Editor’s Column: Asking the Right Questions

Editor’s Column: Asking the Right Questions

My years as a litigation attorney provided me with excellent insight into failed business and employment relationships. Here are a few critical questions business owners, managers, and employees can ask themselves to make sure that their thinking is on the right path:

• Is it in the best interest of the team? There’s no substitute for playing with a win/win attitude. As they say, “A rising tide floats all boats.” Putting the team first does not mean that you have to settle for mediocrity – or that you decide simply on a consensus basis. Putting the team first means that you ask the critical question: “Is this in the best interest of the team (or company, nation, family, etc.)?”
• Will this increase or decrease the level of trust in the environment? I’ve never seen a failed relationship where the parties trusted each other. Trusting partners even dissolve their relationships in an amicable manner. To make a trustworthy decision means that you have the skills or critical thinking necessary to make this decision and that you do so with good intent. That’s what makes anybody trustworthy to me. They have the skills and desires I can trust.
• Is it in alignment with our vision, mission, and goals? Sometimes there can be a true conflict among these outcomes. For example, NASA wanted to launch its shuttles in both a timely and safe manner. When the goal of timeliness overwhelmed the goal of safety, it resulted in an ethical violation – and lost lives. Because it’s very hard to know if you’re in alignment if you haven’t clearly identified your vision, mission, or goals, you might want to throw in values, commitments, and anything else on which you intend to focus.
• How does the approach feel? Often we make poor decisions because we’re running so fast that we can’t feel what’s going on. This is one reason why I often sleep on major decisions, perhaps even for a few days, before making a major decision. If after three or four days it still feels right, I’ll go for it. Unfortunately, when I forget this lesson, I end up paying the price.
• Is it legal? Are you sure or just guessing about it? What further research should you conduct?
• Should I get outside advice? There’s no substitute for professional help when making decisions. People rely on the Worklaw® Network and I try to answer their Hotline calls as part of the HR That Works program. Knock on wood, but from what I can tell, not a single one of these calls has turned out poorly for a client who followed the advice. It’s important to be able to get outside your own head when making critical decisions.

Conclusion: Follow these steps and you’ll avoid a variety of risk management problems.

The 1099 Time Bomb

The 1099 Time Bomb

We’ve been advising HR That Works Members to get their independent contractor act together. This is an exploding risk exposure driven in large part by the need of federal and state agencies to make sure that they collect all their taxes. The IRS estimates that the 1099 misclassification problem, due primarily to poor controls, has led to more than $8 billion in unpaid taxes.

As we advise members, “If it walks like a duck and talks like a duck — it’s a duck, no matter what you call it”. If you have any independent contractors and you’re an HR That Works Member, look at the new Independent Contractor Training Module, which includes a video, IC agreement, analysis worksheet, and a guide to many state and federal resources in this area.

Don’t take this lightly! In November of 2009, the IRS launched an audit of 6,000 companies, essentially to prove the value of hiring more auditors to collect more money. I can tell you what their conclusion will be: That they should hire more auditors because there will be a greater return on investment given the amount of unpaid taxes out there. This exposure is significant, not just from a taxation perspective, but as a liability and risk management issue. Bottom line: It’s far better to pay the additional taxes, workers comp premiums, and medical expenses than to run afoul of the misclassification analysis.

For more information, call us!

We’ll set you up with the Independent Contractor Training Module.

You’ll be able to get your company compliant in under an hour!

The Employee Free Choice Act – Dead or Alive?

The Employee Free Choice Act – Dead or Alive?

Although many employers might believe that the Employee Free Choice Act (“EFCA”) is dead, it isn’t. As with many other legislative initiatives, Congress pushed EFCA aside to focus on two other major pieces of legislation: Health care reform and “cap-and-trade.” Although EFCA appears headed for some compromise, it remains organized labor’s top legislative priority and a major objective for the Administration and Congressional Democrats.

EFCA was introduced in the Senate (S. 560) and House of Representatives (H.R. 1409) in March 2009. Since there were more than enough votes to pass it in the House, the focus of debate was in the Senate, where 60 votes are needed for cloture. Last spring and summer, a number of conservative Democrats expressed concern over a union’s ability to organize an employer without a secret ballot election. This is the so-called “card check” provision, which would force an employer to recognize and bargain with a union if a majority of employees in the bargaining unit sign cards supporting it. The opposition to card check by five or six Democratic Senators, together with the focus on health care reform and energy legislation stymied EFCA’s passage, which many commentators had thought would happen by the August recess.

