Category: Benefits

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HR Must Take Proactive Steps To Curb FMLA Misuse

Think fast: An employee returns to work on Monday after six months on workers’ comp leave. On Tuesday, he tells you that he needs to take another four months’ FMLA leave. What do you say? How about this: An employee with a history of poor performance ratings is about to be terminated from the company. The day before you inform her, she informs you that severe emotional stress will require her to take time off. Her poor performance history also includes several cases of falsely reported sick days. Can you turn her down? Can you terminate her? Try this one: A new father wants to stay home with his child in the mornings. However, his job as a sales rep receives its highest level of business in the mornings. What do you say?

Welcome to the second stage of Family and Medical Leave Act implementation. You’ve rearranged your leave plan to accommodate the 12 weeks of unpaid leave required. You’ve posted the necessary notice of FMLA rights. You’ve probably even had a few employees out on FMLA leave already, and juggled duties until they returned to their former positions, as mandated. But that, as many employers are discovering, is only the beginning. Because unless you tie up all the loopholes provided by this act, you may be in for an unpleasant surprise. Unless you make 100% sure your supervisors understand this act, you may invite trouble. Bottom line: If you don’t make it your business to keep current and confident on the provisions of the FMLA, you’re allowing this employee-friendly bill to be misused and misunderstood. What was intended to be a shield may become a sword, with the employer held as captive.

The FMLA tends to be an underestimated law. Described by many as a “feel-good” initiative, it’s often pushed to the back of the compliance to-do list, shadowed by the toothier Americans with Disabilities Act (ADA). It is true that other employer mandates have a harsher bite. The Department of Labor’s FMLA action to date has been focused more on resolving cases than on penalizing wayward employers: In the first half of fiscal year 1994, the DOL resolved 278 of 302 violations. Outcomes involved payments of back wages, restoration of benefits, and returns to former positions rather than harsh penalties. However, signs loom on the horizon that the DOL is tiring of issuing stingless reprimands. J. Dean Speer, director of policy and analysis for the Wage and Hour Division, has stated that his division, which oversees the FMLA, is encouraging the labor solicitor’s office to begin pursuing FMLA cases “to establish a presence.” And many predict that, although FMLA lawsuits won’t reach the proportions of some of the civil rights litigation, they will make more than a ripple. Employers who hope to reach compliance through trial and error may get themselves into trouble along the way. “There will be enough lawsuits that employers should not put it on the back burner,” says Janice Stanger, an associate with the San Francisco office of William M. Mercer. “They want to look at compliance in a proactive and intelligent fashion.”

And, unfortunately, non-compliance is only one potential snag. On the flip side of this issue is over-compliance: Many companies, all too aware of our litigious society, follow the dotted line to correct implementation, and on the way allow employees to get away with more than the law ever intended. And it’s easy to see why—the FMLA favors the worker. Consider this: When someone is about to be hauled off to jail—denied liberty—the arresting officer must read the person’s constitutional rights. Yet the employer must provide a worker his or her FMLA rights in writing.

 

Some abuse can be prevented, some can be curbed.
Certainly most employees will use FMLA in the spirit in which it was intended. It’s not as if masses of spiteful workers are eyeing the Act and plotting its abuse. Yet intentional misuse of the FMLA continues to surface.

Abuse has become a serious issue only recently. Early on, the FMLA had enjoyed a period of good will atypical of most new legislation. For instance, a 1993 survey conducted by the International Foundation of Employee Benefit Plans revealed that of almost 100 respondents, only 1% felt they’d experienced intentional abuse of the Act.

It’s likely that companies themselves gave the current abuse an inroads by not focusing on its prevention in the infancy of the FMLA. For instance, a 1993 Hewitt Associates survey revealed that of 628 employers, only 18% were concerned about potential abuse by employees. More were worried about administrative questions, such as recordkeeping. Such inattention has left the door open for the abuse—and concern over abuse—that we see now.

“There is a lot of fear among our members that their employees will take advantage of the situation and will try to take time off for conditions that aren’t covered by the law or aren’t authentic,” says Mary Reed, legislative representative for the National Federation of Independent Business, which has about 30,000 members affected by the FMLA. Adds David Block, a partner in the New York City-based law firm of Jackson, Lewis, Schnitzler and Krupman: “Most employees are good employees. But it’s those people who know how to work the system where it’s going to be the biggest problem.”

The abuse doesn’t always look the same. It could be an employee documenting exaggerated—or untrue—medical complaints. It could be a new father taking time to spend with his child, but actually using that leave working at his in-home business. Employees may take advantage of the overlap between the FMLA and other laws to take more than their share of time off. The extent and intention of the misuse may vary, but it’s still misuse.

Human resources plays a major part in protecting business from abuse—whatever form it takes. In a 1994 survey conducted by William M. Mercer and the University of California at Berkeley, more than half of 299 respondents reported that in their companies, human resources would be the primary administer of the FMLA.

One obvious role for HR to play in fending off FMLA abusers is that of police officer—and sometimes detective. When faced with an employee applying for leave, HR must first assess the situation. Does the certification seem sound, or does it need further investigation? “You hope that the instances of employees just getting a doctor to sign [medical certification] are small, but I don’t think that’s going to be the case, especially with what I call the more suspect,” says Block. “Certain things are very easy to document and are very tangible. Other issues, such as stress and back injuries, you can’t really tell.”

Businesses shouldn’t feel uncomfortable challenging suspect serious health conditions. It’s their right. Yet it is a rather prickly maneuver. In this situation, several issues arise. First is the wording of the FMLA itself, which demands that an employee’s reported condition only be questioned in good faith. So, in the earlier case of the about-to-be-terminated employee whose leave request was suspicious, a poor service record would not support a challenge. “If you’re going to doubt a medical certification, it’s got to be based upon some evidence,” says Lynn Outwater, a managing partner in the Pittsburgh office of Jackson, Lewis. Outwater gives examples of situations that employers may—and probably should—challenge: an employee who, in the past, had a workers’ comp certification proven false, or an employee who communicated with witnesses the untruth of a medical certification.

If an employer does decide to challenge the certification, it can demand two more medical opinions, but is required to pick up the tab for these. The employer may select the physician who’ll provide the second opinion, but the physician must have no previous relationship with the company. The third opinion must be given by a health-care provider who is mutually chosen by the employee and company. It is a final and binding opinion.

Because eliciting three different medical opinions can take so long—and rack up quite a bill in the process—Block warns that in absence of a bona fide doubt involving a substantial period of leave, the company may be wise to just accept the first certificate. Those who are determined to game the system have the advantage. “The potential for abuse is that employees will be able to get notes that say what they want to say because in general, physicians will accommodate their clients,” says Block. “From a malpractice point of view you can never be wrong by saying ‘Stay home and rest.’ So there’s no incentive for the physician to say anything other than what the employee would like to have said.”

However, a quick check into the physician’s history with the employee may prove beneficial. For example, Outwater cites an experience in which an employee’s physician turned out to be a relative. The worker received false certification and was going to use the time to take a vacation. An employer can give additional discouragement to this type of abuse by forcing employees to use vacation or personal time accrued as part of the FMLA leave. This will keep workers from trying to get two vacations for the “price” of one.

 

HR must get beneath the surface of the FMLA.
Not all misuse of the FMLA is intentional. Very often, employers themselves are indirectly responsible for the negative outcomes of its use. That’s because those granting leave haven’t been properly educated on the more intricate details of the Act.

HR needn’t start from scratch. Most companies know the basics. But because the FMLA has been in effect only since August 1993, many employers get stumped when it comes to the trickier questions.

