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One of the most recognizable things about this century’s workers is their passion to exercise rights. Yet today’s HR managers often contend with the opposite problem: resentment and low morale among employees who are afraid to express virtually any opinion for fear of losing their jobs.

It’s rare to encounter an organization in which the free-speech rights of employees are actually championed. More common is the office where employees at all times keep their opinions and suggestions to themselves, where bottom-up feedback comes in dribs and drabs, or not at all, where creativity and innovation get squashed by the chest-thumping index finger of an employer who can terminate “at will.” You may think you’re managing an “open” culture—what with your town meetings and rap sessions and offsite workshops—but have you really taken a hard look at the poker-faced silence of your own workforce?

There exists a growing number of workers who believe they’re not being listened to, says David C. Yamada, associate professor of law at Suffolk University Law School in Boston, Massachusetts. “Isn’t it ironic that while management often waxes enthusiastic about the principles of employee participation, they fall well short of suggesting that the best way to encourage this participation would be to afford each worker a right of expression?”

Unless the contract states otherwise, most private employers can impose pretty much any rules they want on speech, subject to statutory or common-law exceptions. And normally they can fire anyone, anytime for good reason, bad reason, or no reason at all, says Cynthia L. Estlund, visiting professor of law at New York City-based Columbia Law School. The First Amendment to the U.S. Constitution, it seems, applies only to government and/or public agencies—not to private employers.

Consider Drake vs. Cheyenne Newspapers Inc. The Wyoming Supreme Court noted in 1995 that the right to free speech is not absolute, and that terminating an “at-will employee for exercising this right to free speech by refusing to follow a legal directive of an employer on the employer’s premises during working hours does not violate public policy.”

Make no mistake, companies now present a threat to individual freedom comparable to that which would be posed if government power were left unchecked, says Suffolk’s Yamada. “Rather than being urged to offer suggestions to employers on how to become more productive,” he says, “workers are learning how to avoid being laid off by remaining silent. Instead of being encouraged to question management’s decisions when appropriate, employees are being taught to curry favor. Is this the type of workforce we want?”

Also emerging is the malignant practice in some private companies of implementing broad-based, zero-tolerance polices that do more than just politely hand-slap employees who tiptoe across the lines, says Eugene Volokh, professor of law at UCLA Law School in Los Angeles. “A number of employers are imposing speech restrictions on employees simply because they’re being pressured by government into believing that sexual jokes, for example, may be a violation of a person’s rights. The government has no business imposing speech codes on private property.”

Is speaking one’s mind a bad career move?
It’s undeniable that waves of well-publicized terminations have convinced some employees that speaking one’s mind can be a bad career move. In 1991, the Massachusetts Supreme Judicial Court held in Korb vs. Raytheon Corp. that the state’s free-speech clause did not protect from discharge a corporate spokesperson who spoke out against his company’s economic interests. The plaintiff was terminated after he made remarks during a press conference in which he criticized increased defense spending and urged that plans to expand the U.S. Navy be scaled back.

In Mountainair, New Mexico, an energy conservation advisor for a utility company was terminated after he won the local mayor’s race. The New Mexico Supreme Court held in 1993 in Shovelin vs. Central New Mexico Electrical Cooperative that the state’s free-speech clause did not create a broad right of political expression for a private employee.

As Suffolk’s Yamada points out, just a few decades ago, workers who wanted to bitch about a boss or fight an unfair disciplinary action could go through their union representatives. Not so much any more. These days, the vast majority of American private-sector workers are not protected under the National Labor Relations Act, and thus, “do not have the right to express their priorities and concerns through collective bargaining, because the lines of communication inherent in any union-management relationship have been severed.”

Furthermore, according to a recent survey by the American Management Association, nearly two-thirds of employers monitor employee voice-mail, e-mail, phone calls and computer files. And the surveillance measures don’t stop there. Some companies have even installed computer programs that monitor which Internet sites employees visit, and how long they stay there. This specter of electronic surveillance alone can severely chill employee free speech, says Yamada. “Any employee who knows that e-mail is being monitored or that phone calls are being recorded is likely to engage in a fair amount of self-censorship.”

