Tag Archives: healthcare

Labor Policy Changes Under the Trump Administration


Most of the news about the Trump Administration in recent days has involved developments arising out of the special counsel’s investigation. But as Labor Day approaches, it is worth examining what the administration has accomplished in the labor arena. Many stories about changes in regulations are getting less media attention than they might have, had we not had daily stories about sensational prosecutions or pleas and inflammatory tweets about Russia’s meddling and campaign finance violations.

Here are a few of the more significant changes in labor policy under President Trump:

DOL seal.pngFair Labor Standards Act: Although the 80-year-old Fair Labor Standards Act remains largely unchanged, the Department of Labor has again started using DOL opinion letters, which the Obama Administration had abolished. Opinion letters provide guidance that employers can rely on for interpretation of the regulations, so returning to this practice is a help. Moreover, many of the Bush Administration opinion letters have been reinstated.

Furthermore, in June 2017 the Trump Administration withdrew the Obama-era interpretation on joint employment. The joint employment interpretation—designed to make large franchisors liable for the practices of independently owned franchisees—was roundly criticized by employers, so the return to the former DOL interpretation of when joint employment arises is a welcome relief for employers.

The Trump Administration has also rolled back rulemaking under the white collar overtime exemption and the tip pooling regulations. In both cases, DOL is now attempting to provide employers with broader exemptions and greater relief from regulation.

Still, any changes to current FLSA regulations are likely to engender future litigation, so even if DOL’s Wage & Hour Division issues favorable changes, employers will have a long time to wait until there is certainty in this area.

Broader Range of Health Plans for Small Businesses: As a result of a Trump executive order seeking to reverse or limit portions of Obamacare that can be addressed by regulation, DOL has proposed letting more small firms and individuals form association health plans (AHPs). Large businesses have the market power to get good discounts from health care providers; the proposal is intended to let small businesses, including self-employed workers, pool their populations to get similar discounts through an AHP. Under this proposal, companies or individuals involved in the same type of business or located in the same region could band together to form AHPs.

Any attempts to broaden access to healthcare insurance should be encouraged, even if they do not satisfy all the benefit coverage requirements or other restrictions of Obamacare. More choice in insurance options will help employers of all sizes attract and retain employees.

Union Negotiations: The Trump Administration has pushed federal agencies with unionized workforces to reopen collective bargaining agreements with their public unions. Agencies have also been directed to move swiftly to fire poor performers. The Administration argues it is trying to streamline costly government bureaucracy and improve accountability of the federal workforce.

As with changes under the FLSA, litigation over these changes is likely. (In fact, on August 25, 2018, just as I was finalizing this post, a district court judge overturned some of the executive orders implementing them.)

In Janus v. American Federation of State, County, and Municipal Employees, Council 31 (Sup. Ct. June 27, 2018), the Supreme Cout ruled against public unions in a different context (deciding that public employees could not be forced to pay union dues). This decision weakens public unions, and arguably indicates possible Supreme Court support for government efforts to push back against such unions. However, it remains to be seen whether the Court would help the Trump Administration roll back previously negotiated collective bargaining agreements.

And nothing in Janus changes how the NLRB deals with issues between private employers and their unions, which would be a more helpful area of focus during the next two years of the Trump Administration.

nlrb logoRestrictions on Employee Use of Employer Email: One helpful development for private employers that the Trump Administration has undertaken is that the National Labor Relations Board (NLRB) has invited briefs on whether it should overrule Purple Communications, Inc., 361 NLRB 1050 (2014). The Board held in that case that employees had a presumptive right to use employer email systems on nonworking time for organizing and other protected communications under the National Labor Relations Act.  In Purple Communications, the Board overruled its earlier decisions holding that employers could maintain union-neutral policies regarding permissible uses of their email systems, even if these policies had the incidental effect of limiting use of those systems for union–related communications. Presumably, the NLRB is now considering a return to the holding of those prior cases.

This and other NLRB actions could have far-ranging impact on employers’ efforts to maintain union-free workplaces. However, NLRB policy in recent decades has tended to shift with the party affiliations of the five NLRB members, so whatever the current administration does could once again be overruled.