“The first thing that employers should be cognizant of is the rather low threshhold it takes to trigger eligibility for leave,” says Block. Take the following example: An employer reports to her supervisor, explaining that her stomach hurts and she needs to go home. The supervisor assents and tells her to take a few days off. For two weeks, the employee remains out. A few weeks after returning, she becomes ill again. The worker contacts her supervisor with the news that the stomach ailment is serious and she’ll need the full 12 weeks of FMLA leave. But the manager only grants 10 weeks, reasoning that the employee has already been out for two. It seems logical. It’s also illegal. Because from the point that the worker informed the supervisor of her illness, the employer was considered on notice that the employee could be eligible for FMLA leave, and was obligated to give the employee her FMLA notice. So the firm loses two weeks that could have been chalked up to FMLA leave because the supervisor overlooked a policy detail.

The employer, however, is not completely stuck. Once a health condition is identified as being covered by the FMLA, leave may be applied retroactively—but only under specific conditions. These are:

  • The employee is still out on leave when the FMLA qualifications are discovered; and
  • The employee is out on paid leave.

All other situations would prevent an employer from applying FMLA leave retroactively.

Ellen McLaughlin, partner at Chicago-based Seyfarth, Shaw, Fairweather & Geraldson, offers another suggestion to keep a grip on FMLA leave. If an employee uses sick days sporadically, have the worker’s physician fill out a medical certification to ascertain whether the illness is due to a serious medical condition. “Then you may get an indication earlier as to whether the time they’re taking off is FMLA leave,” says McLaughlin. This way, if it’s a serious medical condition that is causing the spotty attendance, the company may count those lost days under FMLA leave—but it must make sure each absence is verified as being caused by the medical condition. “Just saying they’re sick isn’t going to get you anywhere,” says McLaughlin.

Again, the company must balance protecting itself with making leave taking as easy as possible for those who really need it. But if a company must err, it should err on the side of caution. Says Block: “You’re never wrong in jumping the gun. If an employee says that it’s not an FMLA [condition], then you can count those leaves as unexcused absences. But you should start getting reflexive.”

Unfortunately, proactive response seems to be the exception rather than the rule. To date, employers appear to have more of a knee-jerk reaction to the FMLA’s mandates. They go through the obvious surface gestures but fail to follow through. For instance, 75% of respondents to the Mercer-Berkeley survey said that they had prepared a formal, written policy on family leave to comply with the FMLA. Yet only about 50% had prepared a form that employees can use to request leave. And less than half had prepared notices to give to employees who request leave. This type of oversight is the very thing that invites misunderstanding. And it’s the type of misunderstanding that can wind up on the DOL’s plate. “The folks over at the DOL are finding that employers are not complying,” says Kathleen Rosenow, consultant, group and health-care practice with Washington, D.C.-based Wyatt Co. “It’s not for not wanting to comply. They’ve tried to comply and something slips through the cracks.”

And there’s a lot that can slip through the cracks. “Administering this law has become a nightmare,” says Block. “It’s different than other laws. The discrimination laws, in Biblical proportions, say: ‘Thou shalt not discriminate against someone because they are white or black; thou shalt not sexually harass.’ This law is very different, it’s a ‘Thou shalt…’”

Yet employers don’t have to allow the FMLA commandments to completely disable them in their quest to keep the workplace running smoothly. Many of the mandates give business the room to tinker with policies—and a few twists of wording can protect the employer, while still serving the employee.

For instance, in addition to policing the amount of time employees take off, HR can also control the period of time in which the leave is taken. This can be done by instituting a rolling year policy. The FMLA only demands that a 12-week leave period be granted within a 12-month period. This allows the possibility of leave stacking, in which employees take 12 weeks at the end of a year and then 12 weeks at the beginning of the next. There is nothing in the Act’s wording to prevent this. However, there is nothing in the Act that says an employer must allow it. By instituting a rolling year policy, the employer ensures that leave requests will be granted only if the time has not been used in the 12 months previous to the request. Such preventive measures as this can give the employer a little perk in a legal environment that tends to favor the employee.

 

Know the overlaps between the FMLA and other acts.
One thing that must be done is to look at the FMLA in the big picture. The Act has many overlaps with other federal mandates, and a failure to address this can cause serious problems. “If you look at the FMLA in isolation, you can get in big trouble,” says Outwater. “Anybody who’s reading the FMLA and saying, ‘Well, that’s all I have to do’ is making a serious mistake. If the employer has not carefully integrated its policies, that minority [of abusers] is going to be able to get away with significant amounts of time off.”

One situation that allows widespread abuse occurs when an employee is out on workers’ comp leave, and the injury—for instance, a serious back trauma—also is covered under FMLA. Unless HR ensures that the two leaves run concurrently, the employee may take workers’ comp, return to the job and then decide to take another 12 weeks of FMLA leave. Mandating that the two leaves are spent simultaneously is one of the aforementioned policy tweaks that too many employers ignore.

In fact, a lot of unnecessary leave taking can be headed off—and not enough companies are taking advantage of the situation. Here’s a common problem: A company has a clear-cut policy that if a worker is out for an entire year, be it short- or long-term disability, the employer will terminate the relationship. However, if the employer doesn’t explicitly include FMLA in this policy, it may not terminate a worker who decides to take 12 weeks in addition to the provided year. To do so would be viewed as retaliatory, in that the employer is considered to have taken adverse employment action in response to an employee’s use of FMLA leave.

The solution to this is simple: integrate your leave policies. Reword company documents. For example, if you want the total cap of permissible employee leave to be one year, revamp leave policy to be 40 weeks so that when the 12 weeks of FMLA leave is added, the total is one year. “What I suggest to employers,” says Block, “is to discard the concepts of separate disability, maternity and workers’ comp leave. Get everything under the same umbrella. If you don’t do that, you’re creating: (1) Confusion among your employees as to what leave they’re under and (2) The possibility of what I call double dipping: [The employee] takes disability now and later will take FMLA.”

Other acts must be considered in relation to the FMLA, even though they aren’t areas that invite employer regulation. One such act is the ADA, which overlaps the FMLA in several areas. For instance, a problem could show up as soon as an employee requests time off. Here’s what’s happening: An employee with a serious health condition applies for leave, and receives the mandated 12 weeks. At the end of the 12 weeks, the employee asks for another five. If the employee has a condition that is covered under both the ADA and the FMLA, the employee is indeed entitled to the extra five weeks. The EEOC’s current position is that FMLA leave is considered a right, so it does not qualify as reasonable accommodation under the ADA. There’s nothing that can be done to prevent this, but it’s something employers must know. “Sensitize management and supervisors to the interplay between the ADA and the FMLA, because sometimes they’re the ones out there interpreting the policy,” says Outwater.

Those not advised of the overlap between the FMLA and ADA can run afoul in other areas also. For instance, under the ADA, an employer is required to reasonably accommodate the worker by offering intermittent leave, a reduced schedule or a transfer to a less demanding position. However, under the FMLA, the employee is not required to accept the offer and may choose to sit out the full 12 weeks. Those implementing the policy must be aware that: (1) An employee who is covered by the ADA may very well be covered by the FMLA also; and (2) If this person does qualify for FMLA leave, the company can’t compel the employee to return to work.

In addition, if an employee does choose intermittent leave, he or she is entitled to take this for any time period. For instance, if an employee must be gone from noon to 2 p.m. every day, the employer must allow this. However, the company does have the option to temporarily transfer an employee requesting intermittent or reduced work leave to an alternative position, with equivalent pay and benefits, which better accommodates the employee’s recurring periods of leave.

Another careful balance is required when an employee announces the need for intermittent or reduced-time leave. Obviously, most employers want to know why. Under the FMLA, it’s fine to ask the necessary questions. However under the ADA, companies may ask only certain questions. “This is one of the areas that’s sort of a stickywicket with employers—just how far they can go in asking questions,” says Rosenow. She says that employers can handle the situation one of two ways. Employers may decide to play it safe and stick to the ADA line, or go ahead and ask the questions, citing allowance by the FMLA if an ADA complaint occurs.

 

Spread the word: Training and communication can head off trouble.
Successfully coping with the ramifications of the FMLA is still not the same as successfully using it to your company’s best advantage. Organizations that take proactive steps by training managers, informing employees and allowing appeals find that they can balance the employee-friendly spirit of the law with running a business.