Just two years ago, chairman Alan Greenspan of the Federal Reserve Board testified before Congress that workers are so worried about their own job security that they accept smaller pay raises for fear of losing their jobs—even when the labor market is tight. Greenspan’s findings are consistent with the results of a 1995 public opinion survey by The New York Times that found high levels of economic insecurity among American workers. Only 13 percent of respondents reported feeling “very secure” about their economic prospects, while 72 percent believed that layoffs and job losses in America are permanent, as opposed to temporary. More alarming is that almost 50 percent of total respondents said they would “challenge the boss less often than in the past if it meant increasing their chances of keeping their jobs.” A 1994 poll by Princeton Survey Research Associates found that one in six employees have withheld a suggestion about improving work efficiency because they worried it may cost someone a job.

So where are the champions of free speech?
It’s possible that companies which encourage a free, reasonable exchange of ideas may actually create a more productive, participatory workforce, says Haydn Shaw, facilitator of the “Four Roles of Leadership” seminar for the Salt Lake City, Utah-based Franklin Covey, a leadership and time-management consulting company. “Open-door policies can be the best source of new ideas and new potential for an organization,” he says. “And unless there’s freedom of speech, there are missed opportunities. Ultimately, a company that figures out how to create openness and direct that toward better service will shape its own future.”

People need to connect meaning to their work, and that means they need to bring their humanness to the table, adds Shaw. The more a person is involved on a personal basis with his or her work, the less that person can be expected to escape work by creating controversy in the workplace. “And the more meaningfully connected they are to their company, the more their focus will be on the appropriate feedback to make a difference.”

Keeping the lines of communication open also means the employer is more likely to be aware of employee grievances, more likely to be able to solicit ideas about how to improve the company’s products and services. When there’s a sense in the workplace that viewpoints aren’t welcomed, these grievances tend to bubble from within and employees spend a lot of time talking among themselves, cutting down on productivity and morale.

Lynn McClure, a Mesa, Arizona-based management consultant, encourages HR managers to listen to employees, treat them as business partners, and design policies and training programs that reinforce appropriate speech in the workplace. “There’s always the fear that if we cross the people in charge, we’ll hang ourselves,” she says. “This kind of inhibition decreases employee commitment to the company. Managers, especially, need to learn how to accept criticism because it takes so little to discourage an employee from contributing.”

Obviously, there are reasonable restrictions on an employee’s freedom of speech. A receptionist shouldn’t shout profanities at customers, for instance. But it’s hard to see how wearing a “Save-the-Whales” T-shirt could interfere with repairing your company’s computers or how a union poster would slow an assembly line. Maybe it’s time to allow private-sector employees a greater degree of freedom without compromising the legitimate needs of the employers. “The alternative,” says Yamada, “may well be a workplace that harbors cynicism and anger, destroys morale and consequently results in a less productive workplace.”

Surely most human resources managerswould agree there exist similarities between winning in sports and winning inbusiness. Both take determination, talent, hard work, strategic planning and a“killer instinct.” But can you inspire these same qualities in yourworkforce?

There’s really no reason why not,says Bob Bassman, 61, chairman and CEO of Dallas, Texas-based Kaye/BassmanInternational Corp., an executive search and consulting firm, and staffingpartner of Management Recruiters International. Bassman has lectured nationallyat various CEO clubs about the connection between competition and motivation insports, and how these same principles can be applied successfully in a businessenvironment.

Bassman, the current Amateur WorldPowerlifting champion and a black belt in tae kwon do, says it’s every HRmanager’s responsibility to make sure employees understand how to achievepersonal growth and contribute to the overall success of the company throughdiscipline, sheer determination and a winning attitude. Not that these realitiesare unknown to us, says Bassman. “We just choose to ignore them. They are partof a disbelief in HR that says the mindset of a champion belongs on the playingfield, not in the boardroom.”

To learn more about what it takes toinspire competitiveness in your employees, Workforce spoke with Bassman abouthis philosophy on sports, business and the winning edge.

What exactly are the similarities between sports and business?

