I’ve already provided a link to Jason Corsello’s blog containing my thoughts on Consumer-Driven Health Plans.  But that bite-sized posting was just an excerpt from a longer article on CDHP.  Since we have to consider the pros and cons of CDHPs constantly in our HR outsourcing and benefits services environment, it’s an article worth sharing.  So here it is…

It only feels like it’s been 60 million years of the same health and welfare benefits structure. Still, Americans have stuck with it this long, right? So how bad could it be? The truth is, the old school, dinosaur method of strategizing employer benefits is not that bad. For the longest time, tax-subsidized, employer-sponsored/funded health plans have served business and insurance industry well, and even employees marginally well. Indeed, a case can even be made that the tax subsidy has helped to spur American research and innovation in medicine.

But the dinosaurs are in danger.  The advent of new forms of benefits has introduced a consumer-driven element into the prehistoric healthcare landscape that looks great and seems cost effective—at least at first blush.  In reality, Consumer Driven Health Plans (CDHP) may turn out to be a tremendous compliance risk for companies.

These plans are part of a movement to deliver greater control to consumers over the management of their health plan costs and behavior, somewhat like the way that the advent of §401(k) plans revolutionized consumer activity in retirement planning and investment.  While many try to equate the two, the commoditization of financial planning for retirement, and the consumerism it has driven, is different than the type of consumerism required of health plan participants to engage the complexities of the health care system, as well as the intricacies of their own family’s health profiles. Consumerism of the 401(k) variety requires merely that someone understand basic actuarial assumptions—i.e., you live, you die, and someone else has already figured out how long you get—and then be willing to make investments to maximize the possible return during that time frame within the scope of your personal risk aversion. It’s not much more complicated than picking different flavors of a passbook savings accounts… unless you want it to be. CDHPs, on the other hand, may still be decades away from such commoditization, if ever. At the very least, while such commoditization is just around the corner, it is not available to consumers currently, and therein lies the yawning chasm cutting across the road of mass adoption.

Still, consumerism properly informed and supported can in fact increase efficiency, rationality, quality of care, patient satisfaction, and cost-effectiveness in the health care system.  But this first wave of CDHP is deficient in several key areas:

1. Inadequate consumer information for making informed choices. This is one of the more known problems with CDHP, and every day progress is made toward addressing it. But the insurance companies and government bureaucrats driving some of these widespread changes seem to have excluded …

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TriNet works in a space where M&A activity is not merely frequent, it is constant. Within that activity framework, it is essential that human resource outsourcers--particularly PEOs--be able to supply the legal and HR needs not only of the customer, but also of the M&A transaction itself. This includes payroll tax, CODA compliance, and health & welfare structural and compliance representations and warranties. While it is true that the sophisticated PEO should be able to meet the customer’s M&A needs on short notice, it is also true that the sooner the need is surfaced by the customer, the more effectively it can be serviced. Word to the wise: ask early, be happy.

Governor Schwarzenegger has vetoed SB815, the bill that would have doubled workers compensation permanent disability payments in California over the next three years. Rightly noting that changing workers compensation benefits now would alter the comp reform landscape, Schwarzenegger committed to monitoring the disability payment schedule and assessing its impact on injured workers.

We previously discussed some of the factors you should consider when selecting a Professional Employer Organization, and today would like to emphasize one in particular: ESAC accreditation. ESAC is the Employer Services Assurance Corporation, an independent, not-for-profit organization that accredits, and guarantees obligations of, PEOs that meet extremely high financial and ethical standards. ESAC brings more than 100 years of professional regulatory experience to bear on a cumulative payroll of nearly $20 billion. If you review the scrutiny that ESAC brings to the task of accrediting quality PEOs, you would have to ask yourself why you would ever choose to trust the performance of human resources, payroll and benefits services for your workplace to any entity that is not ESAC-accredited.

And in case you were wondering, yes, TriNet is ESAC-accredited; in fact, we were one of the first.

CDHP--don’t get us started. Wait, you don’t have to, because Jason Corsello over at The Human Capitalist already gave us a chance to lay out some of our concerns about the first wave of CDHP. Check it out.

FWIW, and lest you think that we’re just CDHP curmudgeons, TriNet has been providing benefit plan services under a defined contribution model--a core element of many CDHP approaches--for nearly twenty years. Since 1999, we have worked with customers and vendors to develop CDHP products before they were called CDHP including, e.g., virtual PPO networks, safety net plans, integrated HSA plans, etc. At each crest of the “latest new thing” wave, TriNet’s focus was simple: how do we deliver the widest array of choices to our customers, without exposing them to unjustifiable and/or unforeseeable risk? Our current CDHP portfolio will continue to expand at an incremental rate, keeping pace with regulatory and technological change, but not disruptively. We do not see CDHP as a disintermediating approach, but as a complementary one.

