Author: Site Staff

Employers that self-insure their health care plans would face a new federal tax under health care reform legislation under consideration by several House committees.

Revenue from the tax, which also would apply to health insurers, would support a federal program created by the legislation to conduct research to compare the effectiveness of various medical treatments.

The legislation, H.R. 3200, which House Democratic leaders unveiled Tuesday, July 14, would leave it to the secretary of the Department of Health and Human Services to determine the size of the tax needed to raise $375 million a year.

If the secretary is unable to determine a so-called fair share per capita amount, the tax would be set at $2 per plan participant, starting in fiscal 2013. Future rates would be tied to the annual rise in the medical care component of the Consumer Price Index.

In addition, several other provisions in the House Democrats’ measure, which is designed to extend coverage to many currently uninsured individuals, would affect benefit plans.

For example, one last-minute addition to the bill would bar flexible spending accounts, health reimbursement arrangements and health savings accounts from being used to reimburse participants for over-the-counter drugs.

Under another provision, employers could extend health care coverage to employees’ same-sex or opposite sex partners without the cost of that coverage being added to employees’ taxable income.

A third late addition would bar employers that sponsor retiree health care plans from cutting benefits to current retirees unless comparable reductions were made for employees.

Self-insured employers are protesting the tax proposal as unfair for companies that provide insurance coverage for their employees.

The tax “would punish those employers that are doing the right thing by providing their employees health care coverage,” the Simpsonville, South Carolina-based Self-Insurance Institute of America Inc. said in a news release Wednesday, July 15.

SIIA also is worried about another provision that would authorize a study by a federal commissioner, which the legislation would create, to examine, among other things, the risk of self-funded plans not being able to pay claims.

The study also would include recommendations to Congress that would be deemed “appropriate” to ensure that the law does not establish incentives for small and medium-size employers to self-insure their health care plans.

“Self-insurance should be a model for reform (rather than) targeted for limitation,” SIIA Chief Operating Officer Michael Ferguson wrote in a letter to Rep. George Miller, D-California, chairman of the House Education and Labor Committee, which has jurisdiction over the issue.

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

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Visteon Corp. said it will delay efforts to pay as much as $80 million in bonuses while in bankruptcy to key employees, including executive management.

The news came a day before arguments about the bonuses were to be heard in U.S. Bankruptcy Court in Wilmington, Delaware. Several key players in the bankruptcy case, including Ford Motor Co. and General Motors, oppose the plans.

“This is appropriate in light of other motions before the court that are driven by immediate business consideration,” said Jim Fisher, Visteon director of corporate communications.

Fisher said the company prefers a “consensual” plan and will continue to work with constituents to address concerns.

A number of other issues will be heard at Visteon’s hearing Friday, July 17, including motions and to allow General Electric Co. to lease a portion of Visteon’s headquarters campus in suburban Detroit.

Fisher said the company expects the court to hear arguments about the bonus plans at a later date. He added the adjournment of the bonus issue was not caused by the objections the motion drew.

Visteon filed a motion June 29 seeking bankruptcy court approval of a new $30 million bonus plan, called the Key Employee Incentive Program, as well as permission to continue existing long-term and annual bonus plans the company had prior to bankruptcy.

But Ford, GM, the UAW, the U.S. Trustee overseeing Visteon’s Chapter 11 case and the case’s committee of unsecured creditors all filed objections to at least parts of the bonus plans. Ford called the proposed bonuses “entirely too rich given current market and economic conditions.” GM noted that the automaker had not pursued such bonuses in its own Chapter 11 case.

Others objected to the validity of the bonus plans.

U.S. Trustee Roberta DeAngelis said in her objection that the incentive plans were not justified considering the number of companies, including Ford and GM, that have eliminated annual bonuses for 2009; and because Visteon lacks funding to pay for the bonuses and more than 250,000 auto industry employees have lost their jobs in the past 12 months.

It’s unclear if Visteon is planning to revise the bonus programs.

“Our preference is to have a consensual plan, and we plan to work with all our constituents and address as many concerns as we can,” Fisher said. “Ultimately, we will do what’s in the best interest of the company, our customers and stakeholders.”

Visteon has never posted an annual profit since being spun off from Ford in 2000.

