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More Employers Offering Only Consumer-Driven Health Plans

Plagued by high health care costs, more employers are embracing the concept of replacing all existing medical insurance plans and implementing a full-replacement consumer-driven health care program. But, they are proceeding with caution.


    Among the top concerns for those pondering the move to a full-replacement program is lack of choice for employees and protection under the plans for lower-paid employees, experts say.


    “Three or four years ago, we saw very few companies give serious consideration to full replacement,” says Patrick Travis, senior manager in Chicago for Deloitte Consulting’s human capital practice. “In this last cycle, we are starting to see many, many more employers giving it a serious look.”


    One reason employers are starting to come around is simply that consumerism is no longer a foreign concept, Travis says. Most organizations now “at least have a toe in the water” when it comes to consumerism, and offer some type of CDHP alongside traditional plans, he says.


    Additionally, continuing cost pressures are forcing companies to evaluate more aggressive strategies to contain costs, Travis says.


    Overall, though, the number of companies taking the plunge remains small; about 10 percent of companies now offer CDHPs as the sole coverage option, says Helen Darling, president of the Washington-based National Business Group on Health.


    “Relatively few employers are offering consumer-directed health plans only,” Darling says. “But the ones who do full replacement are the ones who get significant savings.”


    When imposing a high-deductible health plan, both the employer and the employee tend to save money since utilization of health care goes down in frequency, Darling says.


    “If all employees are in [a CDHP] plan, the savings would be higher than if only 10 percent to 20 percent of employees were in the less costly plan,” she says.


    Total-replacement programs also tend to prevent adverse selection, which can occur when only the healthiest employees enroll in a CDHP while high-dollar claimants remain in traditional plan options, experts note.


    “You don’t have to worry about the person who does five triathlons a year and is generally healthy selecting a CDH plan while your smokers and cardiac patients are selecting traditional plans,” says Mike Sturm, principal and consulting actuary at Milliman Inc. in Brookfield, Wisconsin. “When you switch everyone over, you eliminate that selection bias.”


    Providence, Rhode Island-based Textron Inc.—which in 2002 was one of the very first employers to introduce a full replacement plan—has seen an improvement in the overall health of its 28,000 employees in part because preventive care visits have spiked under its total-replacement plan.


    Over the past three years, lipid tests for cholesterol increased 27 percent, tests for coronary artery disease grew 24 percent, and colonoscopies for those 50 and older are up 66 percent, George Metzger, Textron’s vice president of human resources and benefits, said in an e-mail. In that same period, preventive visits have increased 20 percent among male employees, who traditionally have been less likely to seek preventive care, Metzger said.


    According to Chris Calvert, vice president and senior health consultant at the Sibson Consulting division of New York-based Segal Co., companies going to full replacement “really have bought into the theory of consumer-driven health care that employees should be more engaged in their health care.”


    “Companies that are doing full replacements are saying that ‘we are in this together, company and employee.’ … They’re getting everyone involved, which is one of the keys to success,'” Calvert says.


    A common concern among employers is that the burden of a full-replacement program may fall disproportionately on lower-paid employees, consultants say.


    “It’s a legitimate concern, particularly in some industries where there is a very large disparity between individuals on a pay scale,” Deloitte’s Travis says.


    Employers can, however, solve the problem by altering the plan’s design. “There is nothing that says that you can’t continue to do payroll contributions depending on level of pay. We often see that employers will do pay-banded contributions,” to a health savings account, for example, Travis says.


Linking premium to salary
   Another option, Milliman’s Sturm says, is to charge employees premiums for their coverage based on their salary. “The less you make, the less you pay for health insurance,” he says.


    Fairfield, Ohio-based Innomark Communications, which currently offers a mix of plans that include preferred provider organization offerings as well as CDHP options and is considering a full-replacement consumer-driven health program, is pondering setting up a special account to help offset expenses for lower-wage employees or for catastrophic health events.


    Under such a program, “the money stays with the company, so if [employees] don’t use it or were to leave, the company can keep it,” says David Vonderheide, Innomark’s director of human resources.


    Many employers also worry that implementing a total-replacement CDHP would eliminate choice for employees and therefore not be well-accepted.


    “Most large employers are committed to the concept of choice for their employees, not saying one size fits all,” says Tom Billet, senior benefits consultant at Watson Wyatt Worldwide in Stamford, Connecticut.


    But according to Travis, “There is a misconception that elimination of non-CDH plans and going full replacement means elimination of choice.” Choice could still be made available by changing plan design within the consumer-driven delivery model, he says.


