Power, Negotiation, and the Affordable Care Act: A Look Toward the Future


I didn’t expect to be writing about the King v. Burwell decision today. I didn’t expect the Supreme Court to publish its decision until today. But we got it last Wednesday.

I’m not surprised by the decision. As I wrote after the oral argument in March,

“My prediction is that we will either have a 6-3 vote to uphold the IRS interpretation, or we will have a 5-4 decision against the government. I think the Chief Justice will want to be in the majority on this case, so he can at least assign the opinion, and quite likely keep it for himself. That way, he can shape the future of the Affordable Care Act, as he did in National Federation of Independent Business v. Sebelius.”

The first of my scenarios came true: Chief Justice Roberts was in the majority and did keep the opinion for himself. He admitted that the ACA “contains more than a few examples of inartful drafting,” but decided that undoing the subsidies in states using the federal exchange would negate Congress’s overall intent. Congress intended to prevent “death spirals” in the insurance market, and prohibiting subsidies would vastly increase the likelihood of such destabilization in the insurance market.

Once again, Chief Justice Roberts kept the Affordable Care Act from collapsing, thus supporting a poorly written statute the Democrats crammed down the nation’s throat in 2010.

So, where do we go from here? As I wrote just a few weeks ago, the ACA needs fixing for a variety of reasons. While I would prefer to see Congress start from scratch with a market-based approach to healthcare—an approach not based on employer subsidies—the likelihood is that we cannot get there from here. And probably should not.

I recently attended a mediation training program that talked about negotiation power. The presenter made several points about power:

  • Power is relative—it depends on the specific parties to the negotiation and their circumstances.
  • Power is not static—it changes as time passes and the parties change.
  • And the exercise of power has both benefits and costs. The benefit, of course, is that the parties that exercise their power are more likely to get what they want. But at the same time, each exercise of power changes the dynamics of the situation and often increases the resistance of the other party, which can make future concessions more difficult.

This is exactly what has happened in the Obamacare debate. Because the act passed solely by exercise of Democratic power, Republicans became entrenched in pursuing its defeat. They had not been a part of the negotiations. They had been steamrolled, and they didn’t—and still don’t—like it. The temptation will be for Republicans to run the steamroller back over the Democrats, if they get the opportunity.

But what we need is a candid, bipartisan review of the problems with Obamacare, starting with

  • The tax on medical devices
  • The panoply of mandated benefits that make little or no sense (e.g., requiring nuns to cover birth control) and increase costs
  • The fiction of charging older people no more than three times what younger people are charged when older citizens need far more healthcare than the young
  • The Cadillac tax on employers that provide strong healthcare plans
  • The definition of “full-time employee” that employers must cover under the law as someone who works 30 hours per week

It has been said that healthcare reform is based on a “three-legged stool” approach of (1) requiring insurers to treat everyone the same regardless of preexisting conditions, (2) mandating that everyone buy insurance, and (3) subsidizing insurance to make it affordable. Even if we keep these legs (and the individual mandate remains highly unpopular), how can we reduce the onerous and costly impacts of the reforms?

  • Fewer mandated benefits.
  • Allowing people to choose only catastrophic plans.
  • Lower subsidies, which would be possible because the plans would be cheaper.
  • Other options include allowing state experimentation and the development of regional healthcare plans.

Even President Obama acknowledges that changes to the ACA are necessary. Some minor changes might get passed in the next two years, but Republicans have until early 2017 to coalesce around a proposal for major reform of our healthcare system. They should make their decisions by reconciling what is in the long-term interest of our nation (in terms of affordability and equity), what is possible to pass after the 2016 elections, and what will be acceptable to the citizenry—which may be three different things.

What parts of the Affordable Care Act do you think most need revising?

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My 200th Post: A Retrospective, a Thank-You, and a Request


post-milestone-200-2xWordPress tells me this is my 200th post. I have been posting regularly (weekly or so) since November 2011. I’ve taken a couple of short breaks, but for the most part, every Monday there has been a new post, and sometimes another later in the week.

I am proud of the blog and how it has developed over the past three and one-half years. To give myself a pat on the back, I’m linking to some of my favorite posts. Please take a few minutes to review them. I hope you enjoy the posts, whether you are reading them again, or for the first time.

