Author: Site Staff

Massachusetts regulators in charge of implementing key portions of the state’s health care reform law are considering a delay in rules that impose financial penalties on residents not enrolled in health care plans providing so-called minimum creditable coverage.

In July, the Massachusetts Health Insurance Connector Authority, responding to comments that its earlier rules were too rigid and not sufficiently detailed, proposed new rules that would increase the likelihood that mainstream employer plans would pass the minimum-creditable-coverage threshold, keeping employees from being hit with penalties that can amount to more than $900 a year.

The proposed rules also increase the chances that high-deductible health insurance plans linked to health reimbursement arrangements will pass muster while easing requirements on how many annual preventive visits health plans must cover.

But employers and others are seeking additional changes, emphasizing the need to delay the implementation of the new rules to January 1, 2010, saying it would be difficult to revamp benefit plans in time for the current January 1, 2009, effective date.

A spokeswoman for the Connector Authority said there has been discussion of changes to the creditable-coverage rules and delaying the effective date, but final decisions are not expected until next month.

The goal of the health care reform law, passed in 2006, is to move the state close to universal coverage. The law created a state program that subsidizes health insurance premiums of eligible lower-income uninsured residents and established assessments on employers that do not provide health care coverage. It requires most residents to obtain coverage.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Legislation has been introduced in the Senate that would require group health plans to provide parity in coverage benefits for prosthetic devices for amputees.

SB3517, introduced Friday by Sens. Olympia Snowe, R-Maine, and Tom Harkin, D-Iowa, would require employer-paid health insurance to treat coverage of prosthetic care and devices on par with other essential medical care devices covered by health insurance.

“It does not mandate coverage, but it does assure that when it is offered it is not so restricted or capped that it does not assure an amputee of the prosthetic care they require,” Snowe said in a statement.

A similar bill, HR5615, was introduced in the House of Representatives in March by Rep. Robert Andrews, D-N.J., with bipartisan support. The measure prevents group health plans from imposing any annual or lifetime dollar limits on benefits for prosthetic devices and components, unless such limits apply in the aggregate to all medical and surgical benefits. The House bill has not been acted on.

Coverage for prostheses varies widely, and a growing number of insurers are limiting coverage by imposing low dollar caps and restrictions, according to Amputee Coalition of America, the Knoxville, Tenn.-based advocacy group that has championed the legislation. Approximately 2 million individuals are affected by limb loss, the coalition says.

Prosthetic-parity measures have passed in 11 states, most recently Louisiana and Vermont.

Filed by Colleen McCarthy of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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This week’s woes on Wall Street have recruiters working harder than ever as they get flooded with requests from financial services firms to tap talent at the likes of Lehman Brothers and Merrill Lynch.

“It is historic and it is a feeding frenzy,” said Darin Manis, CEO of financial services recruiter RJ & Makay in Colorado Springs, Colorado. “Whether there will be a massive exodus I don’t know. Nobody knows; that has yet to be determined.”

Recruiters say the upheaval at Lehman and Merrill has created an unprecedented opportunity to lure star employees from two of Wall Street’s most well-known brands.

Gustavo Dolfino, president of recruiting firm WhiteRock Group, said that in the first two days of this week he received 10 requests from employers looking to hire Merrill financial advisors.

Most of the interest is coming from buy-side firms, such as hedge funds and asset management companies, which hope to cherry-pick the best talent at Lehman and Merrill, Dolfino said.

“These guys are vultures,” he said. “We saw the same thing when Bear Stearns went under.”

WallStJobs.com, a New York-based online career site for the banking and brokerage industry, has seen a jump in requests to fill positions from midsize firms and boutique hedge funds in the past week, said site founder Robert Graber. Along with posting job requests and résumés, WallStJobs.com also helps firms fill positions confidentially.

“We are getting a lot of calls from companies actively recruiting candidates from the companies in the news this week,” Graber said. He declined to identify those firms.

Employers have been spending a lot more time on the site in the past few days, Graber noted.

“In the last week, they are spending an hour more a day,” he said. “They are spending time looking at candidates and posting jobs.”

Bank of America, which is acquiring Merrill Lynch, has stated that it will pay retention bonuses to Merrill advisors, but the company has not specified any amount or who would be eligible for the bonuses. In its $50 billion purchase deal, Bank of America has highlighted the opportunity the merger could create for Merrill’s 16,000 advisors, who would gain access to the bank’s 8 million high-net-worth customers without having to make cold calls.

“They’re actually missing the opportunity of a lifetime if they’re going somewhere else,” said Bank of America CEO Ken Lewis in an interview with CNBC reporter Maria Bartiromo, according to a transcript.