Application of Religious Freedom Principles to the Workplace: DOL is attempting to make it easier for federal contractors to claim religious beliefs as a defense against anti-LGBTQ discrimination complaints. Recent directives state that the federal government has a duty to protect religious exercise, not to impede it. The Administration has instructed the Office of Federal Contract Compliance Programs (OFCCP) not to condition federal contracts “upon a recipient’s willingness to surrender his [or her] religiously impelled status.” Rather, faith-based organizations should be permitted to compete on a level playing field for federal contracts.

There will be a rulemaking process, so the impact of these directives may not be known for some time.

* * * * *

All in all, there have been some helpful changes at the DOL, the NLRB, and other labor policy-making agencies. However, much of the Obama Administration’s overreach in the labor arena remains in place.

Employers should encourage the current administration and Congress to pursue business-friendly policies designed to keep the economy growing. Perhaps the likelihood of continued media attention on the special prosecutor’s investigation will enable more good regulatory work to move labor laws and policy in directions conducive to business and employment growth.

But employers should also remain mindful of the need to comply with labor laws and regulations currently in effect.

What labor policies would you like to see changed and why?

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Healthcare Providers Need to Engage in Systems Thinking


wheelchair-1629490_640

I have written before (see here and here) about the adage “Every system is perfectly designed to get the results it gets,” a saying that apparently originated in the medical world.

In recent weeks, I have been personally involved in a medical situation that shows that healthcare providers need to bear this adage in mind. In the case I’ve seen, each doctor and nurse has done his or her specialist’s job well, but no one has considered the patient’s whole person or household environment. The result is that the patient and his family are suffering more than necessary.

This patient fell and incurred an orthopedic injury to his leg. The Emergency Room doctors and nurses did an excellent job of stabilizing him, then sent him home with the instruction to contact an orthopedic surgeon because surgery was likely to be necessary.

So the patient went home. With a spouse who weighed 70 pounds less than him. To a house without a bedroom on the main floor and with only a half bath on this floor that this patient couldn’t fit into with his leg immobilized. He managed to get upstairs, but could not get in or out of bed unassisted. Because he is up multiple times during the night, neither he nor his spouse has had a good night’s sleep since the accident. There is only so much that other family members and friends can do to help.

No one in the Emergency Room made any inquiries about the home situation the patient was going to, nor offered any help once the person left the ER.

The next morning, the patient contacted the orthopedic surgeon, someone who is highly recommended in the community. That office showed no sense of urgency in scheduling an orthopedic consult, even though they had the X-rays from the ER. It took pushing by the patient to get an appointment to see the surgeon that same week. After the office visit, surgery was scheduled fairly promptly, but it still took more than a week after the accident to repair the injury.

The surgery went fine. But in the Recovery Room, the nurses had the same approach as the ER staff had had—get the patient stabilized and out of here. No inquiries about the home situation or how to deal with the patient’s other medical conditions, now worsened by his lack of mobility.

In the post-op follow-up ten days after surgery, the patient mentioned another injury incurred during the accident (to his arm). The orthopedic surgeon took a brief look and ruled out a bone problem, but he made no inquiries that would diagnose a tendon or ligament issue. It was as if his approach was “I do bones; that’s it.”

During the time since the accident, the patient has seen two other specialists for other conditions. Both of them focused solely on their specialty, without considering the impact of immobility on the patient or his spouse.

Meanwhile, the patient and family members have learned to be more insistent on getting questions answered, such as “will this new treatment further reduce his mobility?” and “what can he do to improve his rest at night?”

disabled-728521_640But wouldn’t it be better if each of the doctors and nurses asked such questions and considered this patient to be more than a leg or a bladder or a prostate? Wouldn’t it be better if the medical profession saw the patient as a whole person?

The changes to the healthcare system in the last decade or so have only exacerbated the tendency to see patients as parts instead of a whole. Obamacare has not helped. Republican proposals have not helped.

Expertise exercised in a vacuum ceases to be expertise. And the system is perfectly designed to get the result it gets.

Have you experienced similar issues in your own medical situations?

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Employer Health Care Benefits — Preparing for 2018


medical-563427_640

I last wrote about health care in late March, shortly after the House of Representatives failed to bring the American Health Care Act (AHCA) to a vote. Since then, after a few amendments, the House did pass the AHCA, but with all the other brouhahas in Washington over the last few weeks, it’s questionable whether the Senate will get to health care anytime soon.

