Author: Site Staff

Fortune 500 companies that move a number of their HR processes offshore can save $15.6 million annually, according to a recent report by Atlanta-based consulting firm the Hackett Group.

“116 Million Reasons Why the World Is Flat,” a report based on Hackett’s analysis of HR and other processes at a number of Fortune 500 companies, also finds that a Fortune 500 company can cut its HR staff by 44 percent through offshoring various HR processes.

These findings should serve as a wake-up call to HR executives, says Michel Janssen, managing director at Hackett. HR executives need to get in front of the trend before their CFOs start the process ahead of them, he says.

Those HR processes that offer the largest return-on-investment opportunities for employers include typical high-volume activities like data management, reporting and compliance, total rewards administration and payroll administration.

“This is where there are opportunities for labor arbitrage because these processes are people-intensive,” says Rick Bertheaud, a client executive at EquaTerra, a Houston-based sourcing advisor.

Despite the opportunity for cost savings, organizations have been slower to migrate HR processes offshore than they have been with outsourcing other activities like information technology and procurement, Janssen says.

“We do expect a large number of HR functions to move offshore, but it’s just going to be slower than other functions because of the additional complexities,” Janssen says. HR tends to be more involved with employees than IT or procurement, so offshoring these activities can be more complex.

Hackett anticipates that more companies will start moving their HR processes offshore along with other activities, like IT or finance and accounting, says Steve Joyce, HR practice leader at Hackett.

“HR by itself can’t justify moving offshore, so I think you will see it trailing and being combined with other areas,” he says. “This is an opportunity and you have to invest in it.”

Executives need to evaluate their organizations and see how they can rationalize processes before deciding whether to offshore them. And while companies shouldn’t just jump into offshoring, they do need to start doing such analysis sooner or later, Janssen says.

“Chief financial officers are adopting offshoring as a corporate-wide initiative,” Janssen says. “They may be starting out with other areas, but HR executives should use this time to prepare for it.”

—Jessica Marquez

Yahoo Inc. and a consortium of seven national publishing giants are forging one of the largest multimedia partnerships in history, allowing classified advertisements to be distributed online and across 38 states through a network of 176 newspapers.

The deal, which takes effect immediately, gives job board giant Yahoo HotJobs a much-needed shot in the arm and cements a trend in inter-media alliances between job boards and newspapers.

“The partnership takes a No. 3 player and brings it into back into contention,” says Peter Zollman, founding principal of consulting firm Classified Intelligence.

Under the agreement announced Monday, November 20, HotJobs will power co-branded career sites for print partners Hearst Newspapers, Belo Corp., Cox Newspapers Inc., Journal Register Co., Lee Enterprises Inc., MediaNews Group and E.W. Scripps Co.

Terms of the deal were not disclosed, and both the publishers and Yahoo were vague on financial projections.

HotJobs expects that combining its job listings with those of its print partners will enable it to secure leading market positions in 20 of the country’s top 25 markets, according to Daniel Finnigan, senior vice president at the job board. The publishing companies dominate several of the nation’s largest markets, including Dallas, St. Louis, Atlanta, Salt Lake City, Houston and San Francisco, and will compete in others with rival job boards CareerBuilder and Monster.

Most industry experts contend that HotJobs will finally gain momentum from the deal. The job board has had a difficult time benefiting from the synergies it attained when Yahoo purchased the company in 2002. In spite of Yahoo’s tremendous Web audience, HotJobs had been a distant third in the job board industry. According to Corzen, a New York City-based statistical data provider in the recruitment industry, CareerBuilder has a market share of 39 percent, Monster has 37 percent and HotJobs has 25 percent.

Market share, while important, is only one measure of success, Zollman says. Creating a competitive advantage for HotJobs will depend on other factors, such as recruitment results.

“Producing results for advertisers is what’s important,” he says. “If a recruiter is not satisfied with an outcome, he simply won’t return to the job board.”

The partnership is expected to shake things up not only in the job board industry, but also in publishing.

“This is a turning point for the newspaper industry,” says Dean Singleton, CEO of MediaNews Group.

The publishers will be able to tap new, younger audiences and generate fresh revenues by gaining access to Yahoo, which draws 130 million unique visitors each month.

