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Blue Cross Blue Shield of Michigan to Cut 1,000 Jobs in 2009

Facing projected financial losses that could exceed $1 billion over the next three years, Blue Cross Blue Shield of Michigan announced Friday, January 16, that it plans to eliminate 1,000 jobs this year, cut senior executive pay, freeze wages and reduce spending on advertising and lobbying by 25 percent.


The cuts also affect Blue Care Network, its HMO subsidiary. (For a related story, read “WellPoint Plans to Eliminate 1,500 Positions.”)


Blue Cross also said it will seek average rate increases of 55 percent for individual plans, 42 percent for group conversion plans and 32 percent for Medicare supplemental plans, or Medigap.


Those three individual plans represent about 418,000 members.


“We should not ask our individual subscribers to pay more, without first demanding sacrifices from ourselves,” Blue Cross CEO Daniel Loepp said in a webcast to employees.


Blue Cross plans to cut senior executive salaries by an undetermined percentage and freeze pay for other executives. Blue Cross last froze executive pay in 2007.


“Our goal is to move forward as a strong and financially stable nonprofit company, committed to fulfilling our mission and delivering the best value in health insurance products and services to our customers,” Loepp said.


Based on expense reduction estimates, the Blues estimate that total cost savings over the next three years could total $300 million to $400 million.


“The actuaries are projecting cumulative losses of $1 billion,” said Andrew Hetzel, Blue Cross’ vice president for corporate communications. “[These cuts] will not get us all the way there, which is why we need the rate increases.”


Over the next 60 days, 400 employees will be laid off at Blue Cross and Blue Care, Loepp said. Based on the results of an ongoing performance improvement project, an additional 600 positions could be cut this year.


In October, Blue Cross laid off 130 workers as part of the process-improvement project it began in early 2008. The layoff included workers in various departments, including marketing and communications, where 14 workers were laid off.


Blue Cross said that in 2008 it lost $140 million on individual policies. It projects 2009 to be worse, estimating it will lose $320 million. This includes $210 million in medical underwriting losses and the state-mandated set-aside of $110 million in additional premiums to cover future losses.


The projected losses are based on actuarial assumptions and that Blue Cross receives some rate increases this year.


Hetzel said Blue Cross is having its company 2008 financials audited and said he does not know whether the company itself will post an overall profit.


“It is premature to make a comment on specific gains or losses,” Hetzel said. “We project to be very close to zero for 2008.”


In 2007, Blue Cross said net earnings declined 27 percent, to $152.2 million from $210 million in 2006. The Blues said 2007 marked the third consecutive year of lower earnings for the nonprofit health insurer.


“State law requires our individual products to be financially sustainable, but we will lose hundreds of millions on them this year,” Hetzel said. “Absent regulatory reform, we must turn to the rate-setting process for relief, and we must get new pricing soon.”


In December, the Michigan Legislature failed to act on two bills to reform the individual health insurance market that Blue Cross said was crucial to its financial stability. Officials had said tough decisions would need to be made in early 2009.


The losses are due to “the combined effects of a recessionary economy driving thousands of people into Michigan’s individual health insurance market, a broken regulatory system that requires [Blue Cross] to cover virtually all of the state’s costliest-to-insure individuals, and the increasing cost of health services,” Blue Cross said in a statement.


Other cost-cutting actions include:


• A freeze on salaries for nonunion workers.


• A request of the United Auto Workers to delay a 3 percent pay increase.


• A 25 percent reduction in discretionary spending.


• Cuts to programs funded by Blue Cross in local communities across Michigan.


“All of our actions are to preserve the financial health and stability of the Michigan Blues,” Hetzel said.


(For a related story, read “Cigna to Cut Jobs; Recession Cited.”

Filed by Jay Greene of Crain’s Detoit Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Wachovia Employees Whacked by Wells Fargo

In a move that smacks of corporate retribution, Wells Fargo & Co. has fired employees who left Wells to work at Wachovia Corp.


In total, Wells Fargo fired 175 of 2,000 Wachovia employees who had previously worked for Wells Fargo, said Melissa Murray, a spokeswoman for the bank.


This month, San Francisco-based Wells purchased Wachovia of Charlotte, North Carolina, for $12.7 billion.


They initially agreed to the deal in October.


In an almost unheard-of move, the employees that Wells fired include Wachovia registered representatives and investment advisors who work for Wachovia Securities of St. Louis.


That defies one of the fundamental tenets of the brokerage business: High-producing reps and advisors are untouchables in mergers because they are the backbone and revenue producers of the firm that has been acquired.