Humility and Leadership: Knowing Thyself

Systematic Neglect: Choose Your Priorities and Accept the Consequences

How Managers Can Impact Employee Retention

Making the Tough Calls: It’s What Leaders Do

Change the Organization’s Design To Get Different Results; But Be Careful . . . You Will Get What You Design

Situational Leadership Theory: It’s Just Common Sense

And, as we approach the middle of 2015, I’ll leave you with one more link:

Mid-Year Self-Assessment (It’s Not Just About Performance Objectives)

If you have not started a self-assessment of how your 2015 is going, I hope you will begin one now. As for me, I have certain things I am proud of this year, and certain regrets that projects are behind schedule. At this time, I am formalizing my commitment to weekly posts here.

I appreciate the interest readers have shown in this blog—each and every comment. I want the blog to address the everyday needs of corporate managers and leaders.

So my request is:

What would you like to see more of on this blog? Less of? I will try to accommodate your interests.

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Succession Planning: Developing Future CEOs


I’ve been interested in succession planning throughout most of my career. As many readers of this blog know, my novel Playing the Game deals in part with CEO succession in a family-owned business—an issue the organization was not prepared for and had to face as the novel begins. The novel, of course, is fiction, but the topic is real in many businesses.

A National Association of Corporate Directors survey reports that two-thirds of U.S. companies admit they have no formal CEO succession plan in place. See CEO succession starts with developing your leaders, by Asa Bjornberg & Claudio Feser, McKinsey Quarterly, May 2015. And even those corporate boards who have some plan underway are not satisfied with the results of their succession planning.

leadership sign 2The McKinsey article focuses on the need for a long-term plan for developing CEO successors. Succession is not a short-term project that can wait until the current CEO is ready to step down. Any board members, executives, or Human Resources professionals with significant experience have seen situations where illness, death, poor performance, or a significant lapse in judgment has required an immediate change in corporate leadership.

The authors state:

“Ideally, succession planning should be a multiyear structured process tied to leadership development. The CEO succession then becomes the result of initiatives that actively develop potential candidates.”

Developmental tools that companies can use include new assignments (including international and cross-divisional moves), coaching, mentoring, and outside leadership development programs.

Based on my experience, the important components to include when developing executive talent are

  • providing broad knowledge of the world in which the business operates,
  • a deep understanding of the organization’s unique strategies and goals, and
  • the interpersonal competencies needed to motivate and focus large groups of people through a multi-tiered organization.

The authors of the McKinsey article stated and “clumped” these attributes somewhat differently, but the themes are the same:

“. . . three clusters of criteria can help companies evaluate potential candidates: know-how, such as technical knowledge and industry experience; leadership skills, such as the ability to execute strategies, manage change, or inspire others; and personal attributes, such as personality traits and values.”

It is likely that each potential internal candidate for the CEO role will need an individual leadership development plan. The goal of the succession plan as a whole should be to have two or three strong candidates ready when the role needs to be filled.

Even organizations that want to develop a good CEO succession plan face risks. The plan will not work unless the current leaders have some idea of the future needs of the business. Those involved in selecting potential candidates must base the selection on these future requirements rather than on interpersonal factors not related to strategy. For example, sometimes current CEOs want to perpetuate the roles they have played in the organization. Other times, current leaders who plan to remain a while want weaker candidates in the succession plan, so no one is nipping at their heels.

And, of course, the analysis of future strategic needs and of the candidates themselves cannot be static, but must evolve over time. Too often, once someone is the “golden boy” (or girl) that person remains in the line of succession, regardless of performance.

It is also important to constantly compare the internal candidates with potential outsiders. So those involved in succession planning must know other leaders by staying involved with industry associations and community groups.

But the biggest risk is ignoring CEO succession needs altogether. Starting a plan now is better than waiting until the CEO role is suddenly vacant.

Which succession strategies have you seen work in your organization? Which have failed?

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The Obamacare Squeeze


Supreme Court building, from Wikipedia

Supreme Court building, from Wikipedia

We will know much more about the future of Obamacare (the Affordable Care Act, or ACA) after the Supreme Court rules later this month in King v. Burwell.  That case will decide the future of tax-credit subsidies to individuals purchasing health insurance on exchanges run by the federal government, rather than by the states. These subsidies are an important element of the ACA design that encourages lower- and middle-income individuals to buy coverage.

But King v. Burwell is not the only issue under Obamacare that confronts Americans, their employers, state governments, and the federal government. There are other structural issues in the ACA design that will require rethinking, no matter what the Supreme Court decides.

The U.S. system of financing healthcare has been a morass at least since employers became involved in the 1940s, when employers began offering health insurance to their workers in lieu of raising wages under World War II price and wage controls. Healthcare financing got more even complex when healthcare costs started rising much faster than inflation, requiring employers to start managing costs more closely.