Several members of the consortium admit having explored similar partnerships with other job sites, including CareerBuilder and Monster, before settling on HotJobs, whose key advantage is being part of Yahoo, a multipurpose Web portal that attracts visitors for various reasons. CareerBuilder and Monster are exclusively job board search engines.

“The world is changing rapidly,” Singleton says. “Yahoo has better technology and a better platform that will allow us to keep up with the pace.”

For its part, HotJobs will be able to personalize its international brand and attain local reach through the partnership. Furthermore, it will benefit financially since the local sales forces of the newspapers will begin selling ads for the job board, Zollman says. Many of the newspapers involved in the partnership are local leaders in recruitment advertising, including The Dallas Morning News, Houston Chronicle and The Atlanta Journal-Constitution, he explains.

Both Yahoo and its partners believe the consortium will expand beyond the seven founding print partners.

“I know of many newspapers that have expressed interest in joining the group,” Singleton says.

It could spell trouble for CareerBuilder, which has built its business through strategic partnerships with newspapers. CareerBuilder has a network of some 190 print partners. The company’s print allies are derived from newspapers owned by founding partners Gannett and the Tribune Co., as well as McClatchy, which gained a 15 percent stake in the company in the summer.

“We expect to maintain our leadership position in top markets nationwide,” says Jennifer Sullivan, a spokeswoman for CareerBuilder. The job board has been pursuing a strategy of diversification. This month the company announced a strategic partnership with Lycos Canada, one of the country’s most popular online sites. In addition, the company joined forces with India’s largest Web site, Naukri.com, in September.

—Gina Ruiz

Meet the new American worker: less satisfied, less engaged, but no more likely to leave his job.

Those are the conclusions of a new study by human resources consulting firm Sibson that surveyed some 1,200 employed people in the United States. The report found satisfaction scores dropped for all major categories of work rewards, including compensation, benefits, and career development and advancement. Also tumbling was the level of engagement, defined as a combination of a worker’s understanding of company direction and his motivation to achieve corporate goals. Just over half of employees rated themselves as engaged or highly engaged.

Yet the percentage of workers planning to quit within a year remains at 16 percent, the same as it was three years ago. The results add up to the specter of workers who are “quitting on the job,” according to Sibson.

“Just because you don’t have a turn­over problem doesn’t mean you don’t have a problem,” says Jim Kochanski, who leads Sibson’s organization effectiveness practice.

The report comes amid reduced retirement and health care benefits, stagnant earnings for typical workers and fears of outsourcing. Meanwhile, cynicism toward corporations is fueled by massive executive pay packages along with scandals such as Hewlett-Packard’s spying project.

Some observers, though, see a surge of corporate interest in establishing a good reputation and building trust. Sibson asked about company reputation for the first time in its study this year. It found that 76 percent of respondents gave a favorable rating to their company’s reputation—a relatively high score, Kochanski says.

But other measures related to employees’ sense of affiliation to their employer were gloomier. The level of trust in management fell from 63 percent in 2003 to 56 percent this year. Just 53 percent of employees gave favorable ratings to their organization on the question of its fairness in decisions.

The career category—which refers to long-term opportunities for development and advancement in the organization—showed the greatest dip, with favorable ratings in this area falling from 71 percent in 2003 to 53 percent this year. Satisfaction with the level of training plunged to 47 percent from 70 percent three years ago. And career satisfaction dropped from 61 percent in 2003 to 41 percent.

Americans’ growing unhappiness with compensation has something to do with pent-up demand for salary increases, says Bill Coleman, senior vice president of compensation at research and software firm Salary.com. He also attributes the frustration to a switch to pay for performance, where workers may get a bonus but often don’t see their paychecks rise much, if at all.

“It doesn’t feel like you’re getting as much money,” he says.

Karen Noble, senior consultant at HR advisory firm WFD Consulting, says employees aren’t leaving discouraging situations because they’re too busy working to seek a new position. “It’s a full-time job, as we all know, to find a job,” she says.

Among the steps organizations can take to avoid workplaces full of detached zombies, Kochanski says, is designing jobs that increase employees’ decision-making responsibilities. “Work content is very important both for motivation and retention,” he says.

—Ed Frauenheim

A Bush administration official wants to see 60 percent of U.S. employers incorporate comparable cost and quality criteria into their requests for proposals when they start to shop for health care providers next spring, a number that an HR executive acknowledged is a “high bar.”