More than anything, it’s the ability to think and act as a winner. In powerlifting, I have only one shot to lift the weight. There are no second chances. In business, it’s the same. You typically have only one chance to land that client or make that deal.

What exactly is the ‘mindset of champions,’ and how does it apply to human resources managers?

What’s important on the playing field and in the boardroom isn’t always winning. No one can win all the time. What’s important is that you’ve given your best, that you’ve done the best you can do under the circumstances. And you start by identifying and defining your employees. Hire only the best, and tolerate nothing less. Hire the people who are receptive to your kind of philosophy. Employees need to understand the idea of giving their best. And they need to be receptive to learning. It’s difficult to instill the mindset of a champion in someone who’s closed to the whole idea.

How do you go about finding the right employee who’ll fit into your culture, especially in a tight labor market?

Good people are always available if you know where to look, and I’m not talking about just the unemployed. If you’re a good HR manager, you can track the best talent in the marketplace.

Of course, you’ve got to have the guts to turn down people who don’t fit. I understand the pressure HR managers are under to hire the right person and quickly, but it’s equally as important not to make a bad hiring decision. Sure, there are deadlines and projects that don’t get completed, and that’s when you may have to settle for less – and that’s tragic. So where do you find these people? Through networking, creative and effective advertising, and even a good search firm.

What is it about behavioral-based interviewing that appeals to you?

For many companies, the days when applicants can prepare well-rehearsed answers to traditional, opinion-based questions has decreased in favor of a more in-depth process known as behavioral interviewing. With behavior-based questioning, the interviewer supplements the typical inquiries about the candidate’s background and future goals by asking for specific examples and opinions about their past experiences that can be applied to the job position. This technique has been around for decades, but it’s really starting to pick up steam again.

These answers will tell us if this person is a potential champion. We’ll ask questions about the individual’s ability to press on and do the best he or she can. If the question is structured properly, the answer will tell you if they have the capacity to do the job.

Other ingredients that we use are the shared-interviewing procedure. I generally conduct the first interview. Some may consider it a poor use of my time, but there’s nothing in the world more important to our organization than hiring the right person. If they pass my screening, I’ll have them interview with other senior officers, then the acid test – the staff. We have 61 associates, and a candidate may talk to 10 to 12 associates. They can fool me and other leaders, but they can’t fool the staff.

Once you’ve hired the best, how do you instill this type of thinking in your workforce?

A happy employee is free to perform for the company. Therefore, the first goal of an HR manager should be to improve the work environment for all employees. HR managers also have the luxury of a benchmark in the employee who’s successful. They should hold that standard high and reject employees who don’t stand up.

HR managers need to find and internalize their company’s vision, and affiliate themselves with individuals who fit into the culture. They also need to help employees find that “one thing” that will galvanize them into performance, inspire them to achieve – which is unique to each individual within the organization.

So what techniques can a company use to instill that knowledge in a new employee?

You can start by repeating the organization’s mission statement, the company’s value statements and its code of ethics. All of that can permeate and carry forward from HR staff and line managers. Every activity and action has to be with the mission of the organization in mind – short- and long-term goals.

And they must have the pride factor. Individuals who latch on to the pride factor – the pride of finishing, the pride of the organization – can readily identify what the organization is trying to accomplish. If the business has pride at being No. 1, then the person who joins that organization needs to have that shared vision.

How do you teach employees to deal with failure?

No one can win all the time. It’s important that human resources managers be able to understand that failing is not just defeat, it’s a learning experience. If someone never fails, he or she really isn’t stepping up to the plate often enough. The critical part of failing is to fail quickly, deliver the bad news, make corrections and start again.

How do you internalize the meaning of success?

Success by our definition is a progressive realization of a worthwhile predetermined goal that, when attained, is immediately replaced with a more ambitious challenge and new goal. In understanding what success means within a company, the goal has to be spelled out, and once you’ve attained the goal, it has to be replaced for greater magnitude and the greater good of the organization. HR managers need to keep planning ahead for additional success, and never rest on their laurels.

How important is work ethic?