Unfortunately for employers, it would appear that EFCA has been waylaid, but not forgotten. Although unions still are pushing for a bill which includes card check, a group of Senators, including Senators Brown (D-Ohio), Carper (D-Delaware), Harken (D-Iowa), Prior (D-Ark.), Schumer (D-N.Y.) and Specter (D-Pa.), have been working on a compromise, which they reportedly “think will bring 60 votes for cloture.” Indeed, Senator Specter reported the existence of such a compromise to AFL-CIO convention delegates in September.

Although the details are still sketchy, what appears to be emerging is a bill that would replace “card check” with a “quickie” election. Employers now normally have 42 days from the date a petition is filed with the NLRB to the date of the election to run a campaign. This period reportedly would be changed to just seven days under the compromise, which in most instances won’t be enough time to run an effective campaign. For sake of comparison, unions usually win a little over 50% of the elections in the U.S. (but only about 30% where the employer mounts a strong campaign opposing the union), compared with a win rate of more than 70% in the Canadian Provinces of Ontario and British Columbia, which require elections within five to 10 days. The EFCA compromise also reportedly includes a provision permitting union access to the employer’s premises during the campaign under certain circumstances, which currently is prohibited.

Perhaps even worse, the compromise in the works continues to require binding arbitration for a first contract. This means that if there were no contract agreement within 120 days, an arbitrator would impose a contract of two years duration. This is a huge change from current law, under which neither party can be forced to agree to any contract provision, and would prevent an employer from even attempting to remove a union until after the contract has expired. Under current law, if there’s no contract, a union can be removed one year after its certification as a bargaining representative.

Thus, while employers might have dodged the card check bullet, something almost as bad appears to be on the horizon. This means that employers desiring to remain union-free need to implement such measures as: (1) Effective group and individual communications mechanisms; (2) understandable and consistent personnel policies and procedures; (3) supervisory training on how to manage employees and avoid unionization; and (4) confidential employee surveys designed to measure objectively the effectiveness of an employer’s human relations program and uncover issues that could lead to unionization. Although you now have the ability to uncover and correct such issues, the law severely restricts your ability to do so once union organizing activity begins.

Article courtesy of Worklaw® Network firm Millisor Nobil (www.millisor.com).

Keeping Your Employees Motivated

Editor’s Column: Keeping Your Employees Motivated

1. Survival – This is the greatest need of many employees and many companies given today’s economic stress. This stress is largely self-induced, due to poor financial acumen and practices. Having said this, the most important question becomes “What money am I earning today?” That’s what it means for an individual or company to be in survival mode.Smart companies such as In and Out Hamburger (an incredible California-based private business) and Costco realized the value of paying entry-level employees at a rate above their competition. Consider how paying a few dollars above your competition will affect who you attract, how hard they work for you, and how long you retain them.
2. Security – Unfortunately, many folks still believe that the only form of job security is a union. Just ask the people at United, Delta, American, GM, Chrysler, and Ford. In fact, there’s only one form of job security: Doing a positive job, in a positive manner, where there’s a positive cash flow. Our responsibility, as leaders, is to make sure that our employees understand this by opening up the books and sharing the numbers. I encourage you to watch the Webinar we did with one of Jack Stack’s trainers on the Great Game of Business.
3. Belonging – You might as well substitute the words “company culture” here. Are you trying to maintain a positive attitude in tough times? Are you trying to make the work fun? Are you taking the time to brand your company to your employees? One low-cost way to do this is through company uniforms — whether work clothes, sports teams, or recreational clothing. If I walked into your company today, would I be able to define your company culture just by walking around? If not, why not?
4. Ego Gratification – The biggest mistake I see employers making here is ignoring the ego need, especially those of their superstar employees. Here’s an example: “Bob brings $200,000 to the bottom line every year and causes me no drama. I am so glad I don’t have to worry about him.” What an incredible mistake! Unfortunately, most organizations spend 80% of their time on the 20% of employees who don’t bring it every day and ignore the breadwinners; when in fact they should be doing just the opposite. The ego needs stroking. Give these folks awards, get them in the Business Journal or other industry publications, highlight them on your Web site, upgrade their titles, and so on.
5. Self-Actualization – Although I realize that it’s hard to worry about being self-actualized when you’re in a survival or security mode, this need still remains. I believe that self-actualization has to do with knowing that “you make a difference.” Do this by engaging your clients or customers in the conversation. How do you make or break their day? How does it affect them when they receive good or bad service? Have you brought some of your clients and customers and perhaps even prospects in for a focus group with your employees? Do your employees understand the “precessional” impact of their daily work?