Filed by Ryan Beene of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com

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Like other mixed news about the economy, the outlook for information technology jobs is cloudy.

On Monday, July 13, advisory firm Computer Economics said layoffs among IT workers are accelerating. The Irvine, California-based firm said its survey of more than 200 IT executives found that 46 percent of all IT organizations plan to reduce headcount this year, compared with 27 percent that are increasing headcount.

But the downbeat study comes amid other, positive reports about the technology job market. Last month, staffing firm Robert Half Technology said that for the third quarter of this year, 8 percent of chief information officers plan to add IT staff, while 6 percent plan personnel cutbacks. Robert Half Technology’s report was based on interviews with more than 1,400 CIOs from companies across the U.S. with 100 or more employees.

Also last month, research firm Input analyzed the Obama administration’s federal technology budget for the year beginning October 1. It concluded that double-digit IT budget increases are requested for six agencies, including the Commerce Department and Veterans Affairs.

Rick Albert, co-founder of Gaithersburg, Maryland-based IT services firm MicroServe Consulting, said he expects his staff to jump from 12 to about 30 by the end of the year.

MicroServe’s pitch to help small and midsize businesses save money and improve IT service levels is working in the recession, said Albert.

“Our expectations are that this year will be better than last year,” he said.

Conflicting reports on the technology job sector add to a muddy picture of the economy overall. U.S. job losses in June outpaced those in May, reversing several months of improving payroll job declines. And in early July, the International Monetary Fund said the global economy is beginning to pull out of a recession, but “the recovery is expected to be sluggish.”

The United States’ IT labor market has long been a controversial topic, tied as it is to heated debates about the need for guest-worker visas.

The jumbled outlook for technology jobs could be seen recently in an announcement from job board giant Monster Worldwide. Last week, the New York-based company said it was opening a new technology center in Cambridge, Massachusetts, and recruiting for about 80 technical positions there. But it is also eliminating about 160 jobs within its product and technology group globally, including roughly 50 positions in Maynard, Massachusetts.

Last month, Robert Half Technology said CIOs in the transportation, communications and utilities sector are most optimistic about hiring. It also said staff-level technology professionals are in greatest demand.

In its report Monday, Computer Economics said 27 percent of IT organizations report their staffing levels will remain the same as last year.

“Last year at this time, we reported that IT organizations were focused on reducing capital expenditures but resisting layoffs,” John Longwell, director of research for Computer Economics, said in a statement. “That’s not the case this year. However, we don’t think IT layoffs at the typical organizations are any more severe than in other parts of the labor force.”

—Ed Frauenheim

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A U.S. Senate committee Wednesday, July 15, approved comprehensive health care reform legislation along party lines, becoming the first congressional panel with jurisdiction on the issue to act.

Thirteen Democrats on the Senate Health, Education, Labor and Pensions Committee voted in favor of the measure and 10 Republican members voted against it.

The bill shares elements of reform legislation unveiled Tuesday by House Democrats, including mandating that employers offer coverage meeting certain standards or pay an assessment, partially subsidizing big health insurance claims for employers that offer coverage to retirees before they are eligible for Medicare, providing premium subsidies for the low-income uninsured, and establishing state insurance exchanges through which individuals and employers could buy coverage from commercial insurers or a new public plan.

The coverage mandate would apply to employers with more than 25 employees. Employers would have to pay 60 percent of the premium, plans could not have annual or lifetime dollar limits, and coverage would have to be extended to employees’ adult children to age 26.

Employers not meeting these standards would have to pay an annual assessment of $750 for each full-time employee not covered and $375 for every part-time employee not covered.

However, in a slight modification of an earlier proposal, the assessment would start with the 26th employee not covered. If an employer had 26 employees and did not provide acceptable coverage, its assessment would be $750, not $19,500.

In addition, individuals not enrolled in a health care plan would be liable for an annual penalty of $750.

The Senate committee’s action came as three House panels prepared for Thursday consideration of reform legislation backed by House Democratic leaders.

The Senate Finance Committee, the other Senate panel with jurisdiction over health care, has not yet presented a bill. Sen. Max Baucus, D-Montana, committee chairman, has been working for months to develop bipartisan support for a reform measure.