Nothing will take the place of work ethic. HR managers need to instill it in themselves and others. You need to find out what the person’s work ethic is before you hire him or her. Are they willing to work hard? How many times do they repeat a mistake before they change their behavior? With hard work, application and correction, progress has to be made. Then you assess and make adjustments.

How important is goal setting?

Absolutely critical. Without knowing where you’re going, you’ll most certainly never get there. In setting goals, however, do remember the definition of success: The goal you set must be worthwhile, one that’s practiced progressively, and it must be articulated in advance.

What about employees who just want to come to work, put in their 7 1/2 hours and go home?

We try to hire the people who meet our dreams and standards. Once they’ve joined the company a different mindset can take over, sure. But then we go to them and ask them what they want to achieve. Once we’ve established that, we hold them responsible and accountable. Most companies inflict a goal on the individuals. We found it more productive to help them set their own goals and make them accountable for what they’ve established for themselves.

Workforce, September 1999,Vol 78, No 9, pp. 92-93  SubscribeNow!

Modern management theory about the ideal work environment seems to revolve around employee participation and cooperation. But creating a so-called “open” culture can be a nightmare, what with government pressure to impose speech restrictions, and employees hewing to the longstanding, deluded presumption that a constitutional right of free speech exists in the workplace.

It s an awfully heavy load to hoist when you re trying to run a business. Where do you set the bar when you re trying to respect and encourage the free exchange of ideas among employees, and swim delicately among the icebergs of statutory or common-law exceptions? And what about the potentially inflammatory—true believers who proselytize their religious beliefs to co-workers, cultural outcasts who inflict their loud, violence-mongering music on everyone within earshot, and corporate resisters who covertly bad-mouth management in Internet chat rooms?

“It might be okay if an employee comes to work wearing a Bob Dole T-shirt,” says Bruce Barry, associate professor of management at Vanderbilt University in Nashville, Tennessee. “But what if he comes to work wearing an abortion-is-murder T-shirt? It s easy for employers to say they have a culture of individual rights and free expression, but it s tough to set corporate policy around the gray areas.”

Take the issue of Internet chat rooms. Some companies have become more aggressive about suing disgruntled employees who post messages anonymously or who reveal proprietary information. Certainly, employees are entitled to air their grievances. But such online whining sessions can leave employers grappling with how to react appropriately without stifling free speech.

What is protected speech?
Any HR manager at a private company who has even once counseled an employee victimized by a racial epithet or a sexual innuendo knows how so-called free speech can cause real harm, even disrupt an entire workforce. Such “speech” can also leave your company vulnerable to a lawsuit. The U.S. Supreme Court, for example, has made it clear that speech protected on a street corner may not be protected in the workplace. Equal Employment Opportunity Commission guidelines state that an employer may be held liable for the sexually harassing acts of its non-supervisory employees, if the employer knew, or should have known, of the harassing conduct.

And the California Supreme Court ruled last month that judges do not violate First Amendment rights by prohibiting, in advance, the use of racial slurs on the job. The case stems from a 1993 lawsuit in which 17 Latino employees of Avis Rent-a-Car sued the company and its managers for creating an abusive work environment at its San Francisco International Airport outlet.

Recently, at the Los Angeles-based real estate advisory firm of Charles Lesser & Co., several of the company s roughly 30 employees were recently overheard in the lunchroom complaining about verbal harassment from one particular manager. “Lines were definitely being crossed, and it was up to me to protect both the company and our employees,” says Beverly Kelly, the company s human resources manager. For Kelly, it meant determining if a “hostile work environment” existed, then developing a management response.

“I went ahead and told the employees to document their grievances in writing, so management could take a course of action,” says Kelly. “The next day, a formal written reprimand went into the manager s personnel file, and he was ordered to attend management training courses. Everyone s still working together, and trying to move forward.”

If you ve been a human resources professional for any length of time, you doubtless already know that only a few forms of workplace speech—logging a complaint of discrimination or harassment, whistle-blowing, union organizing—are truly protected in the private sector. Otherwise, an “at-will” employment relationship can be ended at any time by either the employer or the employee, and for any reason or for no reason at all—subject, of course, to statutory and common-law exceptions or a formal employment contract.