Speaking to employers in Washington, D.C., on Friday, November 17, Secretary of Health and Human Services Michael Leavitt outlined four “cornerstone” goals for improving quality and lowering costs in the U.S. health care system: putting medical records in a nationwide electronic system, establishing health care quality and cost measures, and providing incentives for companies to select care at the lowest prices.

Leavitt is leading a nationwide outreach by the federal government to encourage employers to sign a statement supporting those goals, which were first outlined in an executive order signed by President Bush this summer.

“There is an imperative for action–an imperative morally and an imperative economically,” Leavitt says. He will visit many of the largest 200 companies in the U.S. to make his pitch over the next six months.

The executive order stated that federal agencies, including the departments of Defense and Veterans Affairs, as well as Medicare and the Federal Employees Health Benefit Program, would meet the goals when they purchase health care. These groups represent about 40 percent of the market.

The centerpiece of the Washington conference, titled “Implementing Health Care Transparency: A National Summit for Employers on the President’s Executive Order,” was a health care “tool kit” that included the statement of intent and a model request for proposal that employers can use when buying health care. (Both can be downloaded here.)

The conference, hastily organized by the Business Roundtable at Leavitt’s request, was designed to bring together dozens of companies and business groups to show support for the initiative.

Many corporations are embracing the notion of lowering their health care bills by improving information related to costs and quality, but it’s not clear that 60 percent of them will sign on by the spring.

“It’s a significant objective, and it will not be easy to achieve,” says Jerome Carter, senior vice president for human resources at International Paper Co. “He set the bar pretty high.”

After Leavitt’s speech, Carter announced that the HR Policy Association is going to send a letter to chief human resource officers at companies throughout the country urging them to adopt the four goals set out in Bush’s executive order. The letter was signed by executives at Textron, IBM, General Electric, Ball Corp., Caterpillar, Rolls-Royce North America, Lowe’s Companies Inc., McDonald’s, Boeing, Honeywell and Northwestern Mutual.

Carter asserts that companies must coalesce around a uniform and consistent approach to cost and quality transparency. For now, they are approaching those goals on their own.

“We can do a little bit of good [individually], but we can’t turn the tide,” Carter says. “We can do it faster and better if we work together.”

Leavitt acknowledged that setting quality and price standards requires collaboration that can be undermined by competing agendas from companies, insurers and health care providers.

Companies, which are feeling extraordinary health care cost pressure, want to start using quality measures immediately, even if they’re imperfect. Doctors, on the other hand, want to make sure that the ratings are fair and accurate, a difficult objective given the plethora of ways to make that determination.

“That’s a healthy tension,” Leavitt says.

Over the next five to 10 years, Leavitt’s goal is to change the health care system into one in which “value” is the focus.

“Competition today is based on brand,” he says.

Part of the tension is a result of time. Leavitt has two years left to fulfill his goal of reforming the way health care is paid. He says he will spend a good amount of time in 2007 traveling the country to promote the executive order and the need for employers to lead the change.

—Mark Schoeff Jr. and Jeremy Smerd

Vowing to make progress on what he calls issues that American families care about most, Sen. Edward Kennedy will lead efforts next year to raise the minimum wage, extend paid sick leave to every American worker and facilitate unionization.

Over a longer timeline, Kennedy, D-Massachusetts, will work on a broad health care measure that would expand Medicare to cover the uninsured.

In a meeting Thursday, November 16, with reporters on Capitol Hill, Kennedy outlined his agenda for the Senate Health, Education, Labor and Pensions Committee, a panel that he will chair beginning in January thanks to the Democratic takeover of the Senate.

The top priority for Kennedy and the Democratic majority in the House is to increase the minimum wage. Kennedy is set to reintroduce a bill in January that would boost the rate to $7.25 from $5.15. With House Democrats putting the issue at the top of their “100 Hour” agenda, it’s likely that legislation will move quickly.

Although raising the minimum wage has garnered some Republican support on Capitol Hill, it’s unclear whether President Bush would sign such a measure.

Kennedy also is promoting the Healthy Families Act, which would guarantee workers seven paid sick days for their own illness or to tend to a family member. The law would apply to companies with 15 or more employees.