Recruiters, however, believe top Merrill advisors who are the gatekeepers of relationships with customers could be offered as much as 200 percent of their yearly income in transition packages from prospective employers.

“This kind of recruiting frenzy is typical when big firms hit hard times or get acquired,” said Chris Flanagan, advisory director at Silver Lane Advisors, a New York-based investment bank for the financial services industry.

Firms looking to poach talent from the likes of Lehman and Merrill may have a tougher time than they anticipate, he said.

“There could be retention bonuses involved for these employees,” Flanagan said. “They may be wise to see what they are offered.”

—Jeremy Smerd & Jessica Marquez

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Lawyers, accountants and consultants are needed to help firms owed money by failing banks and to represent executives being blamed for the mess on Wall Street.

Similar to the cleanup crews descending on Texas in the aftermath of Hurricane Ike, financial cleanup crews are mobilizing around the wreckage of Lehman Brothers. Just minutes after Monday’s bankruptcy announcement, the cell phones of hundreds of lawyers, accountants and consultants started chirping.

“The BlackBerrys of bankruptcy attorneys have been going off for days,” said Denis Cronin, a partner at law firm Vinson & Elkins.

He represents a bank that was just elected to the seven-member Creditors’ Committee overseeing Lehman’s bankruptcy. The bank is one of Lehman’s largest unsecured creditors.

“There will be additional hiring by firms, you can be sure of it,” he added.

Vinson & Elkins has added five new bankruptcy associates to its 25-lawyer practice in as many months, and is looking to hire several more by year’s end.

In addition to bankruptcy, other areas that are beefing up include white-collar and securities-practice groups at law firms, as well as forensic accountants and legal/financial software companies.

Davis Polk & Wardwell, for example, has several departments that have kept the lights on for the past two consecutive weeks. The firm’s transactional lawyers are lead counsel to the U.S. Treasury Department of the Federal Reserve Bank of New York in the $85 billion AIG rescue, and various financial groups are advising Citi as one of the largest creditors to Lehman. The firm is also lead counsel to Freddie Mac, which was recently taken over by the Fed.

“I’ve barely left the office and I’m not even a lawyer,” said a firm spokesman.

Lawyers rarely travel alone—often they have accountants in tow.

“When there’s business change and big losses, people scramble to try and recover as much as they can,” says Sam Rosenfarb, managing director of M&K Rosenfarb, the forensic accounting division of accounting firm Marcum & Kliegman. “Most of litigation is about money, and whenever you’re fighting about money, people need forensic accountants.”

Rosenfarb’s group has 90 forensic and investigative accountants—the folks who delve into laptop computers’ hard drives and BlackBerry messages to find out who knew what, when. Rosenfarb is hiring at a fast clip, with plans to add 60 more staffers by next summer.

Other related industries are also seeing growth. Online education firm Lawline.com reported this week that a record number of lawyers had signed up for the company’s bankruptcy courses, making it the busiest time in the past decade, president David Schnurman said.

“In the 10 years that we’ve been providing [these courses], I cannot recall another time when the events of the real world crossed over into [ours],” he said.

With so many financial institutions in compromised positions, now is the time when investors and regulators start looking to point fingers. Historically speaking, blame often gets cast on the leaders of those institutions, who will presumably be in need of legal representation.

“I feel like Derek Jeter standing at shortstop,” said Marc Mukasey, head of white-collar criminal defense at Bracewell & Giuliani, which is actively hiring attorneys to handle all of the inquiries coming its way. “You’re ready for the ball to come, and it will be either this batter or the next one.

“If you even think you might need a lawyer, you probably needed one two weeks ago,” Mukasey said.

Filed by Hillary Potkewitz of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Equifax Inc. of Atlanta will freeze its defined-benefit pension plan for about 4,000 U.S. employees, according to a news release.

About 300 U.S. employees who have met what the release called certain grandfathering criteria will remain in the current defined-benefit  and 401(k) plans, while others will be offered a new, enhanced 401(k) plan in which Equifax will make automatic contributions of 1.5 percent to 4 percent, based on years of service. New employees also will be moved to the new 401(k) plan.

The company did not elaborate on the criteria for staying in the previous DB and defined-contribution plans.

The company will also make a 100 percent match on employee contributions up to 4 percent for the new 401(k) plan. The existing 401(k) plan includes a 50 percent match on the first 6 percent of employee contributions.

The changes are “in line with established marketplace trends, in which retirement savings through a 401(k) plan is increasingly becoming the standard retirement offering by employers, including many of the company’s competitors for talent and business,” according to the news release.