There are some good provisions in the AHCA as passed by the House. Among other things, the AHCA makes the following changes to Obamacare:

  • The individual mandate was repealed, as was the employer mandate;
  • The 2.3% medical device tax was repealed;
  • The net investment tax was repealed, as was the .9% Medicare high earner tax;
  • The Cadillac tax for expensive plans was delayed (and will probably never be permitted to take effect, since neither Republicans nor Democrats like this provision); and
  • Health Savings Accounts were expanded, effective in 2018

All of these provisions provide less government control over the health care marketplace. In the long run, these changes would generally be helpful for employers.

Still, as most people recognize, without an individual mandate, some incentive is necessary to get healthy people to opt into health insurance before they get sick and to maintain that coverage. The AHCA continuous health insurance coverage incentive replaces the individual mandate penalty. This incentive operates much like HIPAA certificates of coverage. As long as they do not let their health insurance lapse for more than 63 days, individuals cannot be charged higher premiums because of preexisting conditions. Moreover, the premium penalty for the first plan year cannot exceed 30%.

There is an exception to this 30% limit, but the exception permits insurers to charge late enrollees with pre-existing condition higher premiums only if the state has waived the community rating rule and the state has established a high-risk pool to help people with preexisting conditions fund their coverage.

The AHCA is far from a perfect bill, and it is likely to face substantial amendments in the Senate before it comes to a vote in that chamber. And Congress has many other priorities this session as well. So what will happen with respect to health care legislation by the end of the year is anyone’s guess.

Nevertheless, we are at the time of year when many employers are examining their options for health plans for their employees for the year ahead. What should employers do in this time of uncertainty?

Obamacare, the Affordable Care Act, is still the law, so until Congress acts, employers must comply with the mandates and reporting requirements. With the individual mandate in place, employees will want to know their employer-provided health care options in a timely fashion.

Moreover, although the Cadillac tax has been kicked down the road and its ultimate implementation is uncertain, avoidance of the tax—or preparation for it—will take time to structure.

For 2018 at least, the current employer responsibilities are likely to remain in place. Employers must continue to manage their benefit plans, tweaking them as makes most sense for their workforce. There remain many reasons why employers should support their employees’ health and wellness if they want to be employers of choice.

Employers, what concerns you the most about health benefits in 2018?

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A Retrospective on Healthcare, and Where Do We Go from Here?


800px-Capitol_Building_Full_ViewRegular readers of this blog know that I am not a fan of Obamacare. It is overly prescriptive, too costly, and has been poorly implemented. Readers also know that I have said from the beginning that it needed corrections.

I have never been hung up on whether Congress called it repeal or replacement, as long as our healthcare system was fixed . . . or at least improved.

In November 2013, I recommended the following reforms:

  • Put all forms of health insurance (employer-based and other) on an equal footing
  • Permit a wide variety of insurance plans, from catastrophic plans to high-deductible plans to those with varying levels of coverage and exclusions
  • Provide direct subsidies to the poor and seriously ill so they can purchase healthcare coverage on the open market
  • Repeal the individual and employer mandates

I said,

“In short, the type of healthcare insurance to buy should become a decision that individuals make, not the government. Insurers should be free to design policies that consumers want, and to price them at levels that are profitable. We should abandon the notion that the federal government knows what one-size-fits-all insurance programs are ‘best’ for Americans.”

The Republican bill that Congress could not pass, the American Health Care Act (AHCA), was far from perfect in addressing my concerns, but it addressed some of them. I thought it was better than the Obamacare statute as it exists now. Frankly, the fact that no one liked it made me think the AHCA was as good as we were going to get.

But it went nowhere. Apparently, the split between the ultra-conservative and the establishment branches of the Republican Party is wider than 218 votes, and no bill could bridge the gap.

As the Wall Street Journal stated on March 24, 2017, in The ObamaCare Republicans:

“[The AHCA] worked off the reality that the U.S. health system has changed under ObamaCare and thus an orderly transition is necessary to get to a free-market system without throwing millions off insurance. The GOP also is a center-right coalition with competing views and priorities. The bill had flaws but was the largest entitlement reform and spending reduction in recent decades.”

So, given that Obamacare needs reform, where do we go from here?

I don’t know.

