Author: Site Staff

B elow are charts from the Everest Group showing the number of employees covered under HR outsourcing contracts, the functions being outsourced, how costs are being affected and more.

Workforce Management, June 2005, p. 54 —Subscribe Now!

Competitive benefits programs are critical to effective workforce management. Though necessary to attract and retain quality employees, administration of such programs can be resource-intensive. When choosing a benefits administrator, legal compliance, easy integration, and dedicated account and support teams are a must—and above all, it's got to be good for the bottom line. Companies are re-thinking new strategies for benefits because of recent market, technology, and legal influences. The burden falls on Human Resource departments to "do more with less."

One major player in the benefits administration field—ADP—offers cost effective comprehensive and flexible solutions to meet vital business needs. With a proven 50 year track record in providing benefits outsourcing for large companies, ADP offers cutting-edge solutions that are fully customizable to serve and expertly provide whatever is needed to achieve benefits success—from a standalone product to completely integrated systems. In addition, ADP is a front-runner in providing the most noteworthy new trend—Employee Self Service (ESS).

Recent research suggests that benefits administration is likely to be almost exclusively ESS within the next few years. The systems are easy to navigate and use for participants, with no formal training required. Employees nationwide have embraced ESS—they are even likely to expect having control of managing their own benefits without involving HR staff. And businesses have embraced not only the reduction of repetitive inquiries and administrative tasks, but also the peace of mind in knowing that the latest legal issues and best practices are already integrated in their systems.

Vincent De Palma, President of ADP Benefit Services, provides further insight and solutions for some of these strategic challenges. Mr. De Palma leads the ADP Benefit Services business unit that includes ADP's Retirement Services and Health & Welfare Administration Services. ADP Benefit Services is responsible for delivering World Class benefit services across all markets served by ADP Employer Services. He joined the Employer Services Division of ADP in February 1999 as Senior Vice President-Group Marketing. In that role, in addition to overseeing all of ADP Employer Services Marketing and Marketing Communications deliverables, Mr. De Palma established strategic web marketing initiatives and client services guidelines.

How is technology changing the face of benefits administration?

Employee self-service acceptance has led to new ways to leverage this technology beyond open enrollment. ADP is seeing clients use it year around—for new hires, life events and employee surveys. Additionally, companies are adding functionality, such as cost modeling and plan comparisons, to help employees with their benefit decisions.

What recent legal changes regarding FMLA, ADA, or other workforce-related acts or laws should organizations be aware of?

At the start of the year, several changes to COBRA regulations involving the types and timing of notices required went into effect. Additionally, ADP is closely watching several legislative proposals that have been introduced, which would alter FMLA compliance at both the state and federal levels. For more information, visit www.adpeverybodybenefits.com.

How does your specific product or service help companies maximize bottom line results as they manage the workforce?

ADP’s 20+ years of benefits administration expertise helps companies remove the burden associated with administrative tasks, such as employee inquiries and data processing/management. This allows businesses to focus on core strategic priorities, while increasing cost efficiencies. Further, ADP embeds its compliance expertise to help alleviate this burden and mitigate regulatory risk.

In this volatile market, human resources must be cognizant of protecting both their organization and employers by minimizing the risk on pension and retirement plans. What should companies be looking for from retirement and 401(k) providers, as they develop a program that offers a sound variety of both 401(k) and retirement programs?

Companies should look to providers whose 401(k) programs are designed with the best interest of the participants in mind. ADP’s independence from the management of investments ensures objectivity and is aligned to help providers structure a retirement plan portfolio that meets the various needs of plan participants.

Workforce Management, June 2005, p. 40 — Subscribe Now!

In some states, laws regulating employee benefits are stunting the growth of health savings accounts, according to Business Insurance.

Under federal law, a health savings account must be linked with a health plan that has a deductible of at least $1,000 for single employees and $2,000 for families.

State health benefits laws are all over the board, and pose myriad problems. Some states, for example, require that employers offer plans with lower deductibles than the $1,000/$2,000 floors. Other states require that employers cover certain tests and procedures. That’s at odds with the basic idea of high-deductible plans and health savings accounts, in which the account is tapped until the deductible is reached. New Jersey, for example, requires employers to pay for tests of lead in children, Business Insurance reports.

Some state governments, prodded by lobbyists from health plans, are working to change their laws, but the process is moving at different paces–sometimes slower than employers would like–in each state.

For more information on health savings accounts, see “The Lowdown on Health Savings Accounts.”

Just days before United Airlines and the Pension Benefit Guaranty Corp. announced an agreement to terminate the airline’s pension plan, a bill was introduced that may save other airlines from the same fate.