The company does not expect a material amount of cost savings in the near future as a result of the changes, the release stated.

The company’s defined-benefit plan had $606 million in assets as of December 31, the release stated. According to the 2008 Money Market Directory, the current 401(k) plan had $221 million in assets as of December 2005, the latest data available.

Equifax spokesman Tim Klein did not return a call by press time seeking details.

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Before Lehman Brothers went bankrupt and Merrill Lynch & Co. was forced to sell itself, the deepening subprime mortgage crisis had prompted estimates of Wall Street job losses to soar from 2,000 to 33,000 during the current downtown.

Now, those numbers could climb even higher.

“Certainly, the events of the last few days give stronger reason for concern,” said Doug Turetsky, chief of staff of the Independent Budget Office, on Monday, September 15.

Until recently, Lehman employed about 10,000 people in New York City. Merrill has about 8,000 people on its payroll in the city.

While most Lehman workers are facing unemployment, many, if not most, Merrill employees will keep their jobs under Bank of America since there is not much of an overlap between the two companies.

Economists at the Independent Budget Office, which made the 33,000-job-loss-prediction in May, were scheduled to go back to the drawing board Monday afternoon to determine if the day’s events warrant a revision. “That number presumed some upheaval,” said Turetsky. “It’s hard to weigh whether it presumed enough.”

Securities firms in the city have already cut 11,000 jobs since the employment peak in the summer of 2007, according to the state Department of Labor. And more are likely to come on the books as announced layoffs take hold.

Just how bad things will get is an open question. James Parrot, an economist with the Fiscal Policy Institute, said the earlier estimates of 30,000-plus securities job losses already took into account the turmoil in the mortgage markets.

“Part of that forecast was, there would be a lot of decline on Wall Street,” he said. “We didn’t know exactly how it would manifest itself.”

What is clear is that the pain will be widespread.

Since Wall Street is the driving force of the local economy—the sector accounted for 5 percent of the city’s jobs but 23 percent of its wages in 2006—the cutbacks will reverberate throughout New York. Each securities job creates two others, according to the state comptroller’s office, and the pain will be felt everywhere from retail and restaurants to law and accounting. Economists have predicted that the city will lose 60,000 to 90,000 jobs during this downturn.

“When one of your key industries is suffering dramatic downturns and bankruptcies, that’s going to have a spillover effect,” said James Brown, an economist at the state Department of Labor.

Leonard Logsdail owns a company that makes custom clothes, including suits that go for $2,500 and up. He hasn’t had any orders canceled yet, but said his 37 years in business means he knows what’s coming.

“I’ve seen all these swings,” he said. “It makes everybody put their purchases on hold. Historically, the phone will go dead for a couple of weeks.”

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Crain’s reporter Adrianne Pasquerelli contributed to this story.

J. Patrick Rooney, a former chairman of Golden Rule Insurance Co. and an early proponent of savings accounts linked to high-deductible health insurance plans, died Monday, September 15, in Indianapolis. He was 80.

Rooney championed health savings accounts—long before they became politically popular—as a way of giving employees financial incentives to use medical care services more carefully.

In 1993, Golden Rule set up medical savings accounts—a predecessor to HSAs—and Rooney frequently cited their success in controlling costs in pushing Congress to pass legislation that authorized HSAs, which have greater tax advantages than MSAs.

In his later years, Rooney was active in publicizing how hospitals were charging uninsured patients rates far in excess of their rates for fully insured patients.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Nearly three-quarters of corporate benefit executives say that taxing employees on the value of employer-provided health care benefit programs would have a negative effect on employees, according to a new survey.

Such a proposal is part of the health care reform platform endorsed by Sen. John McCain, R-Arizona, the Republican Party’s presidential candidate. McCain has proposed giving all taxpayers tax credits to offset the cost of health insurance premiums. The tax credit would be $2,500 for individual coverage and $5,000 for family coverage.

In turn, employees who receive coverage from their employers would be taxed on employer-paid premiums. McCain has said such a change in tax law would result in more equity between those who receive coverage from their employers and those who buy coverage on their own and under current law receive no tax breaks for obtaining the coverage.

But according to the survey conducted by the law firm Miller & Chevalier Chartered and the American Benefits Council, both based in Washington, 74 percent of corporate benefit executives said such a change would have a negative impact on employees.

A substantial number, 46 percent, of benefit executives also said requiring employers to offer health care coverage or pay a new tax—an idea endorsed by Democratic Party presidential nominee Sen. Barack Obama of Illinois—would have a strong negative effect on their workforces.