Section 7 of the National Labor Relations Act and the “whistle-blower” provisions of various employment and other protective measures loosely offer speech protection for employees of private companies. The NLRA grants workers the right to engage in “concerted activities” for the purpose of mutual aid or protection. It provides them with a relatively safe means of raising concerns and complaints through their union officials, and it allows them the right to engage in collective bargaining, strikes, boycotts and picketing.

Under so-called “whistle-blower” protections, a growing number of statutes prohibit reprisals against employees who log sexual harassment complaints, who refuse to disobey a law when asked to, who report illegal or harmful activity, or who testify or assist in an investigation.

Employers are prohibited from interfering with the exercise of these rights.

“Obviously, most employers would rather handle these kinds of issues in-house, but that s not always possible when the employee wants to file a formal complaint with a government agency,” says David C. Yamada, associate professor of law at Suffolk University Law School in Boston, Massachusetts. “Generally, external reports of illegalities to enforcement agencies are protected while internal reports of the same activity to company supervisors are less likely to be protected.”

Employers can shield themselves from liability and damage by devising a mechanism to investigate complaints, says labor attorney Wayne Hersh of Irvine, California. On free speech issues, consistency also is important, he says—if employees are allowed to hang Girl Scouts posters on their walls, then they must also be permitted to pin up handbills for, say, the International Brotherhood of Electrical Workers.

“Just make sure you don t have a written policy that denies free speech, because then you start running into prior restraint, which is tricky business,” says Hersh. He also advises managers to avoid written polices that could be construed to mean employees enjoy unmitigated free-speech rights. Courts in many states, it seems, have held that assurances outlined in employee handbooks can be enforceable as contracts. “Some companies have even gone so far as to revise their handbooks so they don t get into trouble with so-called contractual issues,” he says.

Not that these realities mean much in Corporate America. For there remains a tremendous amount of litigation in this country pitting the supposed rights of individuals against the perceived rights of employers. “Unfortunately, there s no matrix here,” says Marelene Heyser, director of human resources and risk management for the Orange County Transportation Authority (OCTA) in California. “You want to build an atmosphere where employees can discuss their differences with supervisors and exchange ideas with co-workers, but you can t allow speech that would violate a state or federal statute.”

It s estimated that roughly 10,000 employees per year are ordered reinstated after it s found they were discharged for engaging in “protected activity” (union organizing, whistle-blowing, etc.). “Just the act of asserting one s rights, even if wrong, might be protected,” advises attorney Peter Susser, author of Employment Law and Practice Handbook (Sheshunoff Information Services, 1998).

In many areas, the laws on workplace speech are either fluid or require fine distinctions. For instance, says New York City-based labor attorney Steven Mitchell Sack, author of Getting Fired (Warner Books, 1999), an airline flight attendant was fired recently for chatting with passengers about her religious beliefs. “Human resources managers should know they shouldn t discriminate against an employee because of her religious beliefs, but they may be able to fire an employee for talking about her religious beliefs to co-workers and customers, especially if it s interfering with work.”

Of course, with freedom comes responsibility. And here s where it gets murky for HR managers. For with every employee who comes to the job with the desire to communicate openly, honestly and respectfully, someone else arrives likely to hurl insults, racial slurs, and sexual innuendos—speech that ultimately undermines employee morale and company productivity.

Employers set the bar.
Employers do not by sinister design tend to create a culture of fear and intimidation. And few managers would argue that everyone needs a little “breathing room,” especially in these days when the office has become a place for defining and reflecting self-identity. Yet it s also undeniable that too much employee freedom can be disruptive, even harmful.

Stacy Griggs is senior recruitment manager for Philadelphia-based System One, a technology consulting firm of roughly 300 employees and 1,700 consultants. “A lot of employees don t know if something s inappropriate unless you tell them,” he says. “For example, on an annual basis we go through sexual harassment issues—why it s wrong, what you should and shouldn t say—just so we know the staff s getting the message. I can guarantee you a lot of HR practitioners lose sleep over these questions.”

