reform bills that included both the creation of a mini-COBRA plan and amendments to the state’s insurance laws, allowing uninsured, single, adult children up to age 30 to be covered under their parents’ health insurance plan.

Both reforms are intended to increase the amount of individuals with coverage while driving down costs for both the state and individual. The creation of a mini-COBRA plan makes Pennsylvania the 41^st state to supplement federal COBRA coverage by extending coverage to small businesses with fewer than twenty employees.

The nature of mini-COBRA plan coverage varies greatly among states. The Pennsylvania mini-COBRA plan would extend coverage to employees of small businesses for up to nine months after termination and would incorporate the federal COBRA subsidy for employees who were involuntarily terminated.

Unlike the federal COBRA subsidy, the Pennsylvania mini-COBRA program is not retroactive, and so only employees terminated between July 10, 2009 and Dec. 31, 2009 are eligible for the federal subsidy to help pay for 65% of their coverage.

The amendment to the insurance laws on dependants’ health coverage allows for inclusion of unmarried adult children without dependents who are either living full time in Pennsylvania or are full-time students.

It is specifically aimed at reducing the number of uninsured individuals, given that 2008 research revealed that 40% of the total uninsured population of the state is between the ages of 19-29. The new provision is not mandatory and is dependent upon the employers’ willingness to offer the benefit to employees with adult children under thirty.

Parents would be required to pay any additional premiums. Not only is participation voluntary, but the language of the bill reads that “insurers may determine increases in premiums related to continuation of coverage for the adult dependent past the limiting age of nineteen.”

Survey: Employers stand by mental health benefits

In a recent survey conducted by the Partnership for Workplace Mental Health, 74% of employers said they are not dropping mental health benefits because of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act.

The Virginia-based group found that 77% of employers will not eliminate their substance abuse coverage as a result of the new law, which takes effect January 2010. The survey, titled “Employer Survey Results: Mental Health Parity Law,” reflects the responses of 143 HR, benefits and employee assistance professionals from large and small employers.

“The business case for quality mental health care is there. Employers see the facts in the medical journals, in the business literature, and directly in their own workplaces,” says William L. Bruning, co-chair of the partnership’s Advisory Council and president and CEO of the Mid-America Coalition on Health Care in Kansas City.

Other key findings:

Companies considering dropping mental health coverage were also considering dropping substance disorder coverage.
More companies (20%) responded that they did not know whether mental health benefits would be dropped as compared to dropping substance disorders coverage (16%).