Healthcare Reform: Know Thine EnemyAnd now, with Obamacare, the financing of healthcare is being complicated even further. Under the ACA design, consumers and providers are getting squeezed on all fronts, and the squeezes will get tighter in the years ahead, no matter what the Supreme Court decides in King v. Burwell.

Here are the reasons for the squeeze on employer plans:

1. MANDATED BENEFITS

Healthcare plans must include an ever-broadening list of products and services. This started prior to the ACA with a variety of state mandates. But the ACA federalized the mishmash of state requirements. Now, to qualify as an acceptable plan under the ACA, healthcare insurance must provide “essential health benefits” in ten categories. There are only narrow exceptions permitting people to choose catastrophic coverage, and they still cannot any categories of benefits they don’t think they will need. This is like requiring every car owner to carry not only liability coverage, but also collision coverage to the full replacement value of the vehicle and roadside assistance as well.

     2.  “AFFORDABLE” COST

Healthcare plans cannot cost too much. Employer plans under the ACA must have an option that offers “minimum essential coverage.” This coverage must include all the “essential health benefits” and must cover at least 60% of the cost of those benefits. Moreover, such a plan must not charge more than 9.5% of household income for the employee’s share of individual coverage. If the employer does not provide such an option under its healthcare plans, the employer will have to pay a substantial penalty per employee.

     3.  BUT NOT TOO GENEROUS

Employer healthcare plans cannot provide too much in the way of subsidies. In 2018, the so-called “Cadillac tax” will kick in for employers who provide more than $10,200 in individual coverage or $27,500 in family coverage to their employees (amounts adjusted for inflation). The Wall Street Journal reports that most employers think they will exceed these thresholds with their plans as currently designed by 2018 or soon after.

Because of these factors, employer-provided healthcare benefits plans are in a vise. The floor is the benefits that must be covered . . . and Obamacare raised that floor. Both sides of the cost equation are pushing in. Obamacare sets the maximum that employees can pay (and the 9.5% maximum will rise only as fast as wages rise) and also sets the maximum that employers can pay (which will go up at the rate of inflation).

Over time, more and more employers will be forced into a Hobson’s choice: (1) pay the increasing costs of healthcare to keep their plans “affordable”, which leads to the Cadillac surtax, or (2) drop employee healthcare benefits, which leads to employers paying the penalties for not offering “minimum essential coverage”.

Regardless what happens in the Burwell case, Obamacare is not sustainable from employers’ perspective.

We are long past the days of complaining about President Obama’s inaccurate statement “if you like your healthcare plan you can keep it.” We now must wonder if we can keep employer-provided healthcare at all. And if we can’t keep employer-provided healthcare, how will Americans pay the unaffordable costs of “essential health benefits” without subsidies?

Should we reconsider linking healthcare coverage with employment?

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Managing Yourself as a Mediator


MP900387517I wrote several weeks ago about communicating with high-conflict people. In the seminar I attended, Bill Eddy of the High Conflict Institute also made the point that mediators and counselors working with high-conflict personalities need to manage their own responses during problem-solving sessions. It is a sure bet that you will face resistance from the high-conflict person, so you need to control yourself.

Although the focus of Mr. Eddy’s program was on high-conflict personalities, anyone can become high-conflict when we deal with emotional circumstances, which many disputes are. Thus, most of what he said has applicability in almost all mediations.

Here were some of his tips:

1. High-conflict personalities have a hard time with problem-solving. They need a structure. Your role is to provide that structure, but NOT TO SOLVE THEIR PROBLEM. Repeat again: Your role is NOT to solve their problem—that is THEIR responsibility.

2. Your focus should be on managing your relationship with the parties to the dispute, NOT to manage the outcome. Repeat again: Your role is NOT to manage the outcome—that is THEIR responsibility.

3. The three skills you need to have when mediating high-conflict disputes (or, really, any dispute) are

  • Connecting with empathy, attention, and respect
  • Structuring the dispute resolution process, and
  • Educating the parties about the available choices and the consequences of their choices.

Each of these skills is worthy of a post in its own right. But for me, the most helpful advice was to step back from managing the outcome to structuring and managing the process.

I know as a mediator I sometimes am too directive and occasionally too passive. It is too easy for me to jump to what I think the outcome should be, and then pushing toward that outcome or giving up when it seems the parties will never get there.