For example, when I finally realized the precessional impact of my litigation career, I had no choice but to quit. Now I know that the work I do makes a positive difference.

This is what it takes to motivate employees. This probably won’t be the last time I mention Maslow. Within each of these categories, we have to be careful about how we spend our money. The next article will address this issue.

Getting the Biggest Bang for Your Motivational Buck

Much of what I share with HR That Works Members comes from my study of marketing. Take any marketing book, replace the words “client” or “customer,” with “employee” and you’ll learn a lot about improving the HR function. Consider the time-tested marketing formula: Cost, ease, and impact (which you’ll find in the Form of the Month spreadsheet) and ask yourself, “What’s the cost of this item, how easy is it to implement, and what’s the bottom line impact?”

For example, a hand-written thank-you note provides a low-cost, easy to implement, high impact motivational tool. In Harvey Mackey’s “Swim with the Sharks,” he shares how he built his business from thank-you notes. This raises two questions: (1) How many thank-you notes to your employees have you written lately? and (2) Have you mailed these notes to their homes – which shows the employees’ families that you acknowledge the contributions they make at work?

The Retention Program Possibilities (Form of the Month) document offers dozens of ways to show your employees that you care. How you do this is secondary. A final bit of advice: The greatest benefit is the one that’s least remembered. It’s usually the frequency of showing you care that matters the most.

Kaiser Predicts Premiums Will Continue To Soar

Simple Arithmetic

This week we put out our annual benchmark survey of employer health coverage and costs. Two numbers jumped off the pages.

The first number was the average cost of a family health insurance policy in 2009: $13,375. To put that number in context, if you are an employer, you can hire an employee at the minimum wage for about $15,000 per year. If you are a consumer, you can rent an average two-bedroom apartment nationwide for $11,136 per year (though it is quite a bit more here in Menlo Park, California where our Foundation is based). You can also buy a new Chevy Aveo for $12,000, and it gets 35 miles per gallon on the highway.

The other result that jumped off the page was the stark contrast between increases in health insurance premiums and overall inflation in the general economy. Premiums went up 5% and prices overall fell 0.7% (mainly driven by a big drop-off in energy prices).

The 5% increase we found in premiums is moderate by long-term historical standards. For example, two different times during the last decade premiums increased by 13% a year, in 2002 and 2003. This year’s increase continues a multi-year period of relative moderation in premium increases. Still, over the last ten years premiums have increased by 131%, while wages have grown 38% and inflation has grown 28%. Consider this: If people (and businesses) are as concerned as they are now about rising health care costs in a period when they are actually moderating, how much more concerned will they be when rates of increase return to historic averages?

Let’s do some very simple arithmetic. Start with a fairly conservative assumption: If we assume that premium increases over the next ten years will average what they did over the last five (about 6.1% per year), the average premium for a family policy in 2019 will be $24,180. That’s a big number. On the other hand, if we assume increases revert to the average of the last ten years—an average annual increase of about 8.7% and a very plausible scenario—premiums in 2019 will average a whopping $30,803, a very scary number (See Image Below).

Health insurance premiums will continue to rise, causing serious problems ahead

One obvious implication is that we need to get more serious about reaching agreement on ways to slow the rate of increase in health care costs.  But consensus on measures that would put a real dent in the health cost trajectory has been hard to achieve. Even simple first steps, such as comparative effectiveness research to collect data on what works and what does not in medical practice, have proven controversial, requiring language in draft legislation disavowing that they will ever be linked to payment. And when the public can be so readily scared that these efforts will lead to rationing, it’s a signal that the obstacles to reining in health costs are more fundamental than interest group opposition and health reform politics. Our polls show that we are far from the level of public understanding needed to meaningfully take on health care costs.