    A multitude of choices can also confuse employees, says Chiaw Eei NgGibson, head of benefits and HR economics for Hartford, Connecticut-based Aetna Inc., which last year went to a full-replacement plan for its 31,500 employees.


    “In the years that we offered the PPOs, HMOs and CDHPs side by side, we got feedback from employees that those were too many choices,” NgGibson says.


    Currently, Aetna offers two types of CDHPs, one linked to a health savings account and one to a health reimbursement arrangement, and typically has 80 percent of employees covered by those plans.


Start early
   When it comes to moving to a full-replacement CDHP, there is no such thing as too much communication, experts say.


    “The singular most important thing [employers] can do is communicate with the employees,” and do so “months before they are going to implement” a full-replacement program, says Bill Tate, corporate vice president of sales and market operations for Humana Inc.


    Tate suggested appointing a team to develop an education campaign that involves insurers, consultants and the company’s senior management.


    In order to provide ample warning and support to employees as they make the transition, companies should ideally have a full year, Darling says.


    “If you were planning to do it in January 2008, it’s probably too late,” Darling says. “But if you want to make that change for 2009,” it can be done.

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African-American Lawyers Working as Temps in Law Firms Signals Possible Trend

Julian S. Brown, president of development at legal staffing company Compliance Inc., in Arlington, Virginia, recently checked up on a job that called for five lawyers to work on a temporary assignment. Four of them, it turned out, were African-American.


    “That’s not rare,” Brown says. “It turns out that there are a higher percentage of minority attorneys who are temping. Typically, on one of our projects, we will have 30 percent who are African-American.”


    The rate of participation by African-American lawyers in temporary jobs at Compliance Inc. is the opposite of the situation at most large law firms in the U.S., where only a fraction of the jobs are held by African-Americans. Brown says Compliance Inc., which is owned by international staffing company Vedior, has made no special effort to recruit African-American lawyers. Rather, he believes the situation at Compliance is indicative of a broader trend in which African-American lawyers, for various reasons, opt to work for temporary staffing agencies instead of at law firms.


    “I would argue that it is not going well at law firms [for African-Americans], or else they are not getting opportunities at law firms,” Brown says.


    While some temporary staffing firms say they also have noticed higher participation by African-American lawyers than might be expected, others say they have either not noticed the trend or else haven’t studied the ethnic makeup of their contract workers. The American Staffing Association, which conducts research on the contingent labor workforce, says it does not collect statistics on participation by African-American lawyers.


    But Brown and other staffing professionals say that they are convinced that African-Americans and other minorities are clearly over-represented in the temporary legal staffing field.


    Nancy Molloy, president of legal staffing company Legend Global Search Inc. in New York, says that more than 40 percent of her contract lawyers are African-American and minorities overall account for more than 60 percent of her contingent workforce. While she hires some African-American attorneys for temporary placement straight out of college, many more arrive after leaving jobs at law firms.


    “There is a high turnover of African-American attorneys at law firms,” Molloy says. “I think what happens is, there is no mentoring. There is just a very small percentage of partners of color.”


    In its 2006 survey of the private law firm workforce, the National Association for Legal Career Professionals surveyed more than 1,500 law offices around the country. Of more than 60,000 partners at those firms, only 1.5 percent were African-American. Of about 60,000 associates at those firms, 4.5 percent were African-American.


    A separate study by NALP found that African-American lawyers leave jobs at law firms at a much higher rate than others. While the overall attrition rate for associates was 43 percent, it was 68 percent for African-American men and 64 percent for African-American women.


    “African-Americans don’t last as long at law firms,” Brown says. “In terms of going from associate to partner, there are very few who make it.”


    Leon Spencer, an African-American lawyer from South Carolina, says he stumbled upon contingent legal work after leaving a job a few years ago with a law firm in Columbia, South Carolina. He moved to Washington in hopes of landing a job with a nonprofit or public interest group. To make ends meet, he took a temporary assignment with Compliance Inc.


    “It was steady income and I could start paying down my student loans,” Spencer says. He never left. Today he is a staffing director at Compliance.

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Temp Lawyers Offering a Permanent Solution

A new office that opened in August on the 16th floor of the Chrysler Building in midtown Manhattan has desks for up to 65 lawyers, complete with phones, computers and legal services software. Yet none of the desks will be occupied by full-time attorneys.


    The office is the newest for the temporary legal staffing operation of Kelly Services and joins a growing number of similar turnkey offices popping up around the country dedicated to short-term contract legal work. Kelly now has two contract legal service offices in New York City.