On April 20, Sen. Johnny Isakson, R-Georgia, presented the Employee Pension Preservation Act of 2005, which would allow airlines to spread the funding of their pension plans over 25 years, instead of the current four, as long as they freeze new benefit accruals or pay for them upfront. The bill, which was co-sponsored by Sen. Jay Rockefeller, D-West Virginia, would require airlines to get union approval before taking this action.

The proposal is particularly welcomed by the airline industry, given the uproar in the wake of United Airlines’ decision to terminate its pension plan. On May 10, a U.S. bankruptcy judge approved the airline’s plan to transfer all four of its underfunded pension plans—amounting to $9.8 billion in liabilities—to the PBGC. The termination has been met with fierce opposition from unions, which have threatened strikes.

Andrea Newman, senior vice president of government affairs at Northwest Airlines, says the bill would help airlines avoid going into bankruptcy and having to renege on their promise to workers. “United has shed enormous liability, and what you would expect to happen is that more legacy carriers will have to do the same thing,” she says. Northwest’s plan is underfunded by $3.8 billion.

Delta Airlines, which worked closely with Isakson’s staff on the proposal, sees the bill as essential, says Benet Wilson, a Delta spokeswoman. Delta froze its defined-benefit plan, which is underfunded by $5.3 billion, to new employees in 2003 and just last month warned that it expects to report substantial losses for the rest of the year and could be forced to seek bankruptcy court protection.

For unions, the legislation could mean more bargaining room. “For an employer to do this they need consent from the union, and that means the union would be able to extract something else for that consent,” says Norman Stein, a law professor at the University of Alabama. This kind of bargaining power is a valued commodity, particularly in light of the United situation, where workers found themselves battling the bankruptcy of their company or losing their pensions. The Air Line Pilots Association says it supports the plan.

The International Association of Machinists and Aerospace Workers, however, is against the proposal because it would restrict the type of retirement plan that it could negotiate for its members, union spokesman Joe Tiberi says.

If future benefits are frozen, the only plan employers would be able to offer are defined-contribution plans, Tiberi says. “We believe there are ways to deal with the companies’ issues while still securing retirement income for the workers.”

The PBGC has not taken a position on the legislation. “We’re willing to look at any proposal that would keep unfunded liabilities off of the government’s books, but we have to be sure that plan participants and the pension insurance program are protected,” says Randy Clerihue, a PBGC spokesman.

The proposal comes as the Bush administration is discussing a complete overhaul of the pension funding system. And some say that despite the United situation, the bigger pension reform may take precedence over a proposal focusing solely on the airlines. Isakson, however, says that the two proposals go hand in hand. “My bill is industry-specific, but the components are still the same,” he says. “The sense of urgency that our bill portends is good for everyone.”

—Jessica Marquez

As private– and public-sector employers increasingly target smoking as a key contributor to rising health care costs, some states are telling their workers to kick the habit or pay the price.

    Beginning July 1, Georgia will impose a surcharge of $40 per month–or $480 a year–on the insurance premiums of state workers, public school teachers and other school personnel if they or covered family members use tobacco.

    “As a self-funded plan, we collectively bear the burden of everyone’s health status,” says a spokeswoman for the Georgia Department of Community Health in Atlanta.

    Last fall, the state’s health plan, with the help of outside consultant Deloitte Development, projected a $446.1 million shortfall for the insurance fund in the 2006 fiscal year because of mounting health care costs. Georgia’s plan covers nearly 646,000 members and dependents.

    Among the proposals presented to lawmakers to address the deficit was the employee tobacco-use surcharge, which won approval with expectations of generating about $16 million a year.

Smoker screening
    Under Georgia’s program, state workers during open enrollment will be asked, “Have you or any of your dependents used tobacco products in the previous 12 months?” Tobacco products include cigarettes, cigars and pipes as well as “smokeless” products, such as chewing tobacco.

    Individuals who report tobacco use will incur a flat surcharge of $40 a month during the upcoming plan year, regardless of frequency of use in the prior year. Separate surcharges will not be applied for each covered member, even if multiple dependents are tobacco users.

   The policy relies on the honor system, and there are no mechanisms in place for tobacco testing. Employees found to be concealing tobacco use risk losing medical coverage for one year.

    Georgia employees, who were notified of the new fees through open-enrollment materials sent in April, have had a mixed response, according to the community health department spokeswoman.

    The spokeswoman says the surcharge aims to “encourage healthy behavior and lifestyles” as well as to reduce the funding shortfall.

    The state does not currently provide tobacco-related wellness programs, such as smoking cessation benefits or counseling. “At this point we do not,” she says, but “it’s being discussed.”

    Alabama also plans to impose a tobacco-use charge. Starting Oct. 1, a supplemental fee of $20 per month–or $240 a year–will be applied to state workers’ health insurance if they or a spouse use tobacco, said a spokeswoman for the Alabama State Employees’ Insurance Board in Montgomery. Child dependents are exempt.