President Barack Obama hailed the Senate health committee’s action and urged Congress to approve reform legislation quickly. The bill’s passage should “provide the urgency for both the House and Senate to finish their critical work on health reform before the August recess,” the president said in a statement.

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

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House Democrats unveiled Tuesday, July 14, a controversial tax on high-income earners to help pay for health care reform. The proposed bill would also require employers with 25 or more employees to provide health coverage or pay an 8 percent payroll tax, a provision that was quickly denounced by employer groups as especially hurtful to small businesses.

Many of the requirements released in the latest House version of health care reform are similar to proposals previously detailed in the Senate but with stiffer penalties for employers.

Employers with 25 or more employees, under the bill’s provisions, would be required to provide health coverage to employees or pay an 8 percent payroll tax. A similar mandate in a Senate bill would charge employers who do not provide coverage $750 per full-time employee per year.

As in a previous draft, employers would pay 72.5 percent of the premium cost for full-time employees and 65 percent for a family policy while meeting minimum coverage standards. In the Senate measure, employers would have to pay 60 percent of the cost of coverage.

The new House bill specifies that employers that offer health care benefits would be required to automatically enroll employees into their programs. Individuals, meanwhile, would not be allowed to opt out of employer-sponsored health care unless the cost is 11 percent or more of an individual’s income. In the Senate bill, that threshold was 12.5 percent of income.

The House bill includes a public insurance plan that would pay hospitals and doctors Medicare rates as well as a requirement that all Americans purchase health insurance or pay an additional income tax of 2.5 percent—up from 2 percent in the earlier version.

The earlier House version had already caused a splinter within the Democratic Party, with fiscally conservative “Blue Dog” Democrats opposing a bill that would add to the deficit.

In a concession to the Blue Dogs, the new bill contains an exemption for employers who would otherwise have to provide insurance but whose payrolls total less than $250,000.

Likewise, the 8 percent payroll tax would be scaled down for employers whose revenue was less than $400,000.

Small employers with fewer than 25 employees would not have to provide coverage but would be eligible for a sliding-scale subsidy if they did.

A preliminary estimate from the Congressional Budget Office, released Tuesday, said the bill would cost about $1 trillion over 10 years, down from the $1.5 trillion estimate that accompanied the House’s draft bill last month.

The legislation would reduce the uninsured by 37 million but would still leave about 17 million uninsured by 2019, the CBO said in a letter to Rep. Charles Rangel, D-New York and chairman of the House Ways and Means Committee.

Democrats, however, said during a news conference Tuesday afternoon that their bill would insure 97 percent of Americans without adding to the deficit.

“We’re still on schedule to do what we planned—to vote on this legislation before the August recess,” said House Speaker Nancy Pelosi, D-California. “The bill will be paid for.”

The proposal would not tax health care benefits, leaving the current exemption in place.

“We’re not going to have it in our bill, and it doesn’t sound like the Senate is going to have it in their bill either,” said Rep. George Miller, D-California and chairman of the House Education and Labor Committee.

The tax on benefits was seen by the Congressional Budget Office as a major source of revenue to pay for health care reform that would also help reduce costs in the long term.

Instead, the House Democrats’ bill would raise overseas corporate taxes and increase taxes on wealthy individuals.

The bill would impose a surcharge on the top 1.2 percent of earners with adjusted gross income in excess of $280,000 for individuals and $350,000 for those married and filing a joint return.

A letter from about 30 employer groups, including the Society for Human Resource Management and the U.S. Chamber of Commerce, strongly criticized the House bill as bad for business—specifically the 8 percent payroll tax on employers that don’t provide coverage, the public plan option and the proposed Health Benefits Advisory Council, which would set coverage decisions.

James Gelfand, senior manager for health policy at the Chamber of Commerce, said the surtax on wealthy Americans would hurt small-business owners since the majority of Americans who earn that much own small businesses.

“This House bill is completely headed in the wrong direction,” Gelfand said. “I don’t know what could be worse than adding new taxes to small business.”

House Democrats also added a $10 billion reinsurance program to help employers pay for retiree medical care, copying an identical measure in the Senate.

The proposal would reform the insurance market by eliminating co-pays for preventive care, cap out-of-pocket expenses and guarantee catastrophic coverage to protect Americans from medical bankruptcy.