To do this, HR must first ensure that management has been properly trained. Supervisors can’t protect their companies unless they know what the law allows and prohibits. “This statute is effecting the way managers have to manage, the inquiries managers have to make and the actions managers have to do,” says Block. “This requires HR to train their managers, because there’s no way you can expect them to know this.”

Unfortunately, corporate America by and large has been remiss in its commitment to educating its managers. Only 22% of respondents to the Mercer survey have trained supervisors on the FMLA, and what’s even more alarming is that 22% said that they probably would not do any training. This is precisely where companies will run into problems. Says Outwater: “Employers are not providing enough training for their first-line supervisors. The employers who are having a problem are having a problem because they are not educating themselves, they are not educating their key people. I feel that’s where the greatest vulnerability remains.”

Mercer’s Stanger, who co-authored the Mercer-Berkeley survey, advises that employers begin supervisor education immediately. She says HR should shape the program to fit its target audience. While some supervisors take to written material, others respond more positively to an ongoing education program. “I think different things would work at different employers,” she says. “There’s no one right approach that’s going to work for everybody.”

The most important issue to remember is that it’s not supervisors’ primary responsibility to inform themselves on the ins and outs of the FMLA—it’s HR’s job to inform them. That doesn’t mean managers need to be able to rattle off all of the FMLA’s provisions forward and backward. But they do need to be confident on the basics. As Seyfarth’s McLaughlin says: “When the red flag goes up, they need to know it’s a red flag.”

Outwater says that many employers are losing out simply because the people granting leaves haven’t been schooled well enough in the FMLA. “The [employee] doesn’t always say the magic words: Family and Medical Leave Act. They don’t use those terms. They just say, ‘I need time off.’ But [in doing this] they advise you of their illness,” she says. And all employees are required to do is inform an employer of their illness. If the employer is unprepared, it has only itself to blame.

Block says that managers must be drilled to handle situations such as this. “Someone hurts themselves at work, most managers say, ‘Jeez, this could be workers’ comp, get the workers’ comp form.’ You’ve got to train them to think the same way about FMLA. I don’t think a lot of managers out there have been trained in this,” he says.

That doesn’t mean that every time an employee gets the sniffles, a manager has to hover over with an FMLA notice. Block suggests that one practical way of preventing overuse of leave is to make it a policy to send out the forms as soon as a short-term disability is triggered. This makes a good compromise between giving employees room to breathe while maintaining control over leave practice.

“Employers must do more than cross their fingers in hopes the FMLA won’t do any damage. They must consider the FMLA in their business strategy.”

As HR embarks on this type of technical training, it must make the education as clear and interesting as possible. Greta Kotler, vice president of training for the American Society for Training & Development, says that the most important thing is to demonstrate what the FMLA means to supervisors in a practical way. “The real issue is to make it relevant to them and interesting to them,” she says. Kotler suggests using case studies to give managers a glimpse of what the FMLA really looks like in action. Don’t get stuck in textbook mode; instead offer examples, hypothetical or real life, of what can and can’t be done. Kotler worries that companies that don’t do this may not be offering the most effective training. “I think that—and this is what’s probably happening—if you give [information] to people in legal language, they just don’t understand it and aren’t interested. Make it real to them.”

Wyatt’s Rosenow says that unless supervisors are well trained, the ignorance can have a domino effect. Because employees look to their direct supervisors for guidance, a misunderstanding on the part of the supervisor can lead to a misunderstanding by a worker. And this, again, opens the door to unintentional misuse. “[Educating] supervisors is very very important. They are the ones out there on the front,” says Rosenow. “They are the ones getting and retaining and passing on information. If they pass it on erroneously, then you have a gap in the system. But also communication to employees is extremely important. If we miscommunicate to an employee, there’s another gap.”

Communicating with employees is definitely an important step in discouraging misuse. It also plays a large role in spreading the good will that enables an employer to put its foot down while keeping morale up. For instance, an employee who erroneously but vehemently believes that his or her FMLA rights are being violated can do a lot of damage before being convinced otherwise.

A clear communication effort can ensure that employees know that they’re receiving fair—and legal—treatment. New York City-based NYNEX, for instance, took pains in communicating to its work force when it tweaked its already generous leave program to comply to minor FMLA rules. It used several communications vehicles, but most importantly was the company’s commitment to ensuring that employees understood the Act’s implications on a personal level.

To address employees’ individual issues, work/family professionals in regional offices are designated to answer inquiries on an individual basis from employees. “We find that that’s a lot more effective than having one central number where people call in, because these individuals counsel both employees as well as supervisors, and they go through specialized training just to up-date from a benefits standpoint,” says Jacquelyn Gates, director of corporate culture initiatives. “We have a tremendous team of resource people whose major accountability is responding to individual questions from our employees.”

NYNEX also works closely with its union, the Communications Workers of America, to spread the word. Says Donna Dolan, director of work and family issues for District One of the union: “We will do something in terms of written communication, and offer speakers at a local union meeting or a workplace lunchtime meeting.”

Alana Kennedy, managing director of human resources planning, strategy and culture change, says that the company has no problem with the FMLA. This may be due to the fact that the organization, in almost every area, goes far beyond mere compliance with the Family and Medical Leave Act. For instance, it allows employees to take up to a year off, during which time the employee continues to accrue credited service. Because it maintains such a commitment to employees, is the chance of abuse limited? “Absolutely!” answers Kennedy.

 

Taking an active role in FMLA leave can give a company some control.
However, many businesses simply don’t have the resources to do more than comply with the FMLA. Just instituting compliance can be a serious burden for some. These employers must do more than just cross their fingers in hopes that the FMLA won’t do any damage. They must ensure that the FMLA is considered in their business strategy.

As part of a company’s further integration of the FMLA into the organization, Stanger suggests providing an appeals procedure. Not only does this allow the company to address a worker’s confusion or anger at being denied a leave, but it also gives human resources a chance to correct any wrongs it may have overlooked. “An appeals procedure can resolve disputes before they get to the let’s call in the lawyers level. They can provide a mechanism for a third party who hasn’t been involved in the dispute to look at it objectively,” says Stanger.

Institution of an appeals procedure is another low-cost, high-gain area that is part of a smart, proactive business plan. However, employers haven’t taken advantage of it much yet. Only 27% of companies responding to the Mercer survey have done so, and 53% said they probably never would.

Other initiatives are less policy oriented but still just as important. For instance, although the FMLA allows employees who need to be out the right to leave, it does not give employees the right to drop everything on their last workday and head out. For instance, employees who know that they will be out from May to August should put in the necessary time during April to create a plan for how their work should be handled. Job duties and training remaining staff to handle the extra load should be addressed.

At this point, it may also be wise to suggest the idea of intermittent leave to the employee. For example, at some companies, workers who leave for maternity reasons enjoy the idea of coming back to work slowly rather than staying off the entire four moths and jumping back into full-time hours. These women may take off completely the first two months, return for a few hours a week the third month, and come back for half days in the fourth month. Such resolutions benefit both the company and the employee.

Also encourage workers on leave to check in from time to time. The continued communication will allow co-workers to resolve any questions that may have arisen in the employee’s absence and will also keep the employee feeling part of the work community.

All this may not prevent abuse of the Act, but it may at least, lessen the detrimental effect of losing an employee for four months.

Successful handling of the Family and Medical Leave Act really comes down to what human resources is all about: Learning, communicating, training and keeping a pulse on the organization. It requires careful treading, yes, but it is possible to ensure that the FMLA assists employees without damaging business. Now quick: What do you say to that sales rep who wants mornings off?

Note: Issues discussed in this article are intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

Personnel Journal, September 1994, Vol.73, No. 9, pp. 36-45.

 

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Work-site Prenatal Programs Cut Costs

Many employers believe that because their workers are employed and have insurance coverage, they’re seeking appropriate medical care. Unfortunately, that often isn’t the case.