Even under the most optimistic scenarios, reducing the rate of increase in health costs will take time. This is why decisions about who gets subsidies and how generous subsidies will be in the health reform legislation now being drafted on Capitol Hill are so important. These decisions will determine how many people get help with their health care costs as insurance premiums and cost sharing become ever more unaffordable for average Americans. Projecting a family premium of more than $30,000 in ten years is simple arithmetic, but the implications for people and employers are real. Low and moderate income people are going to need some help paying for health care and health insurance as we learn which delivery and payment reforms work best and cost containment efforts ramp up.

You can see the original article here
http://www.kff.org/pullingittogether/091509_altman.cfm

**** Note: Health insurance premiums projected for 2010-2019 assuming (1) that the average growth in premiums between 1999 and 2009 (8.7%) continues or (2) that the average growth in premiums between 2004 and 2009 (6.1%) continues. Source: Kaiser Family Foundations projections based on data from Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009.

JACK WELCH ON HR

Don Phinn, Employment Lawyer, Founder of HR That Works, Retired GE president Jack Welch has been a long-time supporter of the HR function. His columns and blogs are widely published. Here are a few of Welch’s pointers: 1. CEOs need to get the importance of HR. Most importantly, they need to understand that they probably aren’t very good at HR and need to find somebody who is. If you’re an HR executive, ask yourself: Just how good are you? How well are you performing? Do you really want to do more? If you’re not having an impact, why would you want to be the HR person? Great HR people are both pastors and parents. They have to listen like a pastor and maintain confidentiality, but they have to tell it straight like a parent. Finally, HR executives need to pound the table to get a voice in their organizations. Riding along, being a bureaucrat, or playing less than a critical role in the organization should be unacceptable to anyone worth their salt. To learn more about Jack’s excellent HR philosophies, go to his Web site at www.welchway.com.

HIRING THE DISABLED

There is nothing nobler than being of service to someone who needs help. Many employers will proactively seek out disabled job candidates, knowing that they tend to be loyal and dedicated workers – and that there are federal, state, and other funds available to help hire them. As the saying goes, “no good deed gets left unpunished.” Employers who hire disabled employees must make sure that:

1. They don’t create some form of unique hiring process which actually discriminates against those who are not disabled.
2. They understand the “risk” associated with hiring people with disabilities, including any propensities to be violent, injury prone, safety or security factors, and the source of discrimination or ridicule. As Worklaw® Network attorney Ken Stettner from Denver wrote, “I applaud these employers, but must also admonish that they must be 180% ready to handle all aspects of this challenge.”

As always, if you have any questions in this area, feel free to contact a member of the Worklaw® Network (www.worklaw.com) or the Job Accommodation Network (www.jan.wvu.edu). To see an excellent resource on the myths and facts of hiring disabled workers, click here.

EMPLOYER MAKES A MILLION-DOLLAR FMLA MISTAKE

In Dotson vs. Pfizer, decided by the Fourth Circuit Court of Appeals, a company was found to have violated the FMLA when they fired an employee who was, at the time, on intermittent leave for an adoption. The court acknowledged that under the FMLA an employee cannot take intermittent leave for adoption unless the employer agrees. However, if the employer, as in this case, allowed the employee to take intermittent leave without objection, this is all the agreement that’s needed. Pfizer claimed that the employee was fired for malfeasance discovered while he was on leave.

This case offers two valuable lessons:

1. If you don’t follow FMLA procedures, you can’t argue that FMLA leave is unwarranted. We encourage you to get proper medical certifications and other documentation before granting any leave. The courts have made it difficult for employers to change their minds afterward – a legal doctrine that’s known as “estoppel.”
2. Many employers only “discover” just how bad an employee is during their leave. This presents a dangerous trap. Sound management practices should identify employee shortcomings without the person having to go on leave for them to surface. The company would have done better to warn Dotson about his malfeasance, put him on a performance plan, and allowed him to finish his leave.

Click here to read the case.

BusinessWeek Examines Consumer Driven Health Plans

Benefits and costs of HDHPs, Health Savings Accounts are discussed.