    Special Counsel, the legal staffing arm of MPS Group Inc., also has two offices in New York, each capable of housing 100 attorneys on temporary assignments. Hudson Legal, a division of Hudson Highland Group, offers turnkey legal staffing options in eight of the 12 cities it serves in the United States.


    Staffing companies say the demand for turnkey operations reflects the increasing burden put on corporate legal offices by the dramatic rise in the number and type of documents and electronic records that must be reviewed in civil lawsuits today. Faced with the need to screen thousands—sometimes millions—of documents and electronic files in a short period, corporate attorneys have turned increasingly to staffing companies for help, seeking not just short-term lawyers but someplace to house them as well.


    “There is a shift in the legal marketplace from just providing talent to providing staffing and space,” says Marc Zamsky, executive vice president of Hudson Legal. “A company might say, ‘Not only do we need 15 or 20 contractors for the next thee months, we need space to house them, we need the computers and technology.’ Our clients, whether they are corporations or law firms, are relying on us more and more for turnkey solutions.”


    The increased spending on legal-staffing contracts has begun to draw human resources departments and purchasing agents into the process. In some cases, corporations are striking longer-term contracts with staffing firms that establish set prices for contract legal services on an as-needed basis.


    Staffing companies offer a way to trim costs for corporations with rising legal bills. Outsourcing basic litigation tasks like categorizing documents and data and checking for specific content in e-mails or other communications can cut millions off legal expenses.


    Christopher Gallagher, regional vice president of Ajilon Legal, a division of international staffing company Adecco, says corporations with large legal bills defending complicated lawsuits can save $5 million to $10 million per year by using contract attorneys.


    The math is fairly straightforward. The billing rate for an associate at a large law firm runs about $275 to $300 per hour. Contract agencies pay their lawyers $35 to $50 an hour, plus time-and-a-half for overtime. Although most contract lawyers working for agencies put in 50 to 60 hours per week, their average hourly pay would still tend to be in the $40 to $60 per hour range. Contract agencies can thus charge three times what they pay their contract lawyers to cover overhead and profit and still save corporations a bundle in legal expenses.


    “It is relatively low pay compared to what a lawyer [in a large firm] would make,” says Julian S. Brown, president of development for Compliance Inc. of Arlington, Virginia, which is part of international staffing company Vedior. “But if they are working most weeks of the year, they will make decent money.”


    The cost-saving potential of contract legal service has made a strong impression on corporations, which typically hire outside law firms to handle complex lawsuits. Corporate legal departments, pressed to control spending, have begun farming out tasks to lawyers at staffing agencies or asking their outside counsels to use the agencies for routine work. Ajilon’s Gallagher says some corporations have established strict guidelines requiring the use of temporary contract lawyers for routine tasks.


    “In the past, it was a good ol’ boys club,” Gallagher says. “The outside counsel would just send bills to the corporation. Now corporations would rather use contract services to control costs.”


    Gallagher relates one case in which a Fortune 100 corporation established a rule for its outside legal counsels that document review jobs requiring more than three attorneys and four days had to be done with contract lawyers. The rules also set the rates that would be allowed for those outside legal services.


    Despite the lower level of pay and emphasis on saving money, legal staffing agencies have managed to find plenty of lawyers willing to take the jobs. Some of those lawyers are just starting their careers and are in need of work. Others are recently retired and are looking for supplemental income. Still others are in transition: between jobs, moving to a new city along with a transferred spouse, or making a lifestyle change.


    All that career movement provides a steady flow of staffing candidates. In the San Francisco Bay area, where Robert Half runs three legal staffing offices, the operation interviews more than 100 candidates each week. Hudson has about 1,800 contract lawyers working under its supervision each day.


    Charles Volkert, executive director of Robert Half Legal, says the types of law firms that are outsourcing work to agencies have changed. “It is no longer just the top 50 law firms using us. We are working with midsize and small law firms.”


    The rise in corporate caseloads and the explosion in the number and types of documents that are now under review in those cases are driving the legal staffing business. Corporations are turning increasingly to outside law firms to help handle those cases, and those outside law firms are, in turn, outsourcing some of the work to staffing agencies.


    In a survey of law firms published in June by Robert Half, 45 percent of corporate legal departments say they had increased their use of outside counsel during the past year. Of the type of work being sent to outside counsel, 66 percent cited litigation. Compliance and regulatory matters ranked second at 16 percent.