Before shareholders approved the deal, Wells created a “do not hire” list of the employees, according to several sources inside and outside Wachovia.


According to one source, the list was dubbed the “conflict employee summary.”


At least in several cases, Wachovia Securities employees either were told directly or sent a letter on Christmas Eve that Wells wouldn’t rehire them, those sources said.


Among those affected were Kent Elliott and Matthew Schmitt, a $1.7 million team in Roseville, California, who on January 5 joined Robert W. Baird & Co. Inc. of Milwaukee.


The fired employees range from bank tellers to stock brokers, sources said.


Teresa Dougherty, a spokeswoman for Wachovia Securities, wrote in an e-mail Wednesday, January 14, that there was a corporate-wide HR eligibility process that Wells Fargo went through as part of the merger, and while up to 300 people were affected, only a handful were brokers.”


A day later, Murray said the correct figure was lower and that all the affected employees were given the opportunity to request a review of their eligibility requirements. As a result, many got their jobs back, she said.


So far, Wells Fargo has not made any other layoffs related to the merger.


She did not give specifics about the criteria employees needed to meet to keep their jobs.


The combination of Wells and Wachovia creates one of the nation’s largest banks, with more than $1.42 trillion in assets, nearly $800 million in deposits and operations in 39 states and the District of Columbia.


Filed by Bruce Kelly and Dan Jamieson of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.


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WellPoint Plans to Eliminate 1,500 Positions

WellPoint is eliminating 1,500 jobs, or about 3.5 percent of its 42,000-member workforce, the Indianapolis-based health insurer announced Friday, January 16. The cuts include 900 unfilled open positions and about 600 workers.


The staff cuts won’t affect Medicare Advantage or Medicare Part D compliance staff, according to a company statement. On January 12, the Centers for Medicare & Medicaid Services forbade WellPoint from enrolling new members in these two programs and conducting related marketing efforts because of multiple deficiencies.


WellPoint, the nation’s largest health insurer by membership with 35 million enrollees, said it will take an after-tax charge of about $24 million because of the job cuts. The company last week said that it had an investment loss of $349 million in the fourth quarter. Officials said they would release more financial details on 2008 and the company’s outlook for 2009 at its earnings release January 28.


“With the current state of the economy, we made a difficult decision to adjust the size of our workforce as we continue to meet our members’ needs while appropriately controlling operating expenses,” WellPoint president and CEO Angela Braly said in the statement.


Aetna and Cigna Corp. previously announced job eliminations in response to the recession.


Filed by Rebecca Vesely of Modern Healthcare, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Bill Would Offer COBRA Subsidies, Extend Eligibility

The federal government would pay 65 percent of COBRA health care continuation premiums for one year for eligible beneficiaries who have lost their jobs since September 1, 2008, as part of a massive economic stimulus bill unveiled Thursday, January 15, by the House Democratic leadership.


The bill also would allow other beneficiaries to hold on to COBRA coverage, for decades in some cases.


The COBRA premium subsidy is certain to increase the number of laid-off employees opting for the coverage. The subsidy is the same provided under a 2002 trade law to employees who lose their jobs due to foreign competition and to pension plan participants 55 and older in plans taken over by the Pension Benefit Guaranty Corp.


Currently, only about 20 percent of those eligible for COBRA enroll, a low acceptance due in part to the high cost of coverage. Under law, employers can charge beneficiaries a rate equal to 102 percent of the cost of coverage offered to employees.


With a higher take-up rate, employer costs would rise since beneficiaries opting for COBRA on average use more medical services than other health plan enrollees, surveys have found.


House Democrats estimate the subsidy would cost the government a total of $30.3 billion. In addition, the stimulus package, which legislators are expected to consider next week, would significantly stretch out the period of time some beneficiaries can retain COBRA coverage.


Under the measure, people 55 and older and those who have worked for the same company for at least 10 years could retain COBRA until they are eligible for Medicare at 65 or obtain health care coverage from a new employer. In the case of younger beneficiaries, that could mean they could retain COBRA for decades.


Under current law, employees who lose their jobs can purchase COBRA for 18 months. In other situations, such as death, divorce or martial separation, beneficiaries have a right to keep COBRA coverage for 36 months.


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


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Nissan Will Continue Four-Day Weeks

Nissan North America Inc. will continue running its two U.S. assembly plants on reduced hours “indefinitely” because of slow U.S. sales.


Nissan’s auto plants in Smyrna, Tennessee, and Canton, Mississippi, have been running only four days a week, eight hours a day, to reduce vehicle inventories.


Nissan began operating some lines on four-day weeks in April and moved all production to the schedule in October.