In BusinessWeek’s (9/10) The Debate Room blog, Paul Kitchen writes, “The only way to truly reduce healthcare costs is to put as many healthcare dollars in consumers’ pockets as possible through consumer-driven health plans (CDHPs), aka high-deductible health plans (HDHPs).

The empirical evidence of this is overwhelming: According to a study by the American Academy of Actuaries, premium costs for CDHPs have trended as much as 40 percent lower than managed-care insurance, and multiyear premium savings reached $21 million per 10,000 employees, according to a study conducted by Aetna (AET).”

President Obama Attempts To Revive Faltering Healthcare Reform

Obama tries to rally Congress to come together to pass healthcare reform. Many remain skeptical.

President Obama’s speech to Congress is generating mostly glowing reviews from the mainstream media. Many business people still feel that  the President failed to provide a sufficient level of detail on his healthcare reform views. Liberal media analysts are predicting that the address will energize the debate in both the House and Senate.

Here’s a roundup of media reports.

The Washington Post (9/10, Balz), for example, reports that the President “almost certainly will get a boost in the polls from Wednesday’s speech,” even as “much work remains.”

Along similar lines, the New York Times (9/10, A42) editorializes that “the president finally found his voice,” but “will need to do more than orate. He needs to twist arms among timid Democrats in Congress to get a strong bill passed, most likely with little support from Republicans.”

In a separate report, the Washington Post (9/10, Connolly, Shear) also noted that Obama cast himself “squarely in the political center,” while the New York Times (9/10, A27, Nagourney) describes the speech as “an attempt by this still new president to display his authority to a Congress that had begun to question his fortitude, to show that he was as strong a political leader as he was a political candidate and to show that he was not — to use the shorthand of the day — another Jimmy Carter: professorial, aloof, a micromanager who perhaps was not ready to be the nation’s chief executive.” And Obama “managed to invest his case with both economic and emotional urgency…without getting bogged down in too many details.”

USA Today (9/9, Wolf) reports that “Obama used Wednesday’s speech to get specific about his plan. He endorsed tax credits for those who need help buying insurance, mandates that individuals get insurance and large companies provide it to workers or pay a fee, and a new tax on the most expensive insurance policies.”

A third story from the Washington Post (9/10, Murray, Kane) reports that the speech “gave the healthcare debate a much-needed shot of momentum, but the direct appeal won’t erase the rancor of recent months, both within the Democratic Party and among Republicans.” Yet “with Obama fully engaged, Democrats were newly confident they could deliver a bill by the end of the year.”

Using Interns As Your Cheap Labor Pool

INTERN OR EMPLOYEE? THAT IS THE QUESTION

 

In tight times, employers might look toward interns to provide them with a cheap labor pool. Remember this: If someone walks like an employee and talks like an employee, then they probably are an employee. Misclassification can result in minimum wage obligations, overtime obligations, penalties and fines, and more. For example, your insurance coverage might apply to employees but not to interns. The DOL has identified six factors to help distinguish between an intern and an employee. In order to be a trainee or intern, the following must take place:

1. The training is similar to that which would take place in a vocational school.
2. The training is primarily for the benefit of the trainee.
3. The trainee does not displace a regular employee and works under close supervision.
4. The training provider derives no immediate benefit from the trainee; in fact, its operations might be impeded.
5. The trainee is not entitled to a job at the completion of training.
6. The trainee is not entitled to wages, but may be paid a stipend where permitted.

Other factors include whether the trainee is enrolled in school, receiving academic credit for the internship, and other related factors. If you’re lucky enough to be an employer in California, there are additional requirements:

• The training must be part of an educational curriculum.
• The training should be general in nature so that the trainee can qualify to work with any employer.
• Advertisements should be couched in terms of education rather than employment.
• The screening process for the program should not be the same as for employment.
• The trainee should not receive benefits.

Unsurprisingly, both federal and California courts considering these factors have come up with different results under similar circumstances.

A final concern is whether the person will be deemed an employee for Workers Compensation, General Liability, and other insurance coverages. Bottom line: Unless you’re 100% certain that you meet the requirements set forth by federal and state statutes, you should hire any intern or trainee as a minimum wage employee, prohibit them from working overtime, and make sure that they’re covered by Workers Comp and other relevant insurance policies.