The bill would also increase payments to primary-care doctors.

—Jeremy Smerd and Mark Schoeff Jr.

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The new GM emerged from bankruptcy Friday, July 10, with a leaner workforce and less debt. One reason is that, with the help of the Treasury Department, the Detroit automaker will not have to pay for the health care of thousands of retirees.

But now some of those retirees are fighting back.

While retirees represented by the United Auto Workers will have a partially funded health care trust managing their health benefits, more than 50,000 retirees represented by three unions—the IUE-CWA, the United Steelworkers and the International Union of Operating Engineers—will have no money from the automaker to fund the more than $3 billion in health care obligations.

The largest among this trio, known by the courts as the splinter unions, are about 28,000 retired workers from the IUE-CWA, the industrial arm of the Communication Workers of America. The union represents, among others, workers from a now defunct assembly plant in Moraine, Ohio, that was the only non-UAW-staffed assembly plant in the country.

In their latest contract, GM had agreed to create a health care trust similar to the UAW’s voluntary employee beneficiary association, IUE-CWA president Jim Clark said.

Unlike the UAW, however, the trust was not funded. And while the UAW received a 17.5 percent ownership stake in the new GM in lieu of cash, the IUE-CWA and other retirees have received nothing but an offer from GM of health insurance with very high out-of-pocket costs.

The unions, as unsecured creditors, stand at the back of the line while the assets of what’s left of the old GM, now called the Motors Liquidation Co., get sold off.

“We don’t feel our retirees should have been left behind with the old GM,” Clark said. “You can change your logo color or do what you want to do, but it’s still the GM company.”

In the eyes of the law, however, it is not.

While the court offered sympathy to retirees, the court said GM was within its legal right to break its contract with the workers. It even articulated the political calculus behind GM and the Treasury Department’s decision to provide for UAW retirees over the other unions.

The court wrote that “with very limited exceptions, the Splinter Unions no longer have active employees working for GM and the U.S. Treasury—triaging its ability to undertake obligations, and trying to make New GM as lean and as viable as possible—allocated its available money to spend it only where necessary to build a new and stronger GM.”

Neither a GM spokesman nor a spokeswoman for the Treasury Department returned requests for comment.

Lance Wallach, an expert on voluntary employee beneficiary associations, said the union’s mistake was to establish a VEBA without funding it.

“The little splinter groups are being cheated,” he said.

And while these so-called splinter unions are appealing the court’s decision, the IUE-CWA is applying political pressure in hopes that the administration of President Barack Obama will support the union workers who endorsed Obama’s candidacy.

To that end, the union published advertisements in major newspapers Tuesday, July 14. In a half-page advertisement in The Wall Street Journal, Debra Turner, a 51-year-old GM retiree with multiple sclerosis, stands next to a wheelchair with a caption that reads: “This Wheelchair Is My Future Once the U.S. Treasury Stops My GM Health Care.”

The ad, perhaps unintentionally, also underscores the very argument GM has made—namely that health care costs for retirees who are not eligible for Medicare are too costly for the company to maintain.

In the ad, Turner, whom the union would not make available for an interview, says that “until now, GM health care paid for most of the $3,400 a month in medicines I have to take.”

The IUE-CWA had negotiated a contract that would require the company to pay for retiree health care through 2011, after which the VEBA would fund future retiree health care costs, Clark said.

Now, with the old GM in liquidation, the union will likely receive mere pennies on the dollar for its health trust if it rejects the Treasury Department and GM’s offer of a catastrophic health plan for retirees.

Clark said this health plan, which would require individuals to spend $8,000 before being covered, “was almost an insult.”

The average cost of a health plan for pre-Medicare retirees is about $700 a month, or $8,400 a year, for individuals, according to estimates by the Employee Benefit Research Institute. Normally, an employer would pick up some of those costs.

Proposed health reforms, if they pass, may make it easier for retirees like Turner to purchase health coverage. But until then, a plan with an $8,000 deductible may be the best option Clark and retirees like Turner can find.

“I think the administration is concerned about health care reform, but you don’t start out by taking away people’s benefits who have earned them,” Clark said.

—Jeremy Smerd

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In a flurry of activity this week, both the Obama administration and the private sector are calling for U.S. workers to get more education and training so that they can fill jobs that increasingly demand higher-level skills.