The health-care system in this country is in a state of flux, and public concern about its status is second only to concerns about the economy. Costs are spiraling upward at a rate far outpacing inflation, with no reductions in sight.

Many people who are unable to afford health insurance have limited access to the health-care system. An estimated 35 million people in the U.S. are without health insurance, and women and children, in particular, suffer greatly from reduced access to needed health care.

Although President Clinton has made overhauling the health-insurance and health-care industries a priority, delays have been inevitable. The process of reform is expected to be lengthy and fractious, leaving U.S. businesses to fend for themselves in dealing with issues of cost and accessibility. Businesses must continue, at least for the time being, to supplement uncompensated care for the uninsured.

To improve the health of their employees and thus reduce company-related health-care costs, companies have implemented a variety of wellness programs. Some organizations have been disappointed because they haven’t been able to evaluate outcomes effectively and verify the results that they had hoped to achieve.

One type of wellness program, however, has been proving itself repeatedly: the work-site prenatal program. This program offers to pregnant employees (and often to pregnant spouses of employees) information on birth risks, assessments for their risk factors, case-management intervention and educational materials for a healthy pregnancy.

Work-site prenatal programs have been developed to control birth-related costs.
Most of the prenatal work-site programs in existence today have been developed by or for insurance carriers. The insurance companies realized that a good portion of their health-care costs occurred as a result of women delivering preterm or having low-birthweight babies. Because many of these women are in the workforce, or are insured through their spouses’ medical plans, expenses related to childbirth have become the largest single component of total health-care costs for employers, according to a 1992 study conducted by Philadelphia-based CIGNA Corp. The study, titled The Corporate Cost of Poor Birth Outcomes, indicated that these childbirth-related expenses account for between 10% and 49% of employers’ total health-care costs. Adding the expenses of absenteeism, disability, turnover and cost shifting compounds this cost further.

A 1987 report of the Southern Corporate Coalition to Improve Maternal and Child Health reported that the average cost of rehabilitation for a preterm infant was $20,000. CIGNA’s recent study, however, found that its actual cost for preterm births and low-birthweight babies averaged $40,000, far higher than anticipated.

CIGNA commissioned the study, along with a second study, titled Impact of Uncompensated Maternity and Infant Care Costs on Employers, to determine the impact of preterm births on its organization. These studies verified the alarming facts about the costs associated with maternal and infant health care.

The first report found that U.S. businesses and their employees pay an estimated $5.6 billion annually for the health-care costs of mothers who deliver babies who are underweight or born prematurely. The second report found that U.S. businesses pay an additional estimated $4 billion annually for uncompensated health-care costs incurred by the nation’s poorest mothers and infants.

CIGNA summarized its findings: “Put simply, infant mortality is taking an expensive toll on U.S. businesses.” W. Allen Schaffer, senior vice president for CIGNA’s Employee Benefits companies, takes it one step further by saying, “Poor maternal and child health is a subject that many people associate with the poorer segment of our society, and because of this, some have looked at maternal and child health as someone else’s problem. Nothing could be further from the truth. These health-care problems have a real impact on the business community, as well as the community at large.”

Many employers believe that because their workers are employed and have insurance coverage, they’re seeking appropriate medical care. Unfortunately, that often isn’t the case. “This isn’t just a problem for the inner-city poor,” points out Schaffer. He says that the CIGNA studies showed that among the population of employed people who have group health insurance, there’s “a high percentage of less-than-best pregnancy outcomes.”

Anne Serra, administrator of employee services and recreation for Pomona, California-based Hughes Missile Systems Co., concurs. She started a prenatal work-site program for her company’s 4,000 employees and insured spouses as a result of lackluster prenatal attitudes. “Even though everyone here has insurance, not all our women sought care during their first trimesters, and quite a few weren’t reporting their pregnancies until after the first trimester or just before delivery,” she says.

The reports funded by CIGNA cited several reasons why insured women may not seek prenatal care, such as:

  • Inadequate time off for doctor visits
  • Extreme out-of-pocket coinsurance costs
  • Severe shortages of practicing obstetricians in many parts of the country.

Atlanta-based Crawford & Company, a health-care-management corporation, found that participants of its Maternity Management Program faced similar barriers to effective prenatal care. “We found that many physicians require a percentage of professional fees for prenatal care and delivery payable within the first trimester,” says Jeff Aycock, Crawford’s vice president of health-care management. Because the cost for physician care from start to finish of a pregnancy can range from $2,000 to $4,000, the physicians required the pregnant women to pay anywhere from $500 to $1,500 up front. “Many of the mothers in our program were generally young and just starting their careers, and found it difficult to come up with that kind of money,” says Aycock. “Consequently, we found that the women were delaying prenatal care for as long as possible, and some until just prior to delivery, based simply on financial factors.”

In certain types of businesses, other factors also may play a role in determining how early an expectant mother seeks prenatal care. Serra discovered that some Hughes Missile Systems’ employees weren’t reporting that they were pregnant because they didn’t want to be transferred—something that is mandatory for pregnant women who work in those areas of the business that have a potential for exposure to toxins. “Some of the women hid their pregnancies to avoid transfers or going on disability,” she says.

Educate workers to seek care early.
Study after study demonstrates that U.S. businesses spend millions of dollars on back-end heroics to save the children of mothers who don’t seek prenatal care. The money would be better spent at the front end for education and prevention.

According to the American Journal of Obstetrics and Gynecology (May 1987), 63% of private-sector preterm births and low-birthweight cases are preventable. “The key to prevention is early recognition of pregnancy,” says CIGNA’s Schaffer. “If we can encourage mothers to access prenatal care early in their pregnancy, and, equally important, educate them about the risks their lifestyles pose to their babies, we have a better chance of favorably impacting the outcome of their pregnancies.”

Prenatal risk-management programs have been proven to reduce the risk, and related costs, of low-birthweight and preterm births. Debbie Nuttycombe’s case illustrates this fact. Nuttycombe is the owner of USA Financial in Newport News, Virginia. When her physician determined that she was pregnant with triplets, Nuttycombe realized that she would need help through her pregnancy, which was deemed high-risk. She immediately joined a program called Baby Benefits by Richmond, Virginia-based Health Management Corp.

Baby Benefits provides pregnant women with nurses who consult with the women and with their participating physicians, coordinate appropriate care, conduct monthly follow-up phone visits and answer questions throughout the pregnancies. “The benefits nurse who was assigned to me knew about high-risk pregnancies and knew the best things to do relative to multiple-birth deliveries,” says 33-year-old Nuttycombe.

Nuttycombe’s pregnancy experience is evidence from the prospective mother’s viewpoint of how effective such a focus can be. “The most important thing I got out of Baby Benefits is that the staff recognized that my pregnancy wasn’t just affecting me, but that it was a family experience,” says Nuttycombe. “They realized that for me to be taken care of properly, my family had to be taken care of properly.” During Nuttycombe’s pregnancy, a nurse helped her find a housekeeper, and convinced Nuttycombe’s insurance carrier to pay for the service. Housekeeping service cost the company far less than hospitalization, which would have been the alternative for preventing preterm labor. The cost savings for the insurance company by avoiding hospitalizing Nuttycombe totaled approximately $28,000.

A Program Effectiveness Study prepared by Blue Cross and Blue Shield of Richmond, Virginia, on the Baby Benefits program that Nuttycombe used, provides tangible evidence of savings for companies offering the program. The actuarial study showed that women who participated in Baby Benefits had 20% fewer charges related to preterm and low-birthweight babies than those women who didn’t participate in the program.

Many of the insurance carriers for which other prenatal work-site programs were developed also have reported significant savings as a result of the programs, even through programs that have been in place for only a short period of time. Their experiences support the theory that through early education, assessment for high risk, and appropriate case-management intervention, mothers and babies can have more positive outcomes more often.