Can I Fire This Employee?

SO YOU WANT TO KNOW IF YOU CAN FIRE THEM?

Perhaps the most frequent question we receive on the HR That Works Hotline is the one that produces the most fear in any manager or owner: “Can we fire this person?” Of course, what they really mean is, “If I fire them, can they sue me?”

Here’s how we usually answer this question:

• Be aware that you might easily face litigation. For a filing fee of about $150, anybody can sue you!
• Review the questions on the HR That Works Pre-Termination Checklist (see the Form of the Month).
• Will it come as a surprise to the employee? The answer says a lot about your performance management. If the employee has been performing poorly, to what degree have they addressed this challenge? Have you provided disciplinary notices or performance plans?
• Check to see if the employee falls into any protected categories. Although employment is “at-will,” the exceptions have, in a sense, swallowed the rule. If an employee fits within a protected category (such as race, religion, age, gender, etc.), they might claim that the real motivation behind their termination has nothing to do with performance. Bear in mind that courts will usually uphold “mixed motivation” cases in which a poorly performing employee was also discriminated against. In other words, they’re treated differently than other employees who have performed poorly. Determine whether discrimination played any role in the termination decision. Give the employee a way to complain if they feel that discrimination played any part in their poor performance reviews or termination decision.
• Review employee complaints. Whistleblower and retaliation cases are filed by employees who complain about health or safety issues and other concerns regulated by state or federal laws. If these people have also complained about discrimination or harassment, you might well face a claim of retaliation. As a loose rule of thumb, most attorneys and judges will consider any adverse action taken within three months of a complaint as “retaliatory” – which means you’ll have to prove that it wasn’t. Good luck.
• Make sure your documentation is in place. Do you have performance evaluations which show the deficiency the employee is being fired for? What about there disciplinary notices or performance plans? What benchmarks apply to determining the employee’s performance? Did they sign an employee handbook acknowledgement identifying the impropriety of the conduct at issue? Although it’s always easy to say that someone is being fired for poor performance, every employer faces this challenge: If you’re going to claim that the poor performance was going on for a while and you didn’t already fire the employee, they might allege that the situation couldn’t have been that bad — which means that something unique was involved, such as discrimination or retaliation. That’s just one trap employers face when they don’t discipline and document in a timely fashion.
• Be careful when terminating “damaged goods” employees. An employer might be concerned that the employee is sick, in failing health, or addicted to drugs or alcohol (they could have also been injured in a Workers Comp claim). In a sense, they’re “damaged goods.” If that’s the case, be aware of your obligations under the ADA (15 employees or more) and FMLA statutes (50 or more employees). The advice is always the same: Don’t play lawyer, doctor or psychologist — unless you are one. Treat the employee as you would a loved one. Focus on their performance and what reasonable accommodations, including leave, might help them to meet legitimate performance standards. Do this regardless of whether the employee is sick, inured, disabled, or otherwise limited in their ability to perform.
• Don’t forget the possibility of human error. We all make mistakes. In one Hotline call a CEO asked if he should fire one of his warehouseman for throwing a cigarette into a tire pile, which then ignited and burned down the warehouse. It was suggested that the CEO might want to give the employee a Darwin Award (for incorrigible stupidity) and then review the man’s work history. If this is a long-time employee who has been working steadily and is relatively safety conscious, I don’t know that I would fire him. If you face a similar situation, consider signing a “do one more stupid thing and you’re out of here” agreement with the offending employee.

• As a last-ditch effort to defuse a possible claim, consider doing an exit interview.

Follow these guidelines and your exposure to employee lawsuits will be cut in half.

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ARRA – What is involuntary termination?

Don Phinn, Employment Lawyer, Founder of HR That Works,

COBRA INVOLUNTARY TERMINATION DEFINED

Many employers have grappled with defining “involuntary termination” under COBRA.

According to a recent IRS bulletin, here are the standards. Note: These questions apply solely for purposes of determining whether there is an involuntary termination under section 3001 of ARRA (including new Code sections added by section 3001 of ARRA — but not for any other purposes under the Code or any other law).

Question 1. What circumstances constitute an involuntary termination for purposes of the definition of an assistance-eligible individual?