    The increasing demand for contract lawyers has provided a boost to the contingent staffing industry. In a report earlier this year, Staffing Industry Analysts, a California-based staffing industry research and consulting company, says temporary legal staffing is the fastest-growing segment of the contingent workforce in the U.S., increasing at an annual rate of 16.1 percent from 1997 to 2005. Two-thirds of the work done by staffing agency attorneys is in litigation or other work, while one-third involves merger and acquisition activity, according to the Staffing Industry Analysts report.


    Growth in the legal staffing business has spurred expansion by most of the major staffing agencies and spawned a host of smaller, independent contract legal staffing firms, particularly in large metro areas. Despite the competition, staffing agencies have been reporting solid growth in their legal services businesses. Ajilon’s Gallagher says his company’s revenue grew more than 30 percent last year.


    The type of litigation being outsourced to staffing agencies stems from an explosion in the types and amount of corporate records subject to discovery in civil lawsuits. Computers create immense storehouses of potential evidence in the form of e-mails, memos and other electronic files.


    Lawyers can use the rules of evidence to force corporations to sift through their vast files for certain documents or communications. And it’s not just the finished documents that are subject to discovery, but also the various early drafts and edited versions that might exist in computer files.


    That has led to a new line of computer software called electronic discovery, or e-discovery, which can help compile and sift through corporate records. But lawyers still need to review documents for relevance and status to determine which ones will be used as evidence.


    The review process is a time-consuming and repetitive task, usually with a short deadline that requires a team of lawyers. All of which makes it ideal for outsourcing to staffing companies that can supply lawyers on short notice for periods of a few weeks to several months.


    “When you get a request to review 2 million e-mails, that is a daunting task,” Volkert says. “That is one of the key components driving the business.”

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Bargaining for Discount Health Care

Since 2002, health insurance premiums have increased by an average of 72 percent, according to the Kaiser Family Foundation. One small company, however, is paying the same for health care as it did five years ago.


    The company, Alliance Underwriters of Lake Mary, Florida, has combined a free primary care clinic at the workplace with a high-deductible health plan, and teaches employees how to bargain for deep discounts from their doctors.


    Two years ago, when the company switched to a high-deductible health plan with a health savings account, executives knew such plans had two major weaknesses: People may forgo necessary medical care if they must pay for it; and it’s impossible to be a consumer in a marketplace where the price of medical care is random and opaque.


    Critics of high-deductible health plans point out that the more people have to pay for medicine, the less likely they are to purchase it. This is particularly true with prescription drugs. The executive leadership at Alliance Underwriters felt it would be equally true for the company’s 80 employees when it came to doctor visits and lab tests.


    Legislation governing high-deductible health plans allows patients to see doctors for care that is considered preventive, like an annual physical. But often, medicine that treats chronic illnesses, like a cholesterol-lowering drug, is not covered as preventive.


    Alliance Underwriters felt that the best solution would be to create a workplace health clinic that would replicate a primary care physician’s office. The company’s executives liked the idea so much they started an on-site health clinic company, We Care TLC, and turned themselves into their first test case.


    Open half a day every week, the clinic is staffed by a doctor and a nurse. Employees can sign up for a 20-minute visit—no time spent in a waiting room, no commute and minimal time away from work. Doctors can address everything from treating a common cold to managing a chronic illness. The company provides an array of commonly used generic prescription medicines.


    Everything at the clinic is free, including the drugs.


    Having pharmaceuticals on hand in the clinic is one way to get people to come for the treatment they need, says Alliance Underwriters CEO Lynn Jennings. “Since the clinic is not part of the plan, there’s no insurance involved, no claims involved.” And technically it’s not considered a benefit that would disqualify it under consumer-driven health plan regulations, he says.


    For many employees, this is the extent of their medical care.


    Before the high-deductible plans were implemented two years ago, individuals paid $800 in premiums and families paid $5,000 premiums. Now, individuals pay $300 in premiums and families pay $2,000 annually.


    Deductibles went up—way up. Individuals today must pay $2,800 before their insurance kicks in, compared with $300 when the company had a low-deductible plan. Families face a $5,600 deductible. The company contributes $800 to individuals’ health savings accounts and $1,600 to families’ HSAs.


    Under the new plan, those who consume the fewest medical dollars pay the least. While some may view this as unfair, Jennings does not.


    “Indirectly, I think that encourages people to get healthy and stay healthy,” he says.


    The free health clinic is a big part of that encouragement, he says.