    The increases will apply to all of the self-insured plan’s 100,000 active employees, retirees and dependents and waived when the individual signs a tobacco-free certification form. The insurance board is relying on a self-reporting system, with no plans for tobacco testing, but has been “amazed” by the number of workers who have admitted to tobacco use, the spokeswoman says.

    Unlike Georgia, Alabama is offering a smoking cessation program. “That is part of what we had to develop with the premium changes and the penalties,” the spokeswoman says. “You have to give people a chance.”

Sticks and carrots
    While consultants say employers are legitimately concerned about the size of their tobacco-using worker population, as smokers’ overall medical costs generally are higher on average than nonsmokers’, most also agree that a “stick” approach to the problem is fair and effective only when “carrots,” such as smoking cessation counseling and products, are also available.

    In a December survey of 270 benefits and human resources managers conducted by the Society for Human Resource Management, 5 percent said they charge smokers higher premiums. In addition, 32 percent of surveyed companies said they offer smoking cessation programs.

    “It’s unusual for an employer to establish a penalty and not provide assistance for avoiding the penalty,” notes Bruce Kelley, a senior consultant for Watson Wyatt Worldwide in Minneapolis.

    Last year alone, smokers cost the United States $157.7 billion in health-related economic costs, according to the U.S. Surgeon General’s Office.

    “Health plans are picking up most of that cost, and I think that’s why the employer thinks it’s OK to intervene,” Kelley says.

    Medical plan contribution differentials for smokers and nonsmokers are becoming increasingly common, consultants say, and are already embraced by companies such as Minneapolis-based General Mills Inc. and Milwaukee-based Northwestern Mutual.

    In addition, the health care plans of states such as Kentucky, South Dakota and West Virginia have or plan to introduce different health insurance rate structures for smokers and nonsmokers.

    “Employers are getting more creative with plan design, with ways to reward healthy behaviors, and to create shared responsibility for poor health decisions,” says Camille Haltom, national practice leader for managed health consulting at Lincolnshire, Illinois-based Hewitt Associates.

    “I think the programs that are voluntary may work the best,” says Tom Lerche, senior VP with Aon Consulting in Chicago. “Financial incentives or disincentives by themselves, we’re not optimistic that they’ll necessarily change behavior.”

    Kelley says he favors positive incentives, such as a discount for completing a smoking cessation program. “Just penalizing smokers financially is probably not going to convince many people to quit,” he says. “I think that what they need is support and programs that help them to change behavior.”

Employers butt in
    From breathalyzers and urine tests to monthly cash penalties, employers are using an array of tactics on tobacco users to curb group health insurance costs.

Public sector:

• Georgia state employees, public school teachers will pay an extra $40 per month for coverage starting July 1, if they or their dependents admit to using tobacco products in the previous year.

  
  

• A $20 monthly surcharge will be applied to Alabama state workers starting October 1 if covered employees or spouses report themselves as tobacco users.

  
  

• South Dakota since 1997 has had different health premium structures for smoking and nonsmoking state employees; smokers currently pay $30 extra per month.

  
  

• Montgomery County in Pennsylvania is attempting to change its application process to prevent the hiring of smokers. If approved, the new law will take effect January 1.

  
  

• State employees and retirees in West Virginia are required to sign a “Tobacco Affidavit” certifying that they are tobacco-free in order to obtain discounts on health and life insurance premiums.

  
  

Private sector:

• Warrenville, Illinois-based trucking firm Navistar International in July is raising health care premium contributions by $50 a month for employees who smoke.

  
  

• Starting January 1, workers at Milwaukee-based Northwestern Mutual Life Insurance will be subject to a $25 fee on monthly health care premiums if the employee or his/her dependents are smokers.

  
  

• Weyco Inc, an Okemos, Michigan-based health benefits administrator, earlier this year stopped employing smokers, vowing to fire workers who continue smoking in violation of the policy.

  
  

• Omaha, Nebraska-based Union Pacific last fall stopped hiring smokers in several states, including Texas and Arkansas.

  
  

• Alaska Airlines for almost a decade has required applicants to pass a urine test for tobacco in order to be considered for employment.

  
  

From the May 23, 2005, issue of Business Insurance. Written by Rupal Parekh

Deborah Soon
Vice president of executive leadership initiatives at Catalyst

Last month Catalyst, which works with businesses to develop opportunities for women, teamed up with the Hispanic Association on Corporate Responsibility and the Executive Leadership Council to launch the Alliance for Board Diversity. The goal of the organization is to help companies identify minority and female candidates for their boards. Only 16.7 percent of board seats at Fortune 100 companies are held by women, and only 14.9 percent of board seats are held by minorities. Soon talked to Workforce Management staff writer Jessica Marquez.