So, how committed are you to developing a paperless/online hiring process? Here at TriNet, we’re big believers in paperless services of all sorts, and recruiting is a largely archaic system that could stand the modernization of paperless methods. Today, I am presenting at a seminar exploring “Recruiting in a Wired World.” Still, I am becoming increasingly convinced that online-limited recruiting programs suffer from a significant defect. If the American experience has taught us anything, it is that exclusionary practices are ultimately counter-productive to goals like productivity and profit. And even nation-building. So what, you say, does this have to do with paperless recruiting? Well, consider the following:

• Only 29% of African-Americans and 23% of Latinos regularly use the Internet; that would make a paperless recruting system a pretty serious exclusionary tool against those groups;
• Similarly, 58% of Americans aged 50-64 use the Internet, while substantially greater numbers of younger workers are facile with the net;
• Just 38% of persons with disabilities go online, compared with 58% of all Americans.

Forget for a moment whether you think it’s right or fair or even legal to constrain a recruiting system by such numbers; focus instead on whether it makes sense for any institution which is economically motivated to hamstring itself voluntarily by such orders of magnitude.

The California legislature has passed, and the Governator is expected to sign, a bill doubling disability payments between now and 2008. This appears to be a repeat of the same cycle that California has repeatedly followed through the “workers comp is a disaster” through the “we must do something about it” phase until the “now that we have done something about it, let’s let the lawyers undo it all” nadir arrives. We will all pay for this within years, but for now, the best thing that small and medium sized businesses can do to bulwark against that future is to make sure that their human resources outsourcing practices take WC stability into account.

And in another example of just how crazy things get here, the legislature passed in its waning hours a single-payer health insurance system, which would in essence ban all private and public health insurance. Schwarzenegger has until September 30 to decide if he will veto the measure; otherwise, incredibly, it would become law.

NelsonHall reports that the growth in the global HRBPO market is being fueled primarily by growth in the North American benefits administration market, consisting of health & welfare, pensions administration, flexible benefits administration, and COBRA services. NelseonHall asserts that growth in these services combined will be 10% compounded annually over the next few years, taking the overall global market to over $22Bn by 2010.

Bucking a two-year flat line, the ranks of the uninsured grew nearly 3% last year, with 46.6 million people without health insurance at year-end 2005 compared with 45.3 million at the end of 2004, the latest U.S. Census Bureau report shows. Increases in the numbers of uninsured U.S. citizens inevitably place greater pressures on the physical abilities of health care providers to supply uncompensated services, and the social systems that spread those costs among taxpayers and insurance purchasers.

You may have staff that are so tired of human resources issues that they want to outsource some or all of their employees.

One way to give those people relief is to hook your organization up to a good professional employer organization (PEO) – companies that will take care of your payroll, benefits, employer compliance and other HR needs.

But finding the right “co-employer” is easier said than done. What you need is the PEO equivalent of a low-price, off-the-rack suit that fits as if it were custom-tailored. Otherwise, the results could be disastrous.

Here are some ways to separate the wheat from the chaff.

1. Make sure the price makes sense.

In the PEO market, a price that looks too good to be true probably is too good to be true. A PEO that advertises unrealistically low initial rates may increase its rates 6 months down the road. More likely, the profit margin is in there somewhere, just hidden from you.

2. Find a PEO with a benefits package designed especially for workers who also resemble your current workers. A PEO that mixes your healthy, well-behaved loan officers with other employers’ hard-living riffraff almost guarantees that your health insurance and workers’ comp rates will skyrocket.

Along the same lines, even something that sounds as if it ought to be pretty basic, such as payroll, ends up working much differently for some types of workers than for others. Payroll for a successful vice president will not be the same as payroll for a minimum-wage factory worker.

3. Demand a solid benefits package.

To make the cut, PEO candidates should offer a benefits package that:

- Provides coverage for new hires soon after they start working.
- Has no pre-existing condition exclusionary clauses.
- Contains no individual underwriting
- Offers guaranteed issue coverage.

4. Look for a quality provider network.

Your employees need a PEO that has a stable health care provider network and modern administration systems. If you have any employees working out of state, picking a PEO with a national presence is also important.

5. See if the PEO employs solid professionals in its own organization.
Does the PEO you are considering have the expertise to deploy human resources managers who understand the needs of specific industry your company is in?  If your PEO’s HR managers haven’t provided services to workers who look like your workers, you may encounter some sticky problems down the road.

6. Opt for a PEO with a brand-name, Web-enabled human resources information system.
Web tools may seem like a bell and/or whistle right now, but they could be a godsend some late night when your HR manager, really, really needs specific personnel information.

7. Ask for references.

Of course. But someone should …

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