    Jennings also recognized that high-deductible plans force patients to act like consumers in a health care marketplace where the price tag of a medical service—if it even has one—is arbitrary. So the company taught its employees how to make a deal with their doctor.


    To show that it could be done, Jennings turned to his COO, Vince Butler.


    “I love to negotiate; I love to make deals,” Butler says. “But I’ve got to tell you, I would never ever have considered negotiating with a doctor or a hospital. To me it would be almost sacrilegious. That’s the mind-set I had.”


    It’s a mind-set many people have. But what Butler found out is that doctors whose patients pay cash don’t have to spend time and money wrangling with insurance companies for repayment. Administrative costs are said to account for about 30 percent of the nation’s $2 trillion health care bill. That’s why some doctors no longer take health insurance.


    “The key,” Butler says, “is cash.”


    His daughter’s tonsillectomy gave him his first bargain-hunting opportunity. The doctor recommended an outpatient facility, which cost $6,000.


    “I want to negotiate a cash deal,” he said. They came down 20 percent.


    Good, but not good enough, Butler went to another facility recommended by his doctor. They told him $2,500.


    “I said, ‘That’s not bad,’ ” he says. Then he asked them what would happen if he paid in advance. Their answer: the surgery would cost $1,600.


    Because Alliance Underwriters is self-insured, meaning the company pays for all its health costs, individuals who save money also save money for the employer. That is why Alliance is willing to do just about anything to encourage employees to negotiate how much they pay the doctor. A human resources manager helps employees understand the basic costs of a procedure by showing how much Medicare pays, since the government usually sets the standard cost for any given medical service.


    Butler has had an easier time negotiating prices with doctors than with hospitals. Administrators do not know how much a procedure will cost until after it has been performed, since each item dispensed and service rendered is billed individually.


    Alliance Underwriters also recognizes that not everyone is in the financial position to pay cash. So the company advances employees the money they need, interest free.


    “If you can advance the money in order to pay cash, you can get a sizable discount,” Butler says. “It’s in the interest of the company to do that.”


    Educating employees about the plan’s benefits and teaching them to measure their relationship with a physician in terms of the quality of care and cost are the two biggest hurdles. Getting employees to believe in the plan requires the support of a company’s executive leadership, says CEO Jennings.


    “It takes a commitment by senior management to do something, which is probably the biggest challenge today: convincing corporate America that you can do something about the cost of health care,” Jennings says. “For 20 years all they’ve done is listen to people who say, ‘Do as I do and I’ll control your health care costs.’ And every year the costs go up 10 to 15 percent. So there’s understandably some skepticism in the boardroom.”


    Jennings believes that continually refining a company’s health care benefits makes employees less sensitive to change.


    “My attitude is, do something different,” he says. “I don’t think you can unequivocally say, ‘This is the right thing for you.’ What I can say is, ‘If you don’t do anything different, you will get the same results.’ ”

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When Pigs Fly New Symbol of Union Protest

The giant inflatable rat—long a device used by unions to protest at a nonunion work site—seems to have a new colleague. This time it’s a pig.


    During the past several months, labor organizers in New York City have been introducing the “greedy pig” balloon to employers at their work sites. The 12-foot-tall balloon portrays a sneering creature decked out in a top hat and suit, chomping on a cigar.


    While the giant rat, with its sharp fangs and beady eyes, has been effective in getting people’s attention, it was time for something new, says Richard Weiss, a spokesman for Local 79 Construction and General Building Laborers, a New York union that helped design the pig a couple years ago.


    “We felt that it was time to spice it up,” he says.


    Also, there was concern among union officials that the days of the inflatable rat might be numbered, as lawsuits by employers fighting the use of the rat at their job sites began to pile up in recent years, Weiss says. The suits allege that since the rat is a well-known symbol of anti-union labor, it’s the same thing as picketing and should be restricted as such.


    Last year, the National Labor Relations Board decided not to rule on the issue of whether the inflatable rat constitutes unlawful picketing. “The case law hasn’t yet materialized, but it still could,” says Chaz Rynkieicz, a field organizer for Local 79.


    Local 79 officials worked with the owners of Big Sky Balloons and Searchlights, a Chicago-based company that manufactures all of the union balloons, to come up with the concept of the greedy pig, Rynkieicz says.


    “We wanted to create something that would look just like a mean employer,” he says. “And people seem to be able to relate to the pig better than other balloons. They say, ‘Hey, that reminds me of my boss.’ “


    So far, Big Sky Balloons and Searchlights has sold 20 greedy pig balloons, most of which are in New York City, says Peggy O’Connor, co-owner of the company.