A measure that would make it easier for unions to organize a workplace likely will gain significant momentum in the Democratic Congress. Kennedy is advocating the Employee Free Choice Act, a bill that would compel the National Labor Relations Board to recognize a union if a majority of employees authorize collective bargaining by signing cards.

The bill is a high priority for labor, which asserts that the so-called card-check method to organize protects workers from employer intimidation. But corporate advocates argue that all union votes should be done by secret ballot because employees are subject to union intimidation under the card-check system.

The U.S. Chamber of Commerce and seven other business organizations sent a letter to Congress on November 16 criticizing card-check authorization, citing the fact that U.S. elections and congressional leadership votes are conducted by secret ballot.

“American workers should have this traditional, democratic protection when making decisions about their own work environment,” they wrote.

The card-check bill garnered more than 215 co-sponsors in the House this year and is the subject of a grass-roots labor campaign. Kennedy says that the Employee Free Choice Act has “high approval ratings, almost as high as the minimum wage.”

Another bill Kennedy is advocating, the Protecting America’s Workers Act, would increase criminal penalties and fines for employers who willfully violate federal workplace safety rules.

Kennedy’s most ambitious proposal in the committee’s health portfolio is “Medicare for All.” Under the plan, the Medicare program would be extended in phases to all Americans under 65.

The goal would be to provide insurance to the approximately 46 million who lack it. Participants would choose among dozens of health plans in a system modeled after the one used by federal employees.

Kennedy’s office asserts that the plan would save $380 billion a year through better prevention and earlier treatment of disease and another $160 billion because of efficiency gains produced by improved health information technology.

A bill summary provided by Kennedy’s staff calls the plan “the starting point for discussions on achieving universal coverage.”

Critics are likely to balk at the costs. Kennedy did not indicate how the proposal would be funded, saying that his panel would have to work with the Senate Finance Committee.

But he ruled out increasing taxes on low-income people and the middle class. He says he would entertain hikes “for those who fall in the millionaire category.”

One of the top education priorities for Kennedy is to increase funding for the No Child Left Behind Act, a bill passed by Congress four years ago designed to raise K-12 education standards. He also wants to increase the amount of money offered to college students in Pell Grants, cap student loan payments and cut their interest rates.

Kennedy’s agenda addresses what he says are concerns voters expressed during the election about Washington ignoring their needs. “They want to know someone is on their side,” he says.

—Mark Schoeff Jr.

The Pension Benefit Guaranty Corp. on Wednesday reported an improvement in its financial position for its 2006 fiscal year, with the agency’s deficit narrowing to $18.1 billion from $22.8 billion a year ago.

Much of the $4.7 billion improvement in the PBGC’s insurance program for single-employer pension plans stemmed from airline industry pension funding relief provisions in the recently enacted Pension Protection Act, which resulted in “a sharp reduction in the amount of ‘probable’ liabilities reflected on the agency’s balance sheet,” the PBGC said in a statement Wednesday, November 15.

“The PBGC’s financial condition appears to have stabilized for the time being,” Vince Snowbargerm, PBGC interim director, said in the statement. “Our current assets can cover pension payments coming due for a number of years into the future, and our exposure to additional losses has declined.”

As of September 30, the agency reported assets of $60 billion and liabilities of $78.1 billion. In addition, the PBGC noted that its potential exposure to losses from pension plans sponsored by financially weak employers decreased to $73 billion from $108 billion in 2005.

In its statement, the PBGC attributed that improvement in part to higher interest rates, better credit ratings and improved plan funding at some employers.

—Matt Scroggins

Scroggins is a reporter for Business Insurance, a sister publication of Workforce Management, where this article first appeared.

Dear One Size Doesn’t Fit:

You raise important points about the challenges associated with developing and implementing a successful performance management system.

 

More and more companies are recognizing that a “one-size-fits-all” performance management approach does not work for their organizational culture, goals, and mission. Different people occupy different jobs that require different competencies, behaviors and outcomes. Although some common expectations might apply for all job functions, it is important to think about the bigger picture. Instead of putting people in a box by using the same performance evaluation for all employees, open up the box to release the potential within each individual.