Rick Dorazil, corporate director of benefits at Roselle, Illinois-based Motorola Inc., agrees. He says that in the first year of providing a prenatal educational, assessment and home-based care program, the consumer-electronics manufacturer saved twice as much in health-care costs as it spent for the program. The program cost the company between $200 and $225 per pregnancy. He says that the eventual savings from preventing preterm births and birth defects far outweigh the program’s expense.

Haggar Apparel Co.’s experience with a prenatal work-site program is similar. The Dallas-based company introduced a broad program of coverage for prenatal care when it discovered that 95% of its female work force wasn’t seeking prenatal care because of the expense. Haggar’s program allows expectant mothers to receive full reimbursement if they see their physicians within the first trimester of their pregnancies.

Savings to the company have been significant, reports Anne Hunt, Haggar’s health and wellness coordinator. “Health claims dropped from $2.3 million in 1991 to $1.8 million in 1992, a savings of more than a half-million dollars,” says Hunt. “And this savings was realized even though the total number of births increased.”

Find a prenatal program to fit your needs.
How does a corporation know which programs are best for its employees and for the overall health of the company? As a human resources professional trying to help your company and its employees, you need to know how to identify a prenatal program that has all the elements for successful implementation. Just what is a prenatal program and what should it include?

Programs available range from simple educational materials to comprehensive pregnancy case management for high-risk mothers. In all cases, prenatal medical care is provided by the patients’ obstetricians, although not all the programs establish relationships with physicians or interact with doctors to share data.

Generally, companies make their programs available to all pregnant employees. Some also offer the program to the spouses of male employees, particularly if many are covered by their companies’ insurance programs. By offering such broad coverage, the companies can screen for the high-risk pregnancies while still providing beneficial information to all expectant mothers.

To be most effective, a prenatal-education program should be as inclusive as possible, both in terms of participants and in the components of the program, says Connie Marshall, spokesperson for the national March of Dimes’ campaign and author of From Here to Maternity, The Expectant Father and other prenatal-wellness materials. “Several elements are required in order to produce the desired outcome, which is delivering healthy babies,” she says. “Comprehensive pregnancy-educational materials and risk assessment by qualified health-care professionals are the minimum requirements for a program that addresses corporate and employee goals and objectives.”

Marshall considers education one of the most vital components of a successful prenatal health-management program. “Many of the factors contributing to low-birthweight babies are lifestyle issues,” says the clinical OB nurse. “Recent studies show that women underestimate the impact that smoking, drinking and drug use have on unborn fetuses. They also are unaware of dietary recommendations and the necessity of weight gain during pregnancy.”

Hughes’ Serra concurs, pointing out that she was surprised at the number of women in her organization who weren’t informed about lifestyle issues and the impact of lifestyle on pregnancy. “We wanted to target those women who needed information and weren’t getting it,” she says. “We wanted to ensure that they had the information they needed to make the right behavioral choices. We offered incentives, such as the opportunity to earn infant car seats or similar items, to entice them to join the program.”

Materials to accompany work-site education programs are relatively inexpensive for employers to provide. Most programs include these materials with the price of the program. If purchased separately and in bulk, many of these materials cost as little as $5 each.

These accompanying materials can educate women on health issues that lead to lifestyle assessment and change. However, Marshall cautions that many companies, and consumers in general, have fallen into the trap of assuming that any book published on pregnancy is clinically correct and up-to-date. “You can’t assume that just because a book is in a bookstore—and possibly is a best-seller—that it’s accurate, and more importantly, up-to-the-minute. Obstetrics is a very specialized and rapidly changing field, and buyers need to be aware,” Marshall says.

To be most effective, educational materials need to be complete, accurate, up-to-date and written in clear and understandable language, according to Thomas Garite, an obstetrician specializing in high-risk pregnancies, and professor and chairman of obstetrics and gynecology at the University of California, Irvine.

Most of the available programs recommend and use the March of Dimes’ Babies and You work-site seminars as an enhancement to their educational component. The March of Dimes recently launched another national campaign, Men Have Babies, Too. The organization designed the campaign to help heighten men’s awareness of the role they play in pregnancy, and to teach them how they can assist their partners in having a healthy baby. “We need to include the expectant father; he’s very important to the outcome of the pregnancy, too,” says Marshall. “It’s been shown that when the expectant father is educated about pregnancy, the chances for a healthy baby increase.”

Other important program components for which corporations should look are management of high-risk pregnancies and postnatal follow-up. All of the major programs available today offer a risk assessment for expectant mothers in order to screen for potential problems as early as possible. “One of the goals recommended by all groups concerned is to assure that women with high-risk pregnancies get into the health-care system as early as possible,” says Donald M. Hayes, medical director for Chicago-based Sara Lee Corp. “Baby Benefits is of immeasurable help in identifying these women and helping them make this connection.”

W. Jack Hudson, director of insurance and retirement for Indiana University, is equally pleased with the prenatal program that his university uses: Start Smart from Indianapolis-based Anthem Health Systems, Inc. “I’m aware of a number of pregnancies that had been identified as high risk and resulted in the intervention by prenatal nurses and case managers,” he says. “I feel confident that this intervention has resulted in both employee satisfaction and in significant cost savings to the plan.”

Keep track of outcomes data.
For most companies, data gathering will be a must in order to verify the cost-effectiveness of the program. Many of the vendors offer quarterly and annual reports on program use, costs, and so on.

Serra says that outcomes data and usage information are important. She has had difficulty tracking the success of Hughes’ internal program, titled Maternity Fraternity. Because the company insures its employees through a self-funded plan, as well as a number of HMOs, Serra often can’t obtain the information she needs to measure the effectiveness of her program, even though more than 200 women have used it in the two years during which it has been in place.

CIGNA’s Schaffer agrees that outcomes data are vital. “Only when a health plan establishes benchmarks and has a system in place to continuously measure quality-management programs can we be satisfied that we have met the standards expected of us,” he says.

Corporations can choose from programs that do all the administration, or can opt to manage the program themselves. Costs for the programs vary, and are subject to negotiation and customization. Some programs offer per-employee prices, or per-pregnant-employee prices. Prices can range from 30 cents to 50 cents per employee, or $200 to $250 per pregnant employee. Many programs add hourly charges as well for high-risk pregnancies. There may be additional implementation fees, which normally include posters, setup and customization of materials.

The size of the employee base and other factors can influence price as well. Corporations always should investigate what the cost of the program would be for the organization. Group demographics, managed-care arrangements and the program components used all can affect the pricing.

Dorazil of Motorola sums up his company’s experience with Irvine, California-based Tokos Clinical Services’ BabyLink program by saying, “There are certainly high-tech applications that are saving us hospitalization costs. What’s even more important, however, is the component that allows us to identify potential problem pregnancies before they become expensive problems.”

Advises Schaffer: “Prenatal care and well-baby programs are important components of an employer’s health-plan offering, and these programs customarily are part of a managed-care plan. Managed-care programs offer an integrated, coordinated system of care that identifies individual medical needs and oversees all the care administered to a patient. Maternity care and case management of high-risk pregnancies are examples of how coordinated care can affect outcome and add value.”

Serra points out that even if a company can’t offer a comprehensive program, it should at least offer the educational component. Her commitment is unflagging, even though she lacks the hard data to back up this commitment. “Any information that a company can provide its employees is worthwhile,” she says.

Corporations that make an investment in education and risk assessment are contributing to the well-being of their workers and taking positive steps toward changing the statistics on pregnancy outcomes and infant mortality—an issue that affects all of society. They also will benefit by lowering company health-care costs and increasing satisfaction among workers, resulting in reduced absenteeism, increased productivity and improved morale. Additionally, companies offering prenatal programs are making a commitment to future generations, helping ensure that as many babies as possible get the best start that they can.

Personnel Journal, October 1993, Vol. 72, No.10, pp. 39-48.

 

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The Family Leave Act a Financial Burden

In April 1991, Washington, D.C., passed a local law mandating unpaid family and medical leave for employees within the district. Between then and the following December, 83 people took leave at Sibley Memorial Hospital. The majority of these leaves were for maternity purposes. At one point, 14 women from the same unit requested maternity leave at the same time.