Answer: An involuntary termination means a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services. An involuntary termination may include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services. In addition, an employee-initiated termination from employment constitutes an involuntary termination from employment for purposes of the premium reduction if the termination from employment constitutes a termination for good reason due to employer action that causes a material negative change in the employment relationship for the employee.

Involuntary termination is the involuntary termination of employment, not the involuntary termination of health coverage. Thus, qualifying events other than an involuntary termination, such as divorce or a dependent child ceasing to be a dependent child under the generally applicable requirements of the plan (for example, loss of dependent status due to aging out of eligibility), are not involuntary terminations qualifying an individual for the premium reduction. In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability.

The determination of whether a termination is involuntary is based on all the facts and circumstances. For example, if a termination is designated as voluntary or as a resignation, but the facts and circumstances indicate that, absent such voluntary termination, the employer would have terminated the employee’s services, and that the employee had knowledge that the employee would be terminated, the termination is involuntary.

Question 2. Does an involuntary termination include a lay-off period with a right of recall or a temporary furlough period?

Answer: Yes. An involuntary reduction to zero hours, such as a layoff, furlough, or other suspension of employment, resulting in a loss of health coverage is an involuntary termination for purposes of the premium reduction.

Question 3. Does an involuntary termination include a reduction in hours?

Answer: Generally no. If the reduction in hours is not a reduction to zero, the mere reduction in hours is not an involuntary termination. However, an employee’s voluntary termination in response to an employer-imposed reduction in hours may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.

Question 4. Does involuntary termination include an employer’s action to end an individual’s employment while the individual is absent from work due to illness or disability?

Answer: Yes. Involuntary termination occurs when the employer takes action to end the individual’s employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual’s employment status is not an involuntary termination).

Question 5. Does an involuntary termination include retirement?

Answer: If the facts and circumstances indicate that, absent retirement, the employer would have terminated the employee’s services, and the employee had knowledge that the employee would be terminated, the retirement is involuntary.

Question 6. Does involuntary termination include involuntary termination for cause?

Answer: Yes. However, for purposes of Federal COBRA, if the termination of employment is due to gross misconduct of the employee, the termination is not a qualifying event and the employee and other family members losing health coverage by reason of the employee’ termination of employment are not eligible for COBRA continuation coverage.

Question 7. Does an involuntary termination include a resignation as the result of a material change in the geographic location of employment for the employee?

Answer: Yes.

Question 8. Does an involuntary termination include a work stoppage as the result of a strike initiated by employees or their representatives?

Answer: No. However, a lockout initiated by the employer is an involuntary termination.

Question 9. Does an involuntary termination include a termination elected by the employee in return for a severance package (a buy-out) where the employer indicates that after the offer period for the severance package, a certain number of remaining employees in the employees group will be terminated?

Answer: Yes.

For more information call us at Healthy Halo.

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How To Save 4% To 15% On Your Health Plan — The Actuaries Agree

Consumer driven health (CDH) plans are not for everyone.

Employees don’t like change, and employers are skeptical about real savings — and at the same time believe that changing health plans is difficult, time-consuming, hassel-filled, and ultimately not worth it.

However, more and more evidence is piling about around CDH.

Health Care Reform — One Area of Real Success!

It is remarkable in the current debate over health care reform how policymakers are ignoring the one thing that has been proven to work: consumer-driven health care (CDH).

I’ve never liked the term “consumer-driven health care” as it came to mean simply shifting costs to employees in the early days of CDH.  But the phrase has stuck, and CDH is catching on for some very good reasons.

CDH is an approach that has proven to work after six years of testing by many millions of people in real-world conditions all across the nation. Consumer-driven health plans empower individuals by taking money away from third-party payers and putting it in the hands of consumers to spend as they wish.

Now that one out of five American consumers under age 65 is paying some of his or her own bills through health savings accounts, high deductible plans and similar consumer-driven plans,  policy makers are beginning to see a profound effect on the service side of the ledger. Consumer-driven health (CDH) plans cost 25 to 40 percent less than PPOs and HMOs, and their rate of cost increases from year to year is one-third of that of PPOs and HMOs, according to a wide variety of health plans and benefits consulting firms.