Behind every “open” culture is the assumption that employees and managers alike will always be reasonable. Yet from an HR perspective, it s not that simple. It s more about actively trying to understand how free expression plays into your corporate culture, and then making sure everyone understands the ground rules. “Companies need to temper openness with a strong dose of reality,” says Jim Weintraub, management professor at Babson College in Wellesley, Massachusetts. “They need to make sure employees understand there s a different set of guidelines and standards in corporate life. At the same time, companies should encourage employees to share ideas. And there needs to be a reward system for exhibiting those behaviors that articulate the corporate culture. It s the follow-up that symbolizes to people what really happens with respect to open communication.”

At Irvine, California-based Freedom Communications Inc., a national media conglomerate of 7,500 employees, management strives for a “minimal amount of control and a maximum amount of freedom,” says Mark Ernst, the company s vice president of human resources. “You set the bar at a certain level, the minimal level of acceptable behavior. If you make racial or sexual innuendos, you ve crossed the bar. If you ve just been jabbering all day, you re below the bar but let s get back to being productive.”

Ronna Lichtenberg, a business and relationship counselor and author of Work Would Be Great if It Weren t for the People (Hyperion, 1998), suggests HR managers work with senior executives to display the sort of behavior expected of company employees. “Senior executives often just flat get away with more in terms of what they can say and do. You should never let anybody get too far away from the bell curve,” she says.

And consider designing policies and training programs for employees and managers as a way to reinforce appropriate behaviors and speech. At the Hoffman Estates, Illinois-based Sears, Roebuck and Co., for example, all 300,000 associates receive a company-sponsored “Freedoms and Obligations” brochure that outlines the company s codes of business conduct and leadership principles, and sets the tone for what is or isn t appropriate expression in the workplace. The brochure itself is first-class all the way—heavy and stately and beautifully laid out with a table of contents as seemingly comprehensive as any brochure any company would ever want. And even though it s the finest money can buy, the company also offers its employees a 1-800 ethics hotline and an electronic suggestions system. “Our company policy is to encourage associate expression,” says John Sloan, the company s senior vice president of human resources. “It s a fundamental principle tied directly to the vision of our company. We ve found that morale improves when associates get the chance to voice their opinions about the company and their jobs. Otherwise, we handle everything else on a case-by-case basis. These things emanate from our corporate culture. And it starts at the highest levels of the company from the chairman on down.”

One reason new employees with great qualifications often fade so quickly is because no one has shared with them how to play the game, how to communicate within the given culture. At San Francisco-based AirTouch Communications, employees are drilled from day one about the company s values on ethics, integrity, customer satisfaction, leadership, teamwork, innovation and the ability to think and act like owners. These values are then linked to the performance appraisal process.

“It s not what we do, but how we do it,” says Maria Powers, the company s director of organization development and training. “Employees are rated on whether they adhere to the corporate values. We also ask for feedback during their performance appraisals from key internal customers—peers, people from other departments. Clearly an issue like free speech can bump up against, say, sexual harassment. And if there s an issue, we settle it by going back to our core values, starting with respect for people. If you can t do that, then maybe you shouldn t be here.”

Two years ago, Nampa, Idaho-basedAIM Companies, marketers of nutritional and health products, began researchingself-insurance for its 130 employees. The human resources team worked with athird-party administrator to audit its own insurance program and to determinethe premium costs versus industry-wide claim averages. What it finally opted forwas a partially self-funded insurance program.

In a self-funded insurance program,a company pays all the costs of insurance for its employees, regardless of theamount. With partially self-funded programs, companies pay claims and losses upto a predetermined amount per employee, and contract with a reinsurance companyto cover catastrophic losses, thus reducing overall risk.

What AIM Companies found was that,on average, if the company paid medical costs directly, it could offer the sameamount of coverage to its employees for less than the cost of the premiums -even after looking at all the “what-if” scenarios: cancer, Alzheimer’s,major surgery, etc.

To learn more about how AIMCompanies made the switch to a partially self-funded insurance program,Workforce interviewed Lynn McConnell, CCP, the company’s human resourcesmanager. 