A spokesman for Nissan’s U.S. manufacturing operations said Wednesday, January 14, that that schedule will remain in place for the foreseeable future.


Nissan and Toyota Motor Corp. have been studying production cuts in light of crashing U.S. industry sales.


A spokesman for Toyota’s North American manufacturing headquarters in Erlanger, Kentucky, said Toyota could scratch more production days during the first quarter.


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


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The Brave New World of Electronic I-9s

In April 2005, Public Law 108-390 came into effect, permitting employers to store electronic versions of completed I-9 forms rather than paper versions. Specifically, the new law allows I-9s, which are the forms that employers must complete to show that an employee is eligible to work in the U.S., to be completed and signed electronically. No regulations have as yet been promulgated by U.S. Immigration and Customs Enforcement. However, in June 2006, ICE issued an interim rule that mirrors its previous guidance on this matter. According to the interim rule, employers who choose to sign and store I-9s electronically should follow this guidance until final regulations are published.


    The electronic I-9 law did not change any of the previous requirements for employers regarding the completion of I-9 forms for all employees hired after November 6, 1986.


    The interim rule allows employers the option to continue to complete I-9s on paper while storing the forms electronically, although ICE has not yet clarified whether such paper versions may be discarded. Alternatively, under the new law and pursuant to the ICE guidelines, employers may now both complete and retain I-9s electronically.


    However, the guidance stops short of identifying which systems will be acceptable under the law. ICE acknowledges in its guidance that there is no single government-wide electronic signature or storage protocol. The ICE guidance suggests that employers may wish to adopt the electronic storage and signature standards of a federal government agency, such as the Internal Revenue Service, until ICE issues the relevant regulations on this topic. U.S. Citizenship and Immigration Services has implemented an electronic signature mechanism for its “e-filing” procedures that requires users to “e-sign” electronic documents by selecting a checkbox that indicates approval of the information contained in the form. The ICE guidance mentions signature methods such as electronic signature pads, personal identification numbers, biometrics and “click to accept” dialogue boxes. The ICE guidance also suggests that employers use a quality assurance program to evaluate their electronic signature and storage systems to ensure integrity.


    With respect to I-9 maintenance for inspection purposes, ICE suggests that employers use indexing systems and employ printing functions so that employers will be able to access and print hard copies of specific I-9 forms upon the request of the government—typically meaning ICE or the Department of Labor. As HR readers know, upon notification of an audit, employers are required to produce I-9s and requested supporting documents for inspection within three business days. The ICE interim rule on electronic I-9s states that at the time of inspection, “Forms I-9 must be made available in their original paper, electronic form, a paper copy of the electronic form, or on microfilm or microfiche.” In addition, the interim rule states that employers must provide to requesting government agencies the “resources, such as hardware and software, necessary to locate, retrieve, read and reproduce any electronically stored Forms I-9.”


    Even assuming that the final regulations will simply adopt the interim rules, there are still a number of open issues that the regulations, once published, will address—or so employers and their counsel hope. The first open issue is that the types of electronic storage that would be allowed are not specified. Second, the law does not indicate how electronic signatures will be handled, and the interim rule does not provide definitive standards. Finally, nothing issued thus far by ICE indicates clearly whether electronic storage will be applied retroactively—in other words, whether electronic storage of I-9s will be permitted for existing I-9s.


    Employers who are considering implementation of electronic I-9s should read the ICE interim rule very carefully and review the I-9 systems of the electronic I-9 storage service providers to ensure that whatever system is chosen will be compliant with ICE guidelines. In particular, they should note the Section C of the interim rule.


    Finally, it bears repeating that the law regarding electronic I-9 storage and signature protocol is skeletal, and that the ICE interim rule does provide definitive legal guidance to employers. Employers and counsel have been waiting for a final decision for quite some time. That word could come today, or years from now. But until the final regulations are published, employers should consult with immigration counsel to weigh the pros and cons of implementation of an electronic I-9 storage system.


    If implementation is chosen before the final rules are issued, employers will have to review the final regulations very carefully to determine what changes, if any, must be implemented to bring an existing electronic I-9 system into compliance.


Workforce Management Online, January 2009 — Register Now!

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Coca-Cola Files to Fund Retiree Health Through Special Trust

In its official filing seeking regulatory approval, Coca-Cola Co. detailed a plan to fund retiree health care benefits through a special trust and its South Carolina-domiciled captive insurance company.


Under the proposal, which Coca-Cola filed last week with the Labor Department, the company would use $187 million in assets now held in a voluntary employee beneficiary association to purchase medical stop-loss policies from Prudential Insurance Co. of America to pay claims over the expected lifetimes of about 4,000 retirees and dependents. Coca-Cola established the VEBA in 2006.