Last fall the Kaiser Family Foundation’s annual employer survey found the average family premium for an HMO totaled $13,100, while a health savings account (HSA) program cost only $9,100. The premiums for CDH plans at WellPoint and Cigna actually fell over a two-year period, while premiums for their HMO and PPO plans rose about 10 percent.

Costs for CDH plans are falling because people are becoming more invested in their own health. Consumers with a CDH plan participate in wellness and prevention programs at a higher rate than others, and they choose generic medications over name brands, avoid using hospital emergency rooms in favor of retail clinics or their own doctor, and comply better with recommended treatment programs.

By any measure, CDH is a rip-roaring success, confirmed last year by the Centers for Disease Control and Prevention. It found 20 percent of the under-65 population is now in some version of a CDH plan. That is an astonishing rate of growth for an approach that has been around only for six years or so.

CDH is not for every client of Healthy Halo.  But every client of Healthy Halo, (and every reader of this website), really should take a closer look at some of the new ways that CDH can be a winner for both employee and employer.

Health Care Costs Projected To Rise 9% Next Year

PricewaterhouseCoopers is projecting that national medical costs will rise 9% next year.  California costs will likely rise more than the national average.  Large employers (>5000 ee’s) can expect their rates to be on par with this average. 

Smaller employers should brace themselves for even larger increases!

Medical costs will grow at a slightly slower rate next year — but the growth will still outpace inflation and workers’ pay, according to a new report from the health wonks at PricewaterhouseCoopers.

The medical cost trend — the measure insurers use to change premiums based on the cost and intensity of health care provided to each person — is projected to grow at 9% next year, down from 9.2% this year and 9.9% last year, the report says.

The estimate is based on interviews with health-plan executives, surveys of employers and hospital-based health plans and analyst reports. Forty-two percent of the employers surveyed said they planned to increase employees’ share of health care costs.

The report says health reform isn’t likely to have much of an effect on health costs until 2011 or later. It also notes that the recession affects overall health costs in multiple ways, many of them contradictory. For example, some people are postponing elective procedures, while others who think they may be laid off are rushing to use their employer-sponsored health insurance.

Elea Sherrod Joins Healthy Halo

Elea Sherrod, Executive Vice President

We’re delighted to announce another new member of the Healthy Halo team as of June 1, 2009.

Elea brings 21 years of outstanding performance in Employee Benefits, Group Health Insurance, Individual Insurance Products, Dental, Life, and Voluntary Products.

In a recent position as Senior Account Executive for USI (the largest privately held agency in America), she was:

• Consultant to over 60 Employer Groups for Medical, Dental, Life Insurance and Voluntary products

• Oversaw client retention and sales of new lines of coverage
• Responsible for delivery of Cobra Services, FSA, Section 105, HR consulting and Safety Services
• Supervised Account Managers and Marketing Managers

In her career, Elea has managed the Group Insurance Department for an insurance brokerage in Westlake Village, and handled customer service, marketing and sales of insurance products for a Tarzana-based brokerage.

She has years of experience with Mass Mutual Life Insurance, and worked for more than a decade with Prudential Insurance Services.

Elea is licensed in California, Arizona, Texas, Ohio and Arkansas.

HEALTH CARE COVERAGE AND WORK COMP LEAVE

Guest Article by Don Phinn

Many employers get confused about their obligation to continue health care coverage when someone is out on extended work comp leave. Here are some general guidelines to consider:

* Workers comp law doesn’t require an employer to keep paying an employee’s health care when they’re on extended leave due to a work comp injury. An employer may not discriminate against someone on work comp leave. For example, if your practice is to continue health care coverage for two or three months hoping that someone can return to work, you need to maintain this practice with an employee on work comp leave or face a discrimination or retaliation claim.
* Be aware of a Health insurance provision that employees must be “actively employed.” For example, if they haven’t worked for two months, they may not be actively employed. Even though you might have extended their coverage, if they have a significant claim, the carrier may decide to decline coverage, leaving them unprotected because you didn’t issue them a COBRA notice. Not a good spot to be in.
* Remember, if you have more than 50 employees, the FMLA requires you to maintain extended coverage for at least 12 weeks — but only if there’s a reason to believe the employee will be returning to work.

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