 

Consider the following steps for developing and implementing a performance management system that is results-focused and distinctive to your organization. Ask yourself the following:

 

1. Which are the major job functions within your organization (i.e., accountants, administrative, marketing, financial, information technology, human resources, operations, sales)? A performance management system should meet the needs of all major job functions.

 

2. What, if any, common expectations exist between job functions (i.e., quality of work, productivity, interpersonal skills, dependability, job knowledge and initiative)? Common expectations ensure there is some level of consistency between performance evaluations. They also provide a great opportunity to put in place expectations that may be unique to your organization’s culture.

 

3. How are expectations defined as behaviors? For instance, quality of work might include accuracy, thoroughness and neatness of work. By defining the expectation as a behavior, it becomes observable and, thus, measurable. The expectations might be enough to cover your administrative team.

 

4. What are the individual key results for each employee? For example, an individual key result for your IT director might be to create and implement a new software training program by a specific date. Individual key results must be measurable and will change as goals are attained and new ones begin.

 

5. What steps will be taken to involve employees in developing the performance management system? Involving employees this way promises a much higher level of acceptance and ownership of the process.

 

6. How will a coaching approach maximize the performance evaluation discussion? Coaching focuses and builds on employee strengths as a way to improve development areas. Two-way communication occurs that sparks solid discussion and generates keen insight. Consider a place on the evaluation form for coaching comments and employee comments.

 

7. What will keep the performance management system alive? You will need to find ways to keep things fresh and relevant to your organization’s evolving goals. If the system becomes stale, change it to keep it properly aligned with current needs.

 

Building a culture of performance throughout an organization in all job functions creates a greater sense of purpose and commitment. Results will be seen internally when employees achieve their goals. It also will be witnessed externally by strengthening your organization’s competitive position.

 

SOURCE: Dana E. Jarvis, human resources director,Snavely Forest Products, Pittsburgh, December 27, 2005. Jarvis also is an adjunct professor at Duquesne University in Pittsburgh.

 

LEARN MORE: Please read How Do We Move From Paternalism to Measuring Performance?

 

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Toyota Motor Co. on Friday will open a new truck manufacturing plant in San Antonio that will include a $9 million comprehensive health care facility for the automaker’s employees and its parts manufacturers as well as employees’ dependents.

Toyota, whose health care costs have doubled in the past five years, will be the first of the large auto manufacturers operating in the U.S. to address health care costs by building a full-service health care center at one of its sites. In doing so, Toyota is applying a popular car manufacturing strategy to its employees’ health in hopes of producing high-quality, cost-effective health care.

“The way we do things at Toyota in general is, the way we improve cost is to improve quality,” says spokesman Daniel Sieger. “We’re looking at health care the same way.”

The on-site health care center, which will be operated by CHD Meridian Health Care, will be open to Toyota’s 2,000 employees working at the plant and their dependents, as well as the 2,100 employees of companies manufacturing parts for Toyota Tundra pickups produced at the 1.5 million-square-foot, $1.28 billion facility.

Reflecting an integrated health care supply chain of sorts, the health care center will bundle a number of health services normally performed by unrelated specialists at different locations. The center, which will open in January, will include preventive and primary health care services, family practitioners, internists, pediatricians, dentists, optometrists, physical therapy, and radiology, pharmacy and laboratory services. The center will include the kind of occupational health services provided by employers at most manufacturing plants that are meant to deal solely with work-related injuries.

As Toyota has expanded its production capacity in the United States–the San Antonio plant will be its 13^th–its health care costs have climbed. Toyota now pays about $11,000 annually to provide health care for each employee, double what it paid five years ago, Sieger says.

Though Toyota surpassed Ford as the second-largest auto manufacturer in the world behind GM, the company does not face the same kind of crushing health care expenditures as Detroit’s Big Three automakers.

Whereas health care cost GM $1,525 per vehicle in 2004, Toyota spent just $201, according to management consulting firm A.T. Kearney. A large part of that cost may have to do with the burden of providing health care to retirees. Health care costs rise exponentially as people age. Toyota has only 250 retirees in North America.

According to representatives from Chrysler, GM and Ford, those companies do not have comprehensive health clinics on factory sites.

Despite taking cues from Toyota’s business plan in the past, the Big Three have resisted building comprehensive medical centers at their plants, according to R. Dixon Thayer, CEO of I-trax, which owns CHD Meridian Healthcare.