President Barack Obama was scheduled to outline a proposal for increasing funding for community colleges on Tuesday, July 14, at Macomb Community College in Warren, Michigan.

In prepared remarks released in advance of the speech, Obama said that community colleges play a central role in helping workers survive economic change.

“[T]he hard truth is that some of the jobs that have been lost in the auto industry and elsewhere won’t be coming back,” Obama said. “And that only underscores the importance of generating new businesses and industries to replace the ones we’ve lost, and of preparing our workers to fill the jobs they create.”

Obama called his American Graduation Initiative the “most significant down payment yet” on his stated goal of ensuring that by 2020 the U.S. has the highest proportion of college graduates in the world. Under the plan, Obama projects that an additional 5 million people would earn degrees and certificates from community colleges.

The $12 billion, 10-year program would help the institutions improve their facilities and expand online education. It would be financed by cutting waste out of the student-loan program, according to the White House.

The goal of the effort is to push workers beyond a high school education. In a July 13 report, the White House Council of Economic Advisers projected that by 2016, occupations demanding an associate’s degree or advanced vocational training will grow twice as fast as jobs with lower qualifications.

The highest-growth areas will be health care, education, transportation and construction.

“In general, the U.S. economy appears to be shifting towards jobs that require workers with greater analytical and interactive skills—skills that are typically acquired with some post-secondary education,” the CEA report states. “Many of the fastest growing jobs—including aircraft equipment mechanic and environmental engineering technician jobs—will require the completion of an associate’s degree or certificate program.”

The White House advocacy for increased education and training comes amid new evidence that many new hires lack basic and applied job skills.

Nearly half of the 217 employers surveyed in a study titled “The Ill-Prepared U.S. Workforce” said that they provide remedial training programs “to erase deficiencies among their newly hired entrants in skills they expect them to have when hired.”

The companies called the training efforts only moderately or somewhat successful and said that programs often failed to meet company needs, according to the report. The study was conducted by Corporate Voices for Working Families, the American Society for Training & Development, the Society for Human Resource Management and the Conference Board.

Companies indicate that the applied skills that are most lacking are critical thinking and problem solving, while the basic skill in short supply is writing in English, said Mary Wright, a program director at the Conference Board.

The report defined three areas of training—workforce readiness (or remedial), job-specific and career development. One of the problems is that training budgets incorporate all the categories into one reporting stream.

“A lot of companies were not separating the cost of the remedial from the job-specific training,” Wright said. That makes it more difficult to demonstrate the drain on company revenues—and competitiveness—that results from deficiencies in the U.S. educational system.

“It’s not a good use of company resources to train people in things they should have known before they arrived,” Wright said.

Wright is encouraged by the Obama community college initiative. She said smart companies develop strategic partnerships with local educational institutions. The schools provide technical training, while companies offer job shadowing and internships.

That kind of cooperation is going to become more critical with the growth of so-called middle-skill jobs that require more than a high school education.

“There’s a real opportunity for both sides to be much more collaborative,” Wright said.

—Mark Schoeff Jr.

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Longtime former congressional pension and health care staff member Phyllis C. Borzi has been confirmed as the Labor Department’s top benefits regulator.

The U.S. Senate confirmed Borzi as assistant secretary of labor of the Employee Benefits Security Administration without objection on Friday, July 10.

President Barack Obama nominated Borzi, who served 16 years as a pension and a benefits counsel for the House Education and Labor Committee’s labor-management relations subcommittee, for the Labor Department post in March.

In her former position as a staffer for Democratic committee members, she was involved in drafting several pension and health care measures, including one Congress passed in 1996 that makes it more difficult for employers to deny coverage for new employees’ pre-existing medical conditions.

Borzi is widely known for her pro-organized labor positions.

In 1993, she served on several working groups that were part of a presidential task force chaired by then-first lady Hillary Rodham Clinton that put together a comprehensive health care reform package that Congress later rejected.

Borzi, a one-time high school English teacher, left Capitol Hill in 1995 after Republicans took control of the House of Representatives and joined the Department of Health Policy at George Washington University’s School of Public Health and Health Services in Washington as a research professor. She also was of counsel at Washington law firm O’Donoghue & O’Donoghue.

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

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