Ninety percent of the women taking maternity leave at Sibley remained out for the full 16 weeks of family leave. Many of them added their accumulated paid leave to the time off, extending it to as long as 29 weeks, or more for complicated births. (Rather than having paid sick days, holidays and vacations, Sibley allots each employee paid days leave, based on years of service. The employees accrue hours each week that can be rolled over each year until the employees have a maximum of 13 weeks of unused paid leave on the books.)

To cover the absent employees, Sibley had to pay overtime to other staffers, and premium rates for credentialed temporaries. “When you have 83 people take leave in a little more than 18 months, it gets very expensive,” says Shari Pollard, vice president of HR at Sibley.

One job cost the company $60,600 to cover. A pregnant employee took 12 weeks of paid leave and 16 weeks of unpaid family leave. Because she worked in a position that required extremely specialized skills, the company couldn’t find any qualified replacements in its local area. In addition, most of the people across the country who had the skills needed for the job had permanent positions and weren’t interested in temporary assignments. As a result, getting someone to fill the position during the leave required Sibley to pay for the replacement’s round-trip airfare, pay her $400 a week for housing, rent her a car for the 28 weeks and pay her a salary of $56,000.

Although the company didn’t have to pay the leaving employee her salary for the unpaid portion of her leave, it did have to continue paying for her medical benefits. To top things off, at the end of her leave, the employee informed the hospital that she wouldn’t be returning to work. After the expense of temporarily filling the position, the company now had the expense of recruiting a permanent employee.

In February 1993, President Clinton signed into effect the federal Family and Medical Leave Act (FMLA), mandating 12 weeks of leave for all workers at companies that employ 50 or more people (see “Advice for Coordinating Federal, State and Local Leave Laws”). Will having this law in place cause the Sibley scenario to repeat itself at companies across the nation? There has been much speculation about the financial impact of the act on companies.

parent leave

In the preamble to the Family and Medical Leave Act’s regulations, the Department of Labor summed up the comments of 400 people who responded to its notice of the act. “Several commenters expressed concern about the law’s impact on their operations,” the publication states. “They indicated, for example, that the FMLA would impact profitability because:

  • Of the burden of recruiting, selecting, placing and training temporary workers to fill clerical and labor vacancies at a much lower rate of efficiency
  • Managerial employees can’t be replaced by temporary workers
  • The employer becomes liable for unemployment costs of temporary workers
  • Temporary workers aren’t typically eligible for hospitalization coverage until after 30 days of employment, which increases hospitalization costs
  • Temporary workers have more accidents, adding to workers’ compensation costs.” (It’s important to note, however, that none of the people commenting provided any data or cost-specific information to the Department of Labor.)

Several studies indicate that the act will have as tremendous a financial impact on other companies as it has for Sibley. A Society for Human Resource Management (SHRM) study, cited in a February 2, 1993, House of Representatives’ Minority Report, indicates that the costs associated with recruiting new temporary-replacement workers, the training of replacement workers and the lower level of productivity of temporary replacement workers could total $56 million nationally. (This number is based on a U.S. General Accounting Office estimate that approximately 30% of the employees who would take advantage of the FMLA leave would be replaced by temporary workers).

A study conducted by the Small Business Administration in 1990 titled Leave Policies in Small Business, estimated the cost of six weeks of unpaid maternity and infant care leave to be $612 million, nationally, a year. The amount for 12 weeks of leave, as mandated by the FMLA, would be double.

Certainly, many small companies fear the truth of these studies. Beth Moser, HR specialist at ESH Inc. located in Tempe, Arizona, says that she’s afraid that the legislation will have a tremendous financial impact on her company. ESH, which designs and manufactures print and circuit boards, employs 75 people. In many of the departments, only one person works per shift. “We’ve got to cover those departments to keep functioning,” says Moser. “We’ll be forced to either go to a temporary service or bring in floaters who can go from department to department.”

Moser says that the company has had leave policies in place for at least 10 years, allowing employees to take up to six weeks off without pay. Only four employees in 10 years have taken the leave, and they only took a portion of the available time. Even these few, short leaves, Moser says, impacted the company. She anticipates that a greater number of people will take leave now because the FMLA has been so publicized.

Carol Sladek, head of the work-and-family consultancy of Lincolnshire, Illinois-based Hewitt Associates, agrees that more people are likely to take leave as a result of the act, even in companies that have offered leave in the past. “This has been so widely publicized, I think more people will know that they’re entitled to this type of leave,” says Sladek. She says that without the legislation, many companies have offered leave on a case-by-case basis, rather than as a universal right.

Also, without the legislation, companies weren’t required to continue paying for employees’ benefits while they were on leave. Now they’re required to continue benefit coverage under the same terms as before the leave. “If an employee goes on leave and isn’t being paid, it’s pretty difficult for him or her to come up with insurance premiums for a few months,” says Sladek. Having the insurance paid during this time may encourage more people to take leave.

Beverly King, HR director for the Los Angeles Department of Water and Power, has similar predictions. She says that with the burden of paying for benefits gone, more people will take leave. Already, the company has seen an average of 600 women a year (5% of its work force) taking maternity leave. Before the FMLA, however, these women were responsible for covering their own insurance costs. Now, the company must pick up the tab. King estimates the impact of the continuation of benefit coverage to be $1.5 million. “People do take leave, they always have taken leave,” says King. “However, they have never taken leave with a continuation of benefits—they paid the benefits themselves. Now, that cost is transferred to the company.”

In a February 1, 1993, report titled Family and Medical Leave Cost Estimate, the General Accounting Office (GAO) estimated the cost of continuing insurance coverage for employees on leave to companies nationally to be $674 million annually. However, the GAO foresees the cost of insurance coverage as the only added cost the FMLA will incur. Based on the results of a survey on the usage of parental leave, the GAO found that there’s no measurable net cost to businesses associated with replacing workers. Most absences are handled by reallocating work among the remaining work force.

Kathleen M. Williams, HR manager of New Jersey Superior Court, has found this estimate to be true. New Jersey has had a state leave act for several years. The law mandates employers who have 75 or more employees to provide 12 weeks of leave every 24 months for births, adoptions and illnesses of children, parents and spouses. It requires that group health insurance coverage be continued for state employees.

Although Williams says that the leave has been used extensively by superior court employees, it’s had no financial impact on the business. “It’s been our practice not to fill positions with temporaries,” says Williams, unless it’s a position such as court reporter that requires a person present. In the majority of cases, Williams uses the rest of the work force to get the job done. Even when the company must hire a temporary, the company can pay him or her up to the amount the leaving employee would be making without causing a financial burden. As far as benefits are concerned, Williams says the company would be paying them for the leaving employee anyway.

The financial impact of the FMLA will vary from business to business.
So, will or won’t the FMLA have a financial impact on businesses? The answer seems to be: It depends on the company. Many factors influence how much impact the act might have. Sibley Hospital, at which the state leave act has had tremendous financial impact, is victim to a great number of the factors.

The health-care industry is predominantly female-oriented. Studies have shown that the majority of leave taken in companies is maternity leave. Therefore, companies that employ a majority of females will see a greater number of people taking leave than male-dominated companies, even though the law stipulates that males are entitled to the same leave as women for the birth of a child. (A June 1993 poll commissioned by The Bureau of National Affairs Inc. found that only 7% of working men would take 12 weeks of unpaid leave for the birth or adoption of a child, compared with 43% of working women.)

Combined with the fact that Sibley’s work force is predominantly female is the fact that those females are in upper-middle-class families. The majority of the women taking the full amount of leave time are in professional positions, and many are married to professional men. “Most of our employees who use leave for maternity purposes have spouses who are working, and [the women] can afford to be off work for an extended period of time,” says Pollard. “People who are in other areas and receive lower rates of pay might not be able to afford to be off.”