The medical stop-loss policies would pay claims that fall between an attachment point and an upper limit. For retirees younger than 65, the attachment point would be $100 and the upper limit would be $5,800, with an attachment point of $100 and an upper limit of $3,500 for retirees 65 and older.


Prudential, in turn, would use the premium it receives from Coca-Cola to reinsure the risk with Red Re Inc., Coca-Cola’s 3-year-old South Carolina captive insurer.


Atlanta-based Coca-Cola, the world’s largest beverage company, now uses Red Re for a wide range of risks, including benefit coverages of employees outside the United States. Red Re’s 2007 gross written premium volume was $11.8 million.


Linking a VEBA to a captive to fund retiree health care benefits has several advantages, outside observers earlier said.


Under federal law, assets contributed to a VEBA must be used to pay benefits or purchase insurance policies that provide benefits. Employers cannot remove VEBA assets for other purposes, even when a benefit program is being wound down.


By contrast, using a captive to fund benefits gives a company greater financial flexibility. For example, investment gains on contributions made to the captive can be paid out as dividends to the parent.


Coca-Cola’s risk management and employee benefit executives briefly outlined the arrangement at the World Captive Forum in November and are asking the Labor Department for quick review of its application. The department has 45 days to act on the application.


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


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Best Practices in Documenting Employee Discipline

In today’s economy, many employers are looking for ways to trim costs. Unfortunately, one of the obvious places to look is the workforce. Whether an employer is considering a small or large reduction in force, the employer must be sure to apply objective factors in selecting the employees to be laid off in order to avoid such legal claims as discrimination and retaliation.

    One of the many factors that an employer may consider in conducting a reduction in force will be employee performance and productivity. In a perfect world, the review of the employees’ personnel files will give the information needed to compare employee performance and productivity. However, many times employers find that the files have been inadequately maintained, especially when it comes to documenting employee discipline and misconduct.


    Documenting such issues can be an uncomfortable experience for most supervisors and managers. However, aside from being a factor to consider in reductions in force, there are many benefits to both the employer and employee in properly documenting employee discipline and misconduct. The documentation may help the employee realize that certain levels of performance or kinds of behavior are unacceptable and can help employees change their performance or behavior in the future.


    Documentation also acts as an insurance policy for the company. If the employee later challenges an action that had been taken against him as a result of poor performance or a behavior issue, or files a grievance or lawsuit, thorough documentation can prevent such actions from continuing beyond the preliminary stages.


    To assist managers or supervisors in documenting employee misconduct, here are some best practices that managers, supervisors and HR professionals who work with them should follow.


    1. Have an employee discipline form. Such a form will make documenting employee misconduct easier for managers and supervisors and it ensures a uniform process. The pre-printed, fill-in-the-blank form should, among other things, have spaces for basic information regarding the employee, the time and date of the incident, a description of the incident for which the employee is being disciplined, the specific policy or work rule that was violated and the action that will be taken against the employee. Make sure that the information is legible and that the person who is completing the form both prints and signs his name on the form so that if follow-up is necessary, you will know whom to contact.


    2. Conduct a full and fair investigation. Before an employer decides to discipline an employee, there should be a full and fair investigation of the events. In certain circumstances, it may be appropriate to have someone other than the employee’s direct manager or supervisor conduct the investigation, or review the discipline decision. If there were witnesses to the misconduct, those witnesses should be interviewed. The person conducting the investigation should include on the employee discipline form the names of any witnesses and note in a separate document what they had to say. Sometimes information from other sources may lead a manager to reconsider whether discipline is appropriate.


    3. Get the facts. For employee discipline documentation to be effective, it must be factual. The goal in completing such documentation is that anyone who might read the employee discipline form will get a clear picture of what happened and why the discipline was imposed.


    4. Be objective. In completing the form, it is important that the manager be objective in describing the incident. The manager or supervisor should describe the conduct that led to the discipline, rather than the attitude of the employee or the manager’s personal views of the employee.


    5. Be clear and specific. In completing the form, it is important to set forth the facts in specific detail. The manager should clearly state what the employee did that violated a company policy or work rule. For example, managers shouldn’t say that the employee is lazy, but should describe the facts that have led to the conclusion. For example: “Marion Jones failed to arrive at the work site on time for seven consecutive days. Jones left the site early on each of those days. The work that was assigned to Jones by the supervisor was not completed on any of the days that Jones worked.” The more specific factual detail that you can record on the form, the better. If there is not enough space provided on the form, additional pages can be attached.