At what point and why did you decide to look into switching to a partially self-funded insurance program?

Back in the early 1990s, the process of self-funding and the potential liability was just too overwhelming, especially in light of increasing health-care costs. So we decided to look into partially self-funded programs, mostly because we didn’t know our actual claims costs.

We experimented with a hybrid solution, where we purchased a higher deductible plan ($1,000/$3,000) from our carrier, then partially funded the deductible so that what our employees saw was a $300/$600 deductible. We felt this was a better option than the medical savings accounts, and gave us a better indication of what our experience ratings were. Then, based on the success of this program, we went partially self-funded in 1997.

What sort of research into the various programs did you conduct before making your final decision?

We did cost comparison between our current coverage and what we anticipated our claims costs to be, taking the worst case scenario. We conducted interviews with different companies who had the same number of employees and who had gone partially self-funded. We also talked to our own employees to find out what they were interested in as far as benefits coverage. The entire process took roughly nine months. We didn’t want to rush it.

What was it about the partially self-funded insurance program that made sense for your company in the end?

The flexibility of coverage benefits we could offer employees. When a company buys coverage through an insurance carrier, it’s stuck offering what the carrier will allow. By being self-funded, we could look at what employees were really asking for – a wellness program, alternative health care. It gave the employees a sense of how they can help the company save health-care dollars, and by saving those dollars we could implement changes. It gave them more of a sense of ownership in saving the company money and designing a health-care plan that met their needs.

How exactly does the program work?

The company deposits funds and the employees pay their premiums into a trust account. The claims go to a third-party administrator to determine eligibility. Claims are paid directly out of that trust. We pay all approved costs after the deductible and co-payments are met, up to a maximum of $10,000 per planned member. After that point, the reinsurance carrier takes over.

How much money did you save, and how?

Even with the expanded benefits, a number of larger claims, premium and administrative costs, we experienced a net savings of over $23,000 last year. During the first half of this year we’re actually doing better than we were doing the first half of last year. The company is on track to save well over $30,000.

Can’t these types of programs fluctuate dramatically?

Heavens yes. But we have a pretty healthy workforce. We’ve had a few high-dollar claims, but not many. Our third-party administrator tells us that our prescription costs are way below norm for a company our size. 

Last year, your company expanded its range of benefits to include such things as mammograms and immunizations. Did the partially self-funded insurance program help you expand the range of benefits offered to employees?

Previously, the company offered employees medical, dental, vision, life and long- and short-term disability insurance. By recouping a large amount of savings last year, we were able to expand medical coverage to include a wellness benefit that covers mammograms, pap smears and regular immunizations.

In addition, we added a flexible savings account option so employees can defer pre-tax dollars for any medical costs that are not covered in the policy. The savings account can also be used to pay for non-traditional therapies not normally paid for by insurance companies. We were also able to increase the amount of life insurance we provided employees, as well as offer a supplemental policy they could purchase for themselves or their families.

How did you manage to keep the employees from getting nervous about the change to their insurance program?

In the beginning, we formed a team of employees from across the company who were involved with the research, and they would go back and talk to their co-workers and keep them informed on where we were in the process.

Once we made the switch, we developed new communication materials that were easy to read and understand. We conducted countless employee meetings, and we even invited employees’ spouses. Also, we didn’t make huge changes to the deductibles and co-payments, and we tried to keep the premiums the same or lower. We have a vocal employee population here. If there had been a problem, we would have heard about it.

What suggestions can you offer other human resources managers about looking into partially self-funded insurance programs?

Hire a third-party administrator who can guide you through the process and help you make wise choices. I would research and interview them just as I would a new employee. Talk to other companies that have gone partially self-funded, and be sure you know all the costs involved.

And finally, I would involve employees in the process – that really helped us sell the idea to the company. They can help create a program that really works by matching coverage to their needs, and they share in the savings. Reinvesting some of the savings into expanded benefits, whether in health insurance or other benefit areas, makes good financial sense.

Workforce, September 1999,Vol 78, No 9, pp. 99-100  SubscribeNow!