HHS sealHHS Secretary Tom Price can work on regulatory reforms, but only within the confines of the Obamacare language. Some of the most pressing issues are part of the statute and cannot be changed (though the Obama administration delayed some of them, or gave exceptions, and perhaps the Trump administration will do the same). Some of these issues include:

  • The tax on medical devices
  • The details of the mandated benefits (“essential health benefits”)
  • The Cadillac tax on employer healthcare plans, which, if implemented, will suck in more and more employers over time as the cost of mandated benefits rises

The fundamental problem with healthcare in the U.S. is that most Americans have not paid the full cost of their care since the 1930s, when employers began offering medical insurance as a benefit. As with all consumer goods and services, Americans want high quality, high quantity, and low prices on healthcare. Any economist can tell you that you can’t have all three—two of the three is the best you can hope for. The ideal system is often a compromise on all three. When healthcare prices are artificially lowered for the consumer, they make irrational decisions on quantity and quality—overusing the system and expecting Cadillac care for Fiat prices.

In my opinion, our healthcare system will not be fixed until employer-based plans are no longer the preferred way of covering the cost. Don’t get me wrong, many employers do an excellent job of managing their healthcare benefit plans. But the distortion in the market caused by these plans is increasing and is only made worse by Obamacare.

The different tax treatment of employer-based premiums and premiums for individual plans is unfair. The proposed AHCA would have helped in that regard, though it wouldn’t have fixed the problem entirely.

As the Wall Street Journal editorial said:

“An ideal free health-care market is never going to happen in one sweeping bill. The American political system is designed to make change slow and difficult, thank goodness. Republicans have to build their vision piece by piece, carefully gauging how to sustain their policy gains politically—the same way Democrats expanded the welfare and entitlement state over the last century.”

I suppose that’s where we go from here.

What do you think?

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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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Filed under Law, Leadership, Mediation, Politics

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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Filed under Benefits, Human Resources, Law, Management

Obamacare at the Supreme Court Again: Is a State a State?


Supreme Court building, from Wikipedia

Supreme Court building, from Wikipedia

Last week the Supreme Court heard oral arguments in King v. Burwell, on the issue of whether the Affordable Care Act authorizes the IRS to grant subsidies to people buying health insurance through the federal exchange, Healthcare.gov, or only to people buying health insurance through state-run exchanges. The debate focuses on Section 1401 of the Act, and in particular on the phrase that provides that subsidies are available to people who buy their insurance “through an Exchange established by the State.”

Does the quoted phrase mean only exchanges established by the state, or does it also mean exchanges established by the federal government? The plaintiffs argue for a plain meaning of the words—a state is a state. The government argues that Congress couldn’t possibly have intended to only help people who used state-run exchanges, particularly because it turned out that most states did not create their own health insurance exchanges. The government says the phrase is ambiguous and the IRS interpretation is reasonable.

However, one of the Senate bills leading up to passage of the ACA did condition exchange subsidies on state cooperation, and some House Democrats complained. Still, the plain meaning of the final language of the ACA appears to limit the subsidies to state-run exchanges.

Moreover, an early draft of the IRS regulations interpreting the subsidy provision originally restricted the subsidies to state-run exchanges. Only when the issue began to be publicized in 2011 did the IRS change their interpretation of this section.

It is likely that no Democrat would have passed a bill that kept citizens of more than half the states from getting subsidies on the federal exchange. It is likely that they never anticipated that more than half the states would decline to establish an exchange.

This is another example of why complex statutes almost always need technical corrections. The problem is that the Democrats don’t have the votes to pass the corrections they need.

Because of the way that the ACA was passed—with only Democrat votes in support, and all Republicans in Congress opposed—the law has no bipartisan underpinning to foster compromise. The Democrats are now reaping the effect of their actions in cramming the legislation down an unready nation’s throat.

So what will the Supreme Court decide in King v. Burwell?

Based on the oral arguments, it seems probable that four justices—Justices Breyer, Ginsburg, Kagan and Sotomayor—will vote to uphold the IRS interpretation and provide subsidies to people who used the federal exchange. It seems likely that three justices—Justices Alito, Scalia and Thomas—will vote to overturn the IRS interpretation.

As is often the case, Justice Kennedy is harder to read, but asked questions indicating he was uncomfortable with the practical result of overturning the IRS regulations. On the other hand, Justice Kennedy voted to overturn the individual mandate the last time Obamacare reached the Supreme Court, in National Federation of Independent Business v. Sebelius, decided in 2012.

Chief Justice Roberts said very little during the King v. Burwell oral argument on March 4.

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.

In that case, Chief Justice Roberts turned the individual mandate that the Democrat proponents of the ACA had very carefully not called a tax during their negotiations over the law into a tax, in order to uphold the mandate under the Constitution.