Ted Pippin, director of HR for Providence Hospital in Washington, D.C., confirms this. He serves as vice president of a local health-care chapter that represents 62 hospitals in the metropolitan area. Of those 62, only Sibley has had a large influx of people taking leave for the maximum amount of time. At Pippin’s hospital, which employs 2,000 people, only 35 workers have taken leave in the two years that the Washington, D.C., law has been in effect, and most of them took less than the full amount of time. “What we’ve found is that because it’s unpaid leave, a majority of the people can’t afford to stay away from work for that period of time,” says Pippin.

Although Providence has fewer people who take leave than Sibley, Pippin says that it too experiences a financial impact when people who have specialized skills and who are in short supply take leave. This is a factor that people in other industries are concerned about as well. Matt Lynch is executive director for Build Rehabilitation in San Fernando, California, a public charity that trains and then finds jobs for adults with disabilities. It has had leave policies for approximately 10 years, but, just like Providence Hospital, few people take it because they can’t afford the time off without pay. In addition, a recent analysis of the work force at Build Rehabilitation indicated that although 90% of the females employed there (which total 65% of the work force) are of child-bearing age, the majority of them are single. Lynch says that the company hasn’t been put yet in the position of having to hire temporaries to cover for employees taking leave. It also hasn’t yet had an employee who’s in a specialized-skills job take an extended leave. Lynch is concerned about the impact that it would have if it happens. “There are certain jobs that only can be done by the individual who has had extensive training and experience,” says Lynch.

A company’s benefits and decisions about those benefits can affect the amount of impact the FMLA will have on the bottom line as well. For example, the law requires that companies continue paying only for medical benefits while a person takes leave. If employees are at least partially responsible for life insurance and disability benefits as well, they may elect not to pay these premiums while on leave. What happens when those employees return to work? Will they have to requalify for the same level of benefits that they were receiving before the leave? Can the company require the employees to pass a medical exam? “The ability to restore someone to exactly where he or she was before taking leave may require some changes in one of two things,” says Karen Ross, an associate at the New York City-based law firm Schulte Roth & Zabel, and formerly a director of benefits at GTE. Either changes need to be made to the employer’s benefits plan or the employer will need to pay the premiums for the employee so that there’s no lapse of coverage. Ross says that companies need to look at their current policies and decide whether to continue the payments.

Gerald Uslander, an attorney in the Washington, D.C., office of William M. Mercer, agrees with Ross that employers need to evaluate their benefits packages carefully. “Is it more trouble than it’s worth to stop coverage or to dock pay [for insurance premiums] while an employee is on leave?” Uslander asks. “An employer may be forced to continue benefits during the leave to satisfy reinstatement requirements.”

 

Preventative measures lessen negative effects.
Although the potential does exist for the FMLA to negatively affect the bottom line in particular companies, there are things that can be done to discourage it. Many companies that have had to deal with state-leave laws have found cross-training to be an effective way to minimize the use and expense of temporary workers. Williams says that cross-training has been imperative for her to abide by the New Jersey Superior Court’s policy of hiring a minimal amount of temporaries.

The court operates under a team concept, so cross-training is part of its procedures. Every member of each team must know how to perform every process. “When someone goes out on family leave, although there’s a hole [in the team], most of the time we can maintain [operations] for that period of time,” says Williams. Employees are able not only to fill in for each other but for department heads as well.

A.L. (Al) Smith, vice president of human resources for Natco in Tulsa, Oklahoma, has an HR staff of five. They’re all cross-trained. “I have everyone learn one anothers’ jobs so that they can fill in for one another,” says Smith. Just recently, Smith’s benefits administrator went on maternity leave. Rather than looking for a temporary worker who had the specialized skills to handle the administrator’s job, Smith moved his secretary into her job and hired a temporary secretary. This minimized the expense, ensured greater efficiency and empowered the secretary with greater responsibilities, raising her morale.

In addition, Smith brought all of the benefits administrators from the company’s operating units to Tulsa and trained them to handle certain aspects of benefits administration from the operations. This would assist the secretary in covering the leaving employee’s job.

The V.P. says that although the tank company doesn’t have a formal policy for cross-training, it’s general practice. Certain positions, he says, need to have backup. So the company provides backup by training others for the job.

What’s been just as vital as cross-training for Smith is communicating the importance of cooperation to Natco’s work force, which consists of fewer than 500 people. Smith has found that working out alternative solutions to unpaid leave helps both the company and the employees. For instance, one woman needed to take several months off between the end of last year and the beginning of this year. Smith arranged for her to work on a consultant basis at home. He kept her on the payroll. The woman was able to continue receiving paychecks, and Natco got its work done.

Lynch works with his employees at Build Rehabilitation in a similar way, which has enabled him to avoid hiring temporaries for employees who take leave. “The company works with employees to use them on a part-time basis [during their leave] so that they can still get paid something and we can more easily keep the job open for them,” says Lynch.

The executive director explains that many of the jobs at the company require at least a year’s training for workers to acquire specific skills. Most of the people in these jobs recognize the fact that Build is a public charity and that the staff, totaling fewer than 200 people, including the disabled workers, must work together as a team. “They have a camaraderie with their fellow employees and realize that they would be hurting everybody else if they were gone for 12 weeks,” says Lynch. Most employees who do take leave call in every day, if possible, to help their co-workers perform their jobs.

“Only time will tell what the financial impact of the FMLA will be. It seems likely that the effect won’t be as bad as many anticipate.”

Pollard used a similar system with employees at Sibley who required leave before Washington, D.C., enacted the local leave act. When a large number of women in the hospital’s critical-care unit requested maternity leave during the same period of time, Pollard suggested that they work together to come up with a plan. “We told them, ‘Look, this is how many people we can have gone at one time,’” says Pollard. The women worked out schedules of when they absolutely had to be gone, and some volunteered to work part-time for a portion of their leave. They even made arrangements to care for each others’ children while they came to work. “They worked it out as a team so that we could continue to provide care for our patients,” says Pollard.

Since the local leave act, however, Pollard says that the company hasn’t been able to convince workers to make these types of arrangements. She says that the employees know that the company is required to give them the requested leave and that they have the right to take it. They say that they believe that it’s the company’s problem, not theirs, to cover their positions while they are gone. Pollard explains that many of the women are in professional positions and work because of a career commitment rather than for economic reasons.

The makeup of Sibley’s work force has made it a prime target for family-leave takers and the ensuing expense. For other companies, family-leave policies have been insignificant to their bottom line. Only time will tell what the financial impact of the FMLA will be on corporate America. It seems likely that the effect won’t be as bad as many anticipate, especially if companies prepare for it. “The bottom line,” says Natco’s Smith, “is how employee-oriented is your company? What’s the moral obligation of management? How do managers feel about employees? If you’re an employee-oriented company, you’ve probably already been taking care of your employees, and [the FMLA] won’t make any difference.”

Personnel Journal, September 1993, Vol. 72, No. 9, pp. 48-57.

 

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Sony Promotes Wellness To Stabilize Health Care Costs

boutique fitness wellness benefits

In 1990, after several years of double-digit inflation, executives at Sony Corp. of America decided to take a closer look at the health care claims of their 12,000 employees. 

An exhaustive study of medical care claims filed during a three-year period—1988, 1989 and 1990—turned up two disturbing trends:

  • Approximately 50% of total claims costs were for illnesses and accidents that might have been preventable or modifiable through behavioral changes
  • The company was paying what it considered to be retail prices for hospital and medical services that could be obtained wholesale through preferred provider arrangements.

As a result of these discoveries, Sony embarked on an Employee Wellness Campaign for 1992, designed to raise the health-consciousness of its employees as well as stabilize the cost of providing health care coverage. Two major features of this campaign are the addition of coverage for preventive care under Sony’s indemnity plans and the provision of incentives in the form of flex benefits credits for employees who take advantage of certain health screenings. These credits can be applied to the following year’s flex benefits’ elections.