Workforce Management: Why are women and minorities so underrepresented on boards?

Deborah Soon: I think the issue has been with the process used to find candidates. It was a matter of who do you know in your personal network and who are you comfortable with. The people that the board members were comfortable with were those that had shared experiences, and those tended to be white men. But if you want to combat groupthinking, you have to go outside the group.

WM: Have you seen this issue in your own career?

Soon: When I was CEO of Larscom (a telecommunications company Verilink bought in 2004) I faced this as I was putting the board together. It’s difficult finding people because they aren’t always visible. You can’t necessarily find them in Securities and Exchange Commission filings because they only list the top five executives at the companies. These are men and women that are in multimillion-dollar business units and have a lot to offer, but are not always visible.

WM: What should companies do to find these candidates?

Soon: If they decide to work with a search firm, they have to be very clear about what skills and experience they want. The Alliance for Board Diversity is acting as a resource for search firms and for companies at no charge to help find candidates. CEOs also can nominate their own people, which helps overcome the anxiety that boards often have about taking people with no board experience. The issue with that, however, is that CEOs often don’t want to stretch their best people too far. Human resources executives can help by making this part of the succession planning process. They could help identify which executives are ready for the board.

WM: Do you think companies are putting in the effort to diversify their boards?

Soon: We certainly see it. Look at professional search firms. They used to do a very small piece of board searches; now it has boomed leaps and bounds. We are getting more requests than before.

WM: Are you seeing progress?

Soon: There are 10 companies on the Fortune 100 that have minorities in 50 percent or more of their board seats. That’s good news.

Workforce Management, June 2005, p. 18 — Subscribe Now!

The purchase of consumer-driven health care pioneer Lumenos by health care giant WellPoint means the last big independent name in the consumer-driven field is off the market. The $185 million deal follows the purchase of another trailblazing company, Definity Health, by UnitedHealth Group in November.

It remains to be seen whether folding Lumenos into WellPoint will blunt the smaller company’s reputation for innovation and market leadership in advancing health insurance products and cost-cutting strategies. But both companies say the strategic marriage will make the partners stronger.

Lumenos will continue to operate from its headquarters in Alexandria, Virginia, and keep its executive staff intact.

“Overall, we are really thrilled with this,” says Doug Kronenberg, Lumenos’ chief strategy officer. “We will be able to continue to do the things we have been doing.”

Kronenberg says he sees advantages for both companies. “It brings together a combination of consumer-driven expertise and brand awareness in the marketplace on Lumenos’ part, coupled with the distribution and resources of WellPoint,” Kronenberg says. “That will move the whole consumer-driven movement forward at a pretty significant pace.”

Once Definity was picked up by UnitedHealth there was widespread speculation that Lumenos would be bought by another major player in the field. Aetna, Cigna and Humana are all marketing consumer-driven health plans. WellPoint, created last year through a merger between Anthem and WellPoint Health Networks, was developing its own consumer-driven plans for its Blue Cross and Blue Shield products. Picking up Lumenos brings it up to speed in a hurry.

“It finally gets the Blues plans seriously into the consumer-driven market,” says Alexander Domaszewicz, a consultant with Mercer Human Resource Consulting. “Lumenos has a passion for changing the health care system, and its customers appreciate its rapid pace of innovation.”

Domaszewicz says Lumenos’ consumer-driven plan is much more user-friendly than the one developed by WellPoint. He wonders whether that spirit will remain or get lost behind the corporate walls of WellPoint.

“Indications are that WellPoint is not going to let that happen,” Domaszewicz says. “But what about three years from now?”

Definity and Lumenos are credited with leading the consumer-driven movement by showing the larger health insurers that a Web-based system that offers high deductibles and freedom of choice to consumers can work. Lumenos developed health reimbursement and health savings accounts to go along with information and services that give plan members incentives and freedom in choosing health products.

“Without Lumenos and Definity, health savings accounts never would have happened,” Domaszewicz says. “They drove HSAs to widespread acceptance.”

Lumenos, founded in 1999, serves 214,000 consumers, a pittance compared to WellPoint’s 28.5 million plan members. Its $45 million in revenue represents less than 1 percent of WellPoint’s annual revenue and is not expected to have an impact on WellPoint’s earnings.

Like other health insurers, WellPoint is experiencing a growing demand for consumer-driven products.

“This acquisition allows us to quickly build upon and enhance our consumer-driven health programs with an overall strengthened portfolio of products,” WellPoint spokesman Jim Kappel says.

—Douglas P. Shuit

Full-time permanent employees of 29 major U.S. agencies and 44 small, independent agencies participated in a large survey of the U.S. government’s workforce.

The results provide a glimpse into how government employees feel about recruiting, development, retention, leadership, performance management, job satisfaction and benefits.