If the IRS regulation is upheld because the statutory language is ambiguous—which is the best the government can hope for—then the next Administration could rewrite the regulation.

It seems Nancy Pelosi was wrong. It takes more than passing the law to know what’s in it. It takes several years of legal battles that go up to the Supreme Court, so the nine justices can decide what the thousand-page law means. It would be better if both Republicans and Democrats compromised, and we developed a workable healthcare system. The system we had before Obamacare was not working, and the ACA system is not working.

Sausage and statutes. As Otto von Bismarck said, it is better not to watch them be made. Some of us, however, revel in the goriness.

What’s your prediction on the decision in King v. Burwell?

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Obamacare and the CBO Report: The Truth Is in the Middle


800px-Capitol_Building_Full_ViewLast week’s kerfuffle over the Congressional Budget Office (CBO) report on Obamacare, like most kerfuffles, had some truth on both sides of the debate. The CBO report says that the equivalent of 2 million full-time jobs will disappear by 2017, and 2.5 million by 2024, in part because people choose not to work at all or to work fewer hours. Is this a liberation of the oppressed American workforce or a death-knell to the American work ethic? Obviously, it is neither completely.

The Affordable Care Act grants subsidies to lower and middle income families to buy health insurance on the exchanges. Subsidies are just a way to give people money, albeit money with restrictions. In this case, people get the money (the subsidy) only if they buy insurance.

If you give people money, they have more choices. People will always choose to use the money in ways that they think will benefit themselves. Some of their choices also benefit society, and other choices do not.

Source: National Cancer Institute

Source: National Cancer Institute

With respect to healthcare, most people have had their health insurance subsidized by someone in the past.  Many received subsidized health insurance from their employers. Many others were covered by Medicare or Medicaid government subsidies. Only those on the individual market who could not tap into a high-risk pool paid for the insurance entirely on their own.

The Affordable Care Act now grants many people another government-subsidized option—health insurance purchased through the federal and state exchanges. So what choices are likely to make as a result of this new option? And will those choices benefit society or only the individuals involved?

  • People will quit jobs they don’t like because they no longer need employer-subsidized healthcare. This is the “benefit” described in the CBO report that the Democrats are touting.

It is true that many employees have stayed employed at a particular workplace only because they need health insurance. Prior to the ACA, employees younger than 65 may only have had the choice of employer-subsidized health insurance or unsubsidized private insurance that they thought cost too much. A second earner in a household might have been working primarily to provide health insurance, rather than because the family needed the salary. Those with pre-existing conditions didn’t feel they could get insurance if they changed jobs or quit work.

So “job lock” is real. Anyone who has worked in Human Resources or managed a workforce knows that many employees would rather be doing something other than working, and often their motivation for staying is related to insecurities around healthcare.

To the extent that the ACA has de-linked health insurance from the workplace, Republicans should extol this benefit. The problem is that the ACA doesn’t de-link insurance and employment. The ACA in fact imposes substantial penalties on employers if they do not continue to provide health insurance to employees. The ACA provides subsidies to employees but increasing costs on employers.

  • People will work less to keep their ACA subsidies. This is the impact of the ACA described in the CBO report that Democrats ignore and Republicans squawk about.

Many government programs give money to people but reduce the amount they receive as their income increases. Most of those programs therefore cause people to question whether they are better off maximizing their government payments or maximizing their income. Some will choose to work less to receive a larger payment from the government. Clearly, ACA subsidies will cause some of this behavior.

Moreover, it appears from the CBO report that lower income workers are more likely to decrease their work hours in response to the ACA. That is because they receive the greater subsidies, and the trade-off between their salaries and their ACA subsidies is more likely to favor the subsidy.

These choices to take the subsidy rather than work more for pay may benefit the individual, because non-working hours are valuable for family, hobbies, and other personal priorities. But the choices do not benefit society, unless someone else performs the same work for less pay or more work for the same pay. If productivity from new workers does not increase sufficiently to cover the cost of the subsidy, then society is worse off.

Even most conservatives believe that some redistribution of income to the poor through government programs is desirable; the question is how much. While I don’t think the ACA itself is the tipping point, I do believe that it will incent some people who could work more to instead work less, and in many cases, that will not benefit society.