“This feedback should be a wake-up call to our political leaders that the people responsible for structuring and managing employer-sponsored health plans … are deeply skeptical about key elements of both presidential candidates’ reform proposals. Rather than taxing workers’ health benefits [or] compelling employers to provide coverage they can’t afford, candidates should focus on initiatives to control costs and promote top-quality care,” said American Benefits Council President James A. Klein in a statement.

The survey is based on the responses of 187 benefits executives.

The survey is available at www.millerchevalier.com or www.americanbenefitscouncil.org.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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}Encourage members of the younger generation to earn their stripes outside the family business. This can help build confidence in the younger generation—and in the workers the younger generation is expected to manage.

}Use an outside advisory board or board of directors made up of nonfamily members. The best boards include successful businesspeople or financial experts who can give impartial advice.

}Don’t underestimate the value of family members who aren’t active in the business in easing transitions or integrating younger family members into the business. Social engineering can be an important part of creating a functional family and business unit.

}Consider drafting a family charter. Setting ground rules during a calm spell can provide a touchstone when things get hectic. It also can help family and nonfamily employees feel they’ve been treated fairly.

}Consider nonfamily employees—ringing in the younger generation shouldn’t be done in a way that will alienate long-term senior employees.

Sources: Alan S. Schwartz, vice chairman of the board of directors and partner at Detroit-based Honigman Miller Schwartz and Cohn; and Phil Bahr, managing principal of Troy, Michigan-based CPA firm The Rehmann Group

In a breathtaking day that saw the map of U.S. finance dramatically redrawn, Lehman Brothers Holdings Inc. teetered toward collapse while Merrill Lynch raced into the arms of Bank of America and reportedly agreed to be acquired for $50 billion.

What was merely a quiet, unseasonably hot Sunday for most New Yorkers will be long remembered on Wall Street as one of the industry’s most astonishing days. The repercussions of the day’s events will be felt in New York and throughout its financial services industry for years to come.

In the early hours of Monday, September 15, Lehman Brothers said it was planning to file for bankruptcy under Chapter 11, and Bank of America announced that it was planning to buy Merrill Lynch.

Though both Lehman and Merrill had prized their independence for many decades, they were done in by the credit crisis that left them stuck with billions of dollars in toxic mortgages stuck on their books.

Topping off the drama, insurer American International Group was planning to reveal a dramatic restructuring plan that would involve shedding billions in assets.

The news was by far most dire at Lehman, a proud name that traces its roots on Wall Street to the 1850s, making it older than Goldman Sachs or any other major brokerage firm.

Talks with Bank of America or Barclays to acquire the ailing investment bank fell apart on Sunday afternoon, apparently because those two institutions wanted government guarantees that were not forthcoming to protect them against losses in Lehman’s mortgage portfolio.

Many Wall Street firms called their traders back to work on Sunday afternoon to try to unwind their complex derivatives transactions with Lehman. A special trading session was held, the International Swaps and Derivatives Association said, to help market participants “reduce their market risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy filing.”

The next step for Lehman appears to be bankruptcy and liquidation. It would be by far the largest such failure in Wall Street history, exponentially larger than the 1990 collapse of Drexel Burnham Lambert. Most, if not all, of Lehman’s 25,000 employees would figure to lose their jobs in such a scenario.

Bank of America, after deciding it wanted no part of Lehman, turned its eyes to Merrill Lynch and a deal was quickly struck Sunday evening, September 14, according to The Wall Street Journal. Merrill has been socked with tens of billions in losses during the credit crisis, though its sales force of about 17,000 retail brokers remains a valuable asset.

Still, the abrupt sale of Merrill is a stiff blow to the reputation of chief executive John Thain, a former top Goldman Sachs and New York Stock Exchange executive who was brought in late last year with a reputation as “Mr. Fixit.”

Under Thain’s watch, Merrill suffered billions in painful write-downs and it recently agreed to sell billions of mortgage-related assets at a steep loss. But the firm still had significant mortgage exposures, and when Lehman’s stock plunged by 77 percent last week, Merrill was also hit hard and Thain evidently had no more cards to play. The sale to BofA would end 94 years of independence for Merrill.

It isn’t clear how many of Merrill’s 60,000 employees stand to lose their jobs, but there doesn’t appear to be a great deal of overlap between Merrill and BofA, a giant commercial bank that for years has struggled to build a significant business on Wall Street.

Finally, AIG, which has also suffered tens of billions in mortgage-related losses, is preparing to sell its enormous aircraft-leasing business, according to The Wall Street Journal, in addition to some insurance-related assets.

Filed by Aaron Elstein of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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