    6. Complete the form while the facts are fresh. The memory of an event is clearer right after the event, as opposed to days later. Managers should complete the employee discipline form as soon as possible after the misconduct occurred so that their recollections will be clear.


    7. Get the employee’s acknowledgement. Managers should make sure that they review the completed form with the employee and have the employee sign it. Such an acknowledgement shows that the employee has been told that that his action was a violation of a company policy or work rule and prevents the employee from claiming in the future that he did not know of the problem. In the event that the employee refuses to sign the form, managers should note that on the form and record the date. In addition, the manager who heard the refusal should sign the form.


    8. Allow the employee to explain the conduct. Record the employee’s version of events on the form. While the explanation may not alter the discipline that is being imposed, it allows the employee to tell his side of the story. It also helps to preserve the employee’s version of events in the event he changes his account in the future.


    9. Be fair. Managers or supervisors will undoubtedly have different relationships with different employees. They will like some and tolerate others. However, managers and supervisors need to be fair and uniform in imposing discipline regardless of who is being disciplined. If necessary, HR may want to review the organization’s employee handbook with managers and supervisors on a periodic basis to ensure that they are familiar with policies and are uniformly enforcing them. Discrimination in the disciplinary process is unlawful, of course. But it also can ruin employees’ respect for their employer, to say nothing of damaging the organization’s reputation.


    10. To the extent that it’s possible, use the discipline process as a positive experience. While the responsibility is on the employee to improve his conduct, you may want to offer a reasonable solution to help. With some employees, it may be beneficial to map out some definitive next steps the employee will take to improve conduct in the future. However, remember that if you are going to offer one employee an improvement plan, such plans must be available for all employees who are having performance problems. Again, it’s a matter of uniformity in the discipline process


    Documentation of employee misconduct must be handled as a business issue. While supervisors or managers may feel that their time would be better spent doing anything other than documenting such problems, the process is essential. It helps the employee change his behavior. And it protects the business.

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Watson Wyatt Employers Need to Triple Pension Funding

Employers’ contributions to their pension plans need to nearly triple this year to shore up plans with funding levels that plummeted due to the equities market crash, according to an analysis released Tuesday, January 13.
 
Under federal funding law, employers in 2009 will be required to contribute $108 billion to their plans compared with just $38 billion in 2008, estimates consultant Watson Wyatt Worldwide.


“It is a staggering burden on employers, especially in a weak economy,” said Alan Glickstein, a senior consultant in Watson Wyatt’s Dallas office.


Watson Wyatt estimates that plans now are funded 75.2 percent on average, a stunning fall from only a year ago when plans had average funding of 97.4 percent.


Responding to lobbying efforts by employers, a federal law enacted last year eases funding requirements. But that relief, which removed a transition rule laid down by a 2006 pension law that required employers to immediately start fully funding their plans if they miss certain funding targets, only slightly reduces the contribution burden employers now face, according to Watson Wyatt. That relief will cut required 2009 contributions by about $16 billion, from $125.1 billion to $108.7 billion.


Without further relief, “companies will still struggle to meet the large and unexpected contributions required,” Watson Wyatt said.


However, several changes that business groups have been urging Congress to pass would cut required contributions this year to just under $66 billion, Watson Wyatt estimates.


Glickstein said legislators are becoming more aware of the severity of the problem for employers and the need for additional funding relief.


“I believe we will get more of what is needed,” he said.


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


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NBGH Backs Temporary COBRA Subsidies

A major employer benefits organization said Monday, January 12, that it would back federal COBRA premiums subsidies as long as those subsidies are temporary.


In addition, the Washington-based National Business Group on Health said lawmakers should consider allowing former employees to choose a less expensive plan in which to receive COBRA coverage. Under current law, COBRA beneficiaries must remain in the plan in which they were enrolled until the next open enrollment period.


“With choice, they might pick a plan that has lower premiums and may be a better value,” NBGH president Helen Darling wrote in a letter sent to the chairmen and ranking members of congressional committees with jurisdiction on health care issues, as well as to Tom Daschle, President-elect Barack Obama’s selection as the next secretary of the Department of Health and Human Services.


The NBGH backing of federal COBRA premium subsidies comes as lawmakers are considering whether to include subsidies in an economic stimulus package. Business lobbyists said last week that lawmakers were discussing a proposal in which the government would subsidize 50 to 60 percent of the COBRA premium paid by beneficiaries.


Under law, employers can charge COBRA beneficiaries a premium equal to 102 percent of the cost of coverage offered to employees.


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


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