“Over the last several years, we had experienced a 15% to 16% increase in the cost of health care to our employees,” explains Alfred E. Hayes, vice president of benefits and administration at Sony’s Corporate Human Resources Group in Park Ridge, New Jersey. “During that time, the concept of wellness coverage was being raised by our employees and by our benefits committee members. Consequently, we decided to look at the demographics of where we were with our claims—what claims were heavy compared with industry standards, what risks were prominent and what we were paying.”

To conduct a thorough study of its claims, in mid-1990 Sony retained Hewitt Associates of Bedminster, New Jersey. Because Sony’s health care plans are self-insured, it was merely a matter of having its benefits administration company turn over three years of computer tapes for analysis by Hewitt’s corporate physician.

Hewitt ran the tapes through its Health Information Systems, which examines several factors: The types of claims submitted, patterns of claims utilization and costs of claims. That information then was compared to similar employer data and adjusted for Sony’s particular medical plan design, employee demographics and geographic locations.

What they found was that one-third of the claims resulted from what they believe to be modifiable conditions. Further, the study showed that about half of that group—17% of all employees—were responsible for 50% of all of the medical claims.

Supplied with that information, Sony “first looked at the risks we have with actual claims, to find areas we could do something about,” says Hayes. Smoking, alcohol abuse and not wearing seat belts figured high on the list of risks that could be reduced through behavioral changes. Other potentially preventable risks included medical conditions such as heart disease, induced by stress-related factors like high blood pressure and high cholesterol levels.

Believing that early detection and treatment of some medical conditions might lead to lower claims costs in the long run, Sony adopted many wellness features in its 1992 medical coverage plans.

First, Sony initiated improved coverage for preventive care and wellness programs, regardless of whether employees enroll in an HMO or in one of three indemnity plan options. For 1992, this coverage includes:

  1. Annual blood screening. Sony employees age 30 or over are reimbursed in full for the cost of obtaining a blood-pressure reading and blood tests, which include testing of cholesterol levels, blood sugar and red blood cell count. (At some locations, testing is available on site at no cost for all employees, regardless of age.)
  2. Annual pap smear. Female employees are reimbursed in full for the expense of having a pap smear once each year. Additional pap smears in a year also are reimbursed in full if recommended by the employee’s physician.
  3. Mammograms. Female employees are reimbursed in full for a baseline mammogram anytime after age 35 and then once every two years after age 40. Employees are reimbursed for mammograms given on a more frequent schedule if recommended by the employee’s physician.
  4. Physical exams for children covered by health insurance up to age seven. Reimbursement is 100% for children younger than age two and 80% from age two to seven for routine baby and child care exams, including the cost of immunizations. However, the annual benefit maximum for each child is $150.
  5. Smoking cessation programs. For employees who smoke, 80% of the cost of completing a program to stop smoking is reimbursed. The benefit maximum is $300 for each program, and no more than two programs will be reimbursed over an employee’s lifetime.

Previously, these types of preventive care and wellness coverage were available only to employees enrolled in the company’s HMO option, says Hayes. However, he points out, “HMOs aren’t available at all locations and only cover about 20% of our employee population. Employees have been asking for this coverage, and the need became more pronounced and visible to us over the last several years.”

For all of these new coverage, no deductible is applied. In addition, employees choosing to have a blood screening, pap smear and/or mammogram can earn up to $130 in additional flex benefits dollars for 1993. Fifty dollars in flex credits can be earned with a blood screening and $40 each for a pap smear and mammogram.

“Each employee receives a flexible benefits allowance each year, and these credits are added to that allowance,” Hayes explains. “It will make it easier for employees to buy insurance coverage or reduce the cost of their contributions toward that coverage.”

To receive these extra flex dollars, the health screenings were to be performed between January 1, 1991 and August 31, 1992. Appropriate forms for each test must be obtained, certified and returned to the employees’ HR representatives by September 10, 1992.

Hayes believes these new provisions will raise employee awareness of potential health risks, as well as provide an incentive to undergo health screenings to detect high-risk medical conditions. Although for 1992, these incentives are available only to Sony employees—not their dependents—Hayes says the company will consider expanding the coverage in coming years.

To help employees further assess their individual health pictures, Sony also gives them the opportunity to receive a customized health risk appraisal.

Through Staywell Corp., an independent third party, employees were mailed a three-part health assessment questionnaire in the fall of 1991. Called Health Path, the study solicited information about the individual employee’s health, such as pulse rate, blood pressure and cholesterol levels, as well as behaviors related to diet, smoking, alcohol use and exercise. Employees choosing to participate received a confidential report rating their health habits and identifying those that could be most harmful to their health.

“Each report gives employees an estimate of their health age, based on their health practices,” Hayes elaborates. “Someone might be 40 but have a health age of 45 or more because he or she smokes. The report suggests the person stop smoking, and also provides three areas of risk where there’s a chance of modifying behavior.”

Hayes says Sony is encouraged by the questionnaire’s reception—it received a response rate of 36%—and will consider making it an annual or biannual part of the overall wellness campaign.

To further involve employees in the concept of wellness and the benefits of participating in preventive care, Sony also produced and mailed to each employee’s home an audiocassette tape on wellness. Called “Sony’s Flex Steps to Good Health in 1992: Lend Us Your Ear,” the tape shares tips and facts on leading a healthy lifestyle.

Using a game-show format called Health Quest—similar to Jeopardy—the tape leads listeners through a series of health categories: exercise, nutrition, cancer prevention, smoking, safety, stress and kids’ health.

Under the topic of nutrition, for example, a panel of contestants is presented with the answer: “A high level of this substance in the diet contributes to elevated blood cholesterol.” A contestant gives the question, “What is saturated fat?” and the game-show host elaborates for the audience by adding, “A diet high in saturated fat—the kind found in most meats and whole-milk dairy products—can boost cholesterol. Heredity also can play a role.” A brief discussion of Sony’s preventive care coverage and the importance of testing cholesterol levels follows.

Another category, safety, gives the answer: “The leading cause of death among teens and young adults.” The question: “What are car accidents?” The game-host elaborates again: “Many deaths and serious injuries could be prevented by wearing seat belts. In fact, many states require it. So, if you’re listening in on your car radio, make sure you buckle up every time you drive.”

In addition to raising the health-consciousness of employees, Sony is attempting to control the rising cost of medical care by introducing the preferred provider organization (PPO) concept. To establish the pilot PPO, Hayes says the company looked for an area with a large concentration of employees and a well-established network of hospitals and physicians. He says that California became the ideal geographic location for several reasons, the greatest being that the majority of the 4,500 employees there already received services from providers within the Benefit Panel Service network. A review of past claims showed usage of those network hospitals to be above 80%, while network physician usage topped 70%.

Now, by using physicians and hospitals within the Benefit Panel Service network, California workers who choose one of the three indemnity plan options will have lower deductibles and higher coinsurance.

Using a physician within the network lowers office-visit copayments to $5 to $15 and provides an 85% hospital copayment— 5% more than out-of-network coinsurance. Annual hospital deductibles are reduced as well, by $50 to $200 for a single employee and by $150 to $600 for a family, depending on the medical plan option.

“Most employees can continue to use their own doctors, and we get an automatic reduction in the cost of those services,” says Hayes. “Most employees will receive lower deductibles and higher coinsurance payments overall.”

The benefit of this PPO to Sony, says Hayes, is an anticipated savings in claims costs of between 15% to 20% for 1992. He says, however, that for these new initiatives overall, it will take much longer to realize the full benefits of these cost-savings efforts. Hayes estimates that the cost of the preventive care and wellness program initiatives will run into “hundreds of thousands of dollars” initially, and will take several years before that expense is offset in lower claims’ costs.

“We don’t expect to reduce our overall medical claims’ costs, but to keep them from skyrocketing,” Hayes says. “Inflation in medical costs isn’t going away, so we want to control that increase. We believe that employees who take care of themselves properly are going to become more useful to the company. These initiatives are designed to produce a more healthy, productive group of employees in the long run.”

 

Personnel Journal, September 1992, Vol. 71, No. 9, pp. 40-44.