    “It’s not quite as popular as the rat, but I assume that within the next 10 years it’s going to be all over,” she says.


    And that’s not good news for employers, who might find it tougher to get rid of the greedy pig than the inflatable rat, observers say.


    “I feel like I had more of a chance of getting rid of the rat than the pig,” says Gerald Hathaway, a partner at the law firm of Littler Mendelson. “But frankly, I would rather we see neither.”


Workforce Management, August 20, 2007, p. 4 — Subscribe Now!

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Disclosure Gone Wild

W ho can blame the average retirement plan participant for losing confidence in the financial future? Not only is it hard to save for retirement amid the mounting expenses of daily life, but it’s hard to even calculate how much money a comfortable retirement will require. Confronted with retirement plan descriptions that seem overloaded with mandated fine-print disclosures and all the user-friendliness of a tax-law textbook, participants often roll their eyes and hope––against hope––for the best.

    There’s no question that the sea of disclosure is a well-meaning byproduct of years of ERISA regulation, litigation and ongoing pension reform policy. But employers need to do more than comply and deliver technical––often too technical––information. They need to fashion effective communication strategies that will educate and engage participants to make more informed retirement choices.


    That’s easy to say, of course. Amid all the legal disclaimers, there are the multiple required notices stemming from the new Pension Protection Act, the looming prospect of new fee disclosures for defined-contribution plans, notices required for automatic 401(k) enrollment, company stock-diversification notices, new notice and consent requirements for distributions, and so on. So much fine print can only lead to information overload at a time when context and clarity are what plan participants need most.


    And let’s not overlook those new right-to-defer notices in defined-benefit plans. Sure, they tell employees about the consequences of electing (or delaying) a distribution, but that information is provided only after the participant has left employment. There are no required disclosures that help participants decide when it’s appropriate to retire. Isn’t the purpose of all this disclosure to help participants make better decisions?


    Most employers and plan sponsors realize that well-focused change communication is the key to providing clarity. For example, are participants simply being told about the mechanics of new retirement options such as Roth 401(k)s, or we engaging them in straightforward language to help them understand how these options can translate into securing their personal goals for retirement?


    Adding to the disclosure-gone-wild scenario is the likelihood that new fee disclosure requirements for DC plans will be implemented in the near future. With 401(k) lawsuits over the adequacy of investment-fee disclosure making headlines, the U.S. Department of Labor is ready to mandate greater disclosure, but are plan sponsors ready for the consequences? At Mercer, we recently hosted a series of forums with DC plan sponsors in cities all over the U.S.—as well as client conversations––and noted some trends.


    For one thing, there’s very little communication or education about DC plan fees taking place, while few plan sponsors disclose fee information beyond what they interpret as being required under ERISA 404(c). That often translates into fee information being buried in fund prospectuses, which most participants don’t read anyway. Indeed, plan sponsors are concerned that mandated fee disclosure might deter their employees from participating, or cause them to place too much emphasis on fees in making their investment decisions (rather than considering fees in the proper context of fund objectives and expected net return).


    Then there are the potential adverse reactions from participants. “Why are you providing this information now?” they may ask, while even the most reasonable fee levels may seem excessive to participants who lack any real context for evaluating this information. And employers themselves often don’t grasp the big picture when it comes to fees––a complicated issue that can be difficult to explain no matter how hard one tries to avoid legalese or numbing disclosures.


    Companies should make it a priority to review their fee disclosure practices in light of ERISA requirements and recent lawsuits. They can then consider whether additional fee disclosure is warranted––in advance of any mandated disclosures––to address liability concerns. Obviously, now’s the time to incorporate education regarding DC-plan fee structures into participants’ communications, to provide some much-needed background for assimilating any new disclosures, and to fit in with other retirement messages.


    The simple fact is, many current disclosure practices are inadequate. While the best practices are still evolving, they certainly must transcend the sea of mandated disclosure. For example, as IBM prepares to replace its longstanding DB plan with a 401(k) DC plan, it has announced far-reaching intentions to provide comprehensive financial advice to all participants.


    Ultimately, plan sponsors have latitude when it comes to participant communications. They can deconstruct the complexities of retirement issues, bringing clarity and a big-picture context to the discussion, rather than rely on the eye-glazing boilerplate of descriptions and disclosures that may satisfy the law but don’t really answer participants’ larger needs. Employees are looking for savvy guidance and straight talk, and they deserve it––it’s their future that’s at stake.