Thayer, a former Ford executive, says that despite some union support at other manufacturing companies, including Goodyear and Nissan, Detroit’s Big Three have not yet seen the value in on-site clinics as a way to manage health care costs.

“The Big Three see on-site health care as occupational health,” Thayer says, “so [for them] it is a risk management and OSHA issue.”

He says it takes “some enlightened HR and benefits people” to see that comprehensive on-site health centers can help manage and prevent chronic diseases, which represent a disproportionately large chunk of health care spending.

Thayer says cost savings for companies come from employees using health care when they need it without waiting to take time off and returning to work too quickly. Lower co-pays and other financial incentives will increase the use of the facility and increase the use of drugs for chronic illnesses, ultimately reducing expensive hospitalizations. Medical care at the clinic will be more in-depth. Doctors will spend 20 minutes with patients.

Companies such as Pitney Bowes, Compuware and Perdue have on-site health clinics, and the benefits often depend on employee demographics. It helps if the clinic is convenient not just for employees, but for their dependents as well. This means employees would have to live nearby or where it’s hard to access health care specialists, says Joe Fortuna, medical director for industry association Automotive Industry Action Group.

Companies in other industries have used the model of on-site health care, but with Toyota now trying it, Fortuna hopes the company can bring its expertise in improving supply-chain quality to improving health care quality.

“We don’t have an integrated supply chain for health care” in the U.S., Fortuna says. “If they use that mechanism and the quality is good, then the question becomes: Can they do it on a cost-effective basis?”

Toyota currently has no plans to expand health care clinics to other plants.

“This is kind of a test run,” Sieger says. “We will see how it works.”

—Jeremy Smerd

Although the U.S. maintains a global lead in innovation and entrepreneurship, it is falling behind other countries in the level of education its people achieve, a factor that could undermine future living standards, according to a new report.

During the past 20 years, the U.S. has accounted for one-third of all growth in the global economy, a figure that is “nothing short of astounding,” says Michael Porter, a professor in the Harvard Business School and co-author of “The Competitiveness Index: Where America Stands.”

The report, sponsored by the Council on Competitiveness, was released in Washington, D.C., on Monday, November 13. It shows that the U.S. leads the world in productivity and household wealth growth, job creation and foreign direct investment.

Even though U.S. companies are sending research and development operations overseas, they’re increasing R&D at home by comparable levels—and America is receiving more foreign investment than any other country.

Porter cautioned that wealth is growing in the U.S. only for people who have a college education. Technological change and globalization have increased the demand for higher-level skills, such as complex communication and creative thinking.

But the U.S. is losing its lead in the percentage of people who complete higher education. In addition, the U.S. invests more in education–$83,910 per student–than most other countries, but produces lower test scores than many of them.

“This is our No. 1 economic problem in America,” Porter says. “There’s no doubt about it.”

For now, U.S. talent has a quality advantage. China graduates more engineers, but only a fraction of them are qualified to work for a multinational company.

Quantity and quality, though, may diminish over the years if more U.S. students don’t enter a math and science track.

Such a decline may not have a deleterious effect on a multinational company like DuPont, which has the wherewithal to reach further than many other firms for talent.

But its chief executive, Chad Holliday, is concerned about the possibility 10 years down the road of a lower-skill domestic labor supply that will earn less income.

“A DuPont will be fine because we can go to India; we can go to China,” says Holliday, who also is chairman of the Council on Competitiveness and was in Washington for the report rollout. “The issue is not DuPont; the issue is the country. We need a better feeder supply for all the companies here.”

The challenge goes beyond graduating enough engineers. They key is to change the way they’re educated so that they can handle higher-level jobs and stay ahead of the global economic “churn,” according to the leader of a major U.S. university.

Wayne Clough, president of Georgia Tech, says that today’s engineers need a background in humanities, communication, teamwork and leadership so that they are more adaptable.

With that kind of flexibility, they can go into nontraditional fields such as health care.

“They can help this country run better,” says Clough, vice chairman of the Council on Competitiveness. “They can fix systems. We need engineers who can get out of their comfort zone.”

A corporate executive who visited Washington last week, however, had a different view. George David, CEO and chairman of United Technologies, favors a laissez-faire approach to a possible engineering shortage. If such a shortage develops, salaries will rise and more students will go into the field, he argues.