What I took away from Mr. Eddy’s program was a reminder to keep myself from owning the outcome. I need to remember that reaching a resolution is the parties’ decision, not mine. I learned that in my mediator training, but it is easy to forget. We all want to take control when we think we know best.

When have you taken responsibility for a problem that wasn’t yours to resolve?

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Summer Price Reduction on Playing the Game


I’ve reduced the price of the ebook version of my novel, Playing the Game, to $2.99. Take advantage of this limited time offer and download the book from Amazon or Barnes & Noble.

Playing the Game was the #1 financial thriller in the Kindle store last summer. One Amazon reviewer said:

Playing the Game is a page-turner from page one. The characters are clever, scheming, even diabolical—but also real, and vividly drawn. Rickover does a masterful job of keeping all the corporate balls in the air and keeping her readers guessing about how things will turn out.

Don’t keep yourself guessing—pick up a copy to enjoy this summer.

And Happy Memorial Day!

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Favorite Firing: “I’ve Hired a Murderer!”


asglassOne morning about twenty-five years ago I sat in my law office. I took a call from an HR manager who was a regular client of mine.

“Sara, I think I’ve hired a murderer!” she said with panic in her voice.

“OK, Roxie, tell me what happened,” I replied, trying to keep my voice lawyer-calm.

Roxie explained that an employee had come to see her about another employee, a shipping employee who worked on the loading dock at her company. According to the report, the shipping employee had been convicted of murder and served time in a state prison. Roxie hadn’t talked to the dockworker yet, but she had pulled his personnel file.

His application had left the space blank where it asked “Have you ever been convicted of a crime?” The hiring staff had either not noticed or had not asked about the missing information. At the time, this company didn’t do background checks beyond reference checking. But company policy stated that they didn’t hire any ex-felons.

“You’ll have to talk to him,” I said. “Ask whether the information is true. Then let’s talk again.”

“You want me to talk to a murderer?”

“Has he shown any sign of violence at work?” I asked.

“No. He’s been a decent employee.”

“Just have Security standing by,” I suggested.

Apply_HandThe Facts: Roxie talked to the employee, who admitted he had been convicted of murder. He hadn’t wanted to tell the company about his felonious past, so he deliberately left that part of the application blank. He had been a little surprised that no one asked him about the missing answer, but he was glad to have received the job.

Roxie and I discussed the situation, and she deliberated with other company managers. They decided to terminate the man’s employment. I told her there was some risk, as the man was African-American, and could file a claim of race discrimination. But at the time, the law was pretty clear that if a company had a blanket rule that no felons of any race could be employed, they had a strong defense. Although I told her they needed to check their applications more carefully and raise issues before making their hiring decisions.

The Moral: There are several morals to this story. Some applied twenty-five years ago, and some have developed in the time since this incident occurred.

1. Get hiring data before the person is hired

If you have certain rules that can disqualify applicants, be sure to ask about these issues before hiring someone. Ask about the qualifications of each and every applicant. Blanks in employment applications about qualifications are not acceptable, and the burden will be on the employer to show that the rule is justified, if you don’t even ensure that the forms are filled out correctly.

2. Apply the same qualifications to all applicants

If you have employment qualifications, they should apply to everyone. Don’t let some applicants slip through with lower qualifications than what you have said are required. And certainly don’t vary the qualifications based on an applicant’s race, sex, or other protected classification.

3. Address discrepancies immediately

If you find a discrepancy in an employee’s application, whether before the person is hired or after, address it as soon as you can. Provide an opportunity for the applicant or employee to provide the missing information, if it can be fixed.

If the person has already been hired and the discrepancy can’t be remedied—such as this employee’s prior conviction—you have a difficult decision to make, particularly if the employee has performed adequately. How can you show the missing qualification is job-related, if the employee has performed well? However, if you don’t fire the person, then you risk the validity of your qualifications.

4. Stay on top of federal, state, and local hiring regulations.

Although criminal convictions were an acceptable reason to weed out applicants twenty-five years ago, the EEOC now takes the position that employers cannot have a blanket rule against hiring felons, because minorities have higher conviction rates than whites. The criminal conviction must be related to the job for it to disqualify an applicant. A conviction of fraud would probably disqualify a bookkeeper, but probably would not disqualify the dockworker.

Thus, the risk today of firing the murderer is much greater than it was twenty years ago. Some employers would take the position that any violent crime is a disqualification for any position. Whether the EEOC and your local agencies would accept such a policy is uncertain. Know how judges in the state and federal courts where your business is located have ruled.

Have you ever been surprised by information missing from an applicant’s records?

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