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Delphi to Freeze Pension Plans

Financially troubled auto parts manufacturer Delphi Corp. will freeze its two pension plans and shift some pension liabilities to former parent General Motors Corp. under a bankruptcy reorganization proposal filed Thursday, September 6, and an agreement reached with GM.


Delphi said the two plans for hourly and salaried employees would be frozen, with participants not earning any new benefits, starting the first month after the reorganization plan receives final approval.


As part of the agreement with GM, Delphi would transfer $1.5 billion in liabilities in the hourly plan to GM. In return, GM would receive a $1.5 billion note from Delphi.


As of the end of 2006, the two plans combined were underfunded by just over $4 billion, with $14.9 billion in liabilities and $10.7 billion in assets, according a Delphi filing with the Securities and Exchange Commission.


Delphi said it will replace the frozen plans with defined-contribution plans.


Delphi, which last year reported a $5.5 billion loss—including about $3 billion in attrition charges—on revenue of $26.4 billion, also will end its health care plan for hourly retirees.


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

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Foundations Foster Public-Private Effort to Develop Workers

Foundations want to combat poverty. The government wants to increase the use of the public workforce development system. Companies need skilled talent.


Those three forces are converging in a new $50 million, five-year initiative to foster training programs that target low-income people and are designed to meet local and regional labor demands.


The goal of the National Fund for Workforce Solutions is to place 50,000 workers in better jobs, leverage $200 million in local funds and help 1,000 companies recruit and train employees.


The fund already has received $15 million from the Annie E. Casey, Ford and Hitachi Foundations and the Department of Labor.


The fund organizers say that they are motivated by two strong trends—higher levels of poverty and the growing demand for skilled workers.


As Hitachi Foundation president and CEO Barbara Dyer talked with businesses, a plaintive cry echoed.


“They simply cannot fill the jobs they have with quality workers,” she said at the launch of the workforce fund at the National Press Club in Washington on Thursday, September 6. “We hear this frustration everywhere we go.”


In order to increase standards of living and decrease the skills shortage, the fund will target community and regional workforce needs that businesses and government highlight.


So far, the program has been tried in Baltimore, San Francisco, Boston, New York, Pennsylvania and Rhode Island. A total of 16,000 workers have been trained and 5,000 businesses have participated.


The extra skills employees obtain have led to a 12.89 percent average wage increase and an 83 percent retention rate.


Partners Healthcare System Inc. in Boston has been participating for three years in a program sponsored by SkillWorks, a workforce development initiative in the city.


Partners, which comprises seven nonprofit hospitals and several physician group practices, was facing worker shortages. It also sought to help low-income Bostonians and to diversify its workforce.


The company set up a training program to help low-wage incumbent workers move from lower-skill jobs, such as patient intake, into nursing and radiology. It also established a pre-employment program for people from poor neighborhoods.


Over the course of the initiatives, 466 current employees have participated in developmental programs and 156 people have gone through the pre-employment process.


Of the latter group, 93 percent have graduated from training courses and 83 percent have been placed in jobs, while 95 percent have been retained after 90 days and 70 percent after one year. The average starting salary is $13.49.


In addition, 250 supervisors have signed up to coach workers on how to take the next step in their careers.


That investment of management time and support is crucial, according to Toddye Anderson, a patient service coordinator in the vascular surgery department of Massachusetts General Hospital.


Anderson was living in a homeless shelter in December 2004. Her needs went beyond training. She also needed child care and housing.


“It’s important to have the managers and the supervisors on board,” she said. “I was blessed to have managers that understood where I was coming from.”


The program not only has transformed lives, it also has changed HR practices at the health care company, said Matt Fishman, vice president for community health.


“We focus much more consciously in developing the potential our incumbent workers bring,” he said. Now the company invests $1 million annually in the training programs.


Fulfilling the hiring needs of a local industry like health care is the thrust of a national training initiative sponsored by the Labor Department. The Workforce Innovation in Regional Economic Development program, launched in 2005, brings together local business, government and academic institutions to identify new industries and jobs in areas hurt by global competition.


It is one of the models that have shaped the national workforce fund. The Labor Department will be a “catalyst” for engaging the public training system in the effort, according to Emily Stover DeRocco, assistant secretary of employment and training.


Educating workers “is a shared responsibility requiring an investment by all partners,” she said.


Cooperation among business, government and foundations is the characteristic that makes the national fund different from previous workforce development ideas, said Steven Gunderson, president and CEO of the Council on Foundations.