“Markets will respond,” he said at an event at the Institute for International Economics in Washington on November 8. “Markets will take care of anything.”

Holliday is not convinced. That may work for United Technologies, but “I’m not sure it’s good for the overall standard of living,” he says.

Porter, too, favors a proactive approach. He recommends an overhaul of the K-12 educational system, beginning with reform of what he views as anachronistic local control of schools.

“We have to make structural changes,” he says. “We can’t just tinker. I don’t know whether the country is ready for that.”

—Mark Schoeff Jr.

Health insurance industry lobby group America’s Health Insurance Plans unveiled a plan Monday, November 13, that it says would help the federal government provide health insurance to millions of uninsured Americans without creating a new government agency.

The plan, broadly outlined in a seven-page pamphlet, arrives at a time of growing public concern about the dwindling numbers of Americans who receive employer-sponsored health insurance and the prospect that a new Congress controlled by Democrats will address the issue of the uninsured.

There are now 46.6 million Americans who do not have health insurance. AHIP says its plan, if enacted by Congress, would cover all children within three years and 95 percent of adults within 10 years.

“The board has been working for the past eight months or so to specifically develop a proposal to deal with the No. 1 domestic policy issue in our country, which is to provide access to health insurance coverage to millions of uninsured Americans,” says Monit Ghose, a spokesman for the insurance lobby.

The cost of providing health care to people without health insurance is passed on to employers in the form of higher premiums. As a result, covering more people could reduce premiums for employers, says Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health.

“Covering the uninsured has the serious potential to lower employers’ costs because they are the ones paying the higher bill for the uninsured,” Anderson says. “It’s not the Medicaid/Medicare program, it’s the private employers [that are paying the costs of the uninsured with higher premiums].”

Having a larger number of insured individuals and families means that health insurers’ risks are spread across a larger group of people, which could mean lower premiums for employers. Also, when people have health insurance, they are more likely to seek medical attention before ailments become big problems, thus lowering the cost of care.

How to extend coverage to the uninsured, however, is a quandary fraught with ideological conflicts and infighting among special interests.

The plan, which AHIP estimates would cost the federal government $300 billion during a 10-year span, includes:

• Expanding the eligibility of state-run health programs to include children whose families earn less than 200 percent of the federal poverty level. The federal poverty level for a single person under age 65 is currently $9,800.
• A so-called universal health account based on health savings accounts that would allow people to contribute toward health care spending and matches by the federal government.
• Establishing a $500 tax credit for families that purchase health insurance.
• Disbursing federal grants to states whose health care meets certain quality standards and other guidelines.

AHIP’s plan does not include a requirement that all residents must obtain health insurance, unlike the groundbreaking law passed in Massachusetts in April.

Covering more uninsured Americans is of fiscal importance to health insurance companies and their stockholders. Membership in health insurance companies has been shrinking as the cost of health insurance for both individuals and employers has risen. This year, health care costs for employers are expected to increase about 7.7 percent. The percentage of people with employer-based health care benefits dropped to 62 percent in 2005 from 64.4 percent in 1994.

Those with health insurance are generally healthier because they have access to timely medical care and preventive services, all of which reduce the cost insurance companies and employers–the entities paying for health care–bear in the long term.

Anderson says employers pay, on average, 25 percent more than the federal government for similar medical services, a premium that is used by hospitals to offset the cost of paying for medical services for the uninsured.

Observers say the insurers’ proposal is born out of self-preservation.

In a pre-election USA Today/Gallup poll, 79 percent of voters said they would support efforts to insure more Americans and 60 percent expected a Democrat-led Congress to focus on that issue.

Health insurance companies like Aetna and WellPoint–which recently reported quarterly earnings growth of 28 percent and 27 percent, respectively–have opposed moves toward a single-payer system because such a model would make their services obsolete. Covering more of the uninsured without a single-payer system would increase their memberships at a time when those numbers are declining, Anderson says.

Historically, lobbying organizations have come out with their own plans, particularly when there is greater public interest in health care, says Jon Gable, vice president of the Washington, D.C.-based Center for Studying Health System Change. During the early years of the Clinton administration, when health reform was a major policy goal, various health industry lobbies each offered plans.

—Jeremy Smerd