“It’s not a public sector approach,” he said. “It’s not a private sector approach. It’s not a philanthropic approach. It’s all of the above. This is a partnership at all levels in the deepest sense of that word.”


The Annie E. Casey Foundation, one of the groups involved, is best known for helping children. But Ralph Smith, senior vice president for the foundation, said that getting children out of poverty requires helping their parents learn skills and find jobs.


“We’ve got to make work work,” Smith said. “We’ve got to make work pay. It all starts with work.”


—Mark Schoeff Jr.

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UnitedHealth Inks $13 Million Settlement With States

UnitedHealth Group will pay out $13 million in a settlement with 36 states and the District of Columbia following a probe of the insurer’s claims processing system.


New York will receive $3.7 million, the largest single amount in the settlement, under the agreement announced Thursday with UnitedHealth Group’s biggest insurance business, UnitedHealthcare. The state will receive an additional $320,000 under a separate agreement regarding the insurer’s violations of New York’s prompt-payment statute, claim appeal rules and other regulations.


UnitedHealthcare will take specific steps in response to the New York findings, including reviewing and reprocessing delayed claims payments with applicable interest going back to January 1, 2003.


UnitedHealthcare agreed to implement a national improvement plan that will be in effect through the end of 2010. The five lead states—New York, Iowa, Florida, Connecticut and Arkansas—will jointly monitor UnitedHealthcare’s market practices.


The plan’s benchmarks include claims accuracy and timeliness, appeals review and consumer complaint handling. If UnitedHealthcare doesn’t meet the benchmarks, insurance regulators could impose up to $20 million in additional penalties.


The national investigation “found many errors in claim processing,’’ such as incorrectly applying fee schedules and deductibles, according to the state Department of Insurance. UnitedHealthcare also frequently violated prompt-payment rules, and when notified, the insurer “was generally unable to correct problems” because of “poor controls and oversight.”


The insurer was proactive in working with states on regulatory issues that set national, standardized goals, according to a UnitedHealthcare spokesman. As a national insurer operating across many states, UnitedHealthcare faces a patchwork of claims processing regulations.


“This is about moving forward and using consistent benchmarks,” the spokesman said.


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

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More Women, Young Workers On The Move

With globalization in full swing and China and India securing their role as international economic powerhouses, a corporate version of wanderlust is on the rise. And the new expatriates are increasingly young, female and single.


Relocation opportunities are rising and companies around the world are becoming more adept at filling positions by drawing from a global workforce, according to new research by relocation consulting firms.


Motivated by a need to cut costs, fill temporary shortages and make expat lifestyles more appealing to employees, companies have reduced the traditional overseas tour of duty to less than a year. The average used to be between three and five years.


Such changes are in part aimed at nurturing talented female managers. Shorter stints that take less of a toll on the family allow women in particular to gain international experience they would otherwise have passed up, says Sue Evens, a director at Cartus Consulting.


“If half your workforce is women,” Evens says, “that is the talent base you will need to grow your people from.”


Cartus’ “Emerging Trends in Global Mobility” report showed a changing dynamic in the types of overseas assignments since the survey was last conducted three years ago. As of 2007, 56 per- cent of the overseas workforce is under age 40, and the expats are increasingly single (43 percent) and female (21 percent). That last figure is up from around 15 percent in 2004, according to Cartus.


In China, where talent shortages have given women more overseas opportunities, 28 percent are female.


“The face of the transferee has changed,” says Brenda H. Fender, director of global initiatives for Washington-based Worldwide ERC, a relocation consulting firm. “It’s not just Anglo and male. It’s all people from all countries—lower-level professionals and not just top-level people. Companies are going after specific skill sets.”


Today, the U.S. is the most common destination to send employees; within the next three years, China will become the top relocation destination, Evens says. Likewise, India is also emerging as a relocation destination.

Earlier this year, David Hickman, a solutions and alliances manager at Infosys, temporarily moved with his wife and two young children from Dallas to Bangalore, where the outsourcing company is based.


The three-month move was voluntary, and Hickman believes it will help him better understand the way Infosys operates. He also thinks the move endeared him to his Indian colleagues.


“I got a real feel for company culture and a great appreciation for how our company has grown up,” he says.


Perhaps most striking, both Evens and Fender say, is that global relocation activity has picked up everywhere. It’s not just U.S. companies sending Americans abroad. Companies surveyed by Cartus reported sending employees to 51 destinations, a 71 percent increase from just three years ago.


“There is just an increase in [relocation] activity globally,” Fender says. “And I think it’s due in part to the global competition for talent.”


—Jeremy Smerd