So the CBO report contains ammunition for both sides of the Obamacare debate. While I believe the conservative arguments in response to the CBO report are over the top, I also believe that the liberal arguments are ignoring the very real likelihood that the ACA subsidies will decrease productivity.

The bottom line is that after the CBO report, the political argument around the ACA remains what it always has been—a debate on the role of government. Is it better for people to work less and receive more government support at taxpayer expense, or is it better to spend less on government programs and make people cover more of their expenses themselves? Should we redistribute income or not?

For employers, however, Obamacare is still bad news. Employers remain on the hook to provide subsidized health insurance to their workers or face substantial penalties. Moreover, the disparate taxation of employer-provided healthcare and privately purchased healthcare continues. In these ways, the labor market continues to be skewed, and therefore I still believe that the ACA has not moved healthcare in this country in the right direction.

For one of the more reasoned discussions of the CBO report, see Obamacare: ‘Job-killer’ or freedom from ‘job trap’?, by Linda Feldmann, Christian Science Monitor, February 6, 2014.

For a good articulation of the philosophical arguments on the role of government, see Leaving Work Behind, by Ross Douthat, New York Times, February 8, 2014.

What are you hearing from your employees about the Affordable Care Act these days?

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Customer Service: The Importance of Letting Employees Use Discretion and Judgment


call_centre_employeewithheadsetportrait_26747-300x226Last week I had two experiences with government-sponsored call centers within twenty-four hours. One was pleasant, and the other was a waste of my time. The comparison caused me to think about the importance of giving employees discretion to handle situations to the best of their abilities.  When employees are allowed to use their best judgment, their ability to satisfy customers improves.

One evening I had to call my municipal government’s 311 action line to complain that my trash had not been picked up on our regular trash day. The garbage truck had been to most of the homes in our neighborhood, but for some unexplained reason it had skipped our block.

Even though I called about 6:30pm (well after normal government working hours), I got a live human being on the phone. “Derrick” took my call, was pleasant and knowledgeable as we talked, looked up my information in his computer as we spoke so I didn’t have to tell him everything, joked with me about Thanksgiving plans, and promised to send another garbage truck the next day. (That didn’t happen, but the call itself was pleasant. The trash was picked up later in the week.) Throughout the phone call I felt like I was talking to someone who cared about me and my problem, who was knowledgeable about his job, and who would do his best to satisfy his customer.

The next morning I had a different experience. I received a survey call from the federal Department of Health and Human Services. I try to take survey calls when I have the time, particularly when I am interested in the topic, and this survey was about health care, which does interest me.

“Rolando”, the representative conducting the survey, launched into his introductory spiel, which he could barely read. I stopped him to ask how long the survey would take. He gave me the usual “That depends on how long your answers are” response that surveyors are trained to use to keep you on the phone. Then he started the introductory spiel all over again . . . from the very beginning, as if I hadn’t heard any of it before. Or maybe he didn’t know where in the speech he had left off.

After the introduction, Rolando started the actual survey. We got through a few demographic and geographic questions, then he asked “How do you get your health insurance?” and he read a long series of options, such as through my employer, through my spouse’s employer, through an individual policy, through Medicare, through military plans, etc.

When he got to the choice that applied to me, I said, “That’s it.”

Rolando didn’t acknowledge my answer and continued reading the options on the page in front of him.

“You read the one that applies to me,” I said, stating it again. “That’s the only health insurance I have.”

“For quality purposes,” he said, “I have to read everything.” And he started reading the list again, from the top, as if I hadn’t said or heard a word he had previously spoken.

At that point I stopped him again. “If you’re going to waste my time reading the whole list instead of listening to me,” I told him, “I won’t take the survey.” I hung up.

HHS sealI probably wasn’t very nice to poor Rolando, but I have no patience with people who waste my time. I don’t know if Rolando’s lack of customer service was due to his cluelessness or if he had been trained that way. Regardless, if HHS doesn’t give its survey conductors any discretion to respond to me as an individual, or hire surveyors who have the capability of using their judgment, then I see no reason to accommodate them by sitting through their survey.

And if HHS cannot allow survey conductors to use some judgment and discretion, how can we expect them to manage the entire healthcare industry? Or even to get Healthcare.gov working?

What are your pet peeves about employees who don’t (or can’t) exercise good judgment?

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Obamacare: Get People Enrolled, then Amend It—Fast!


doctor holding an injectionBased on my earlier posts about Obamacare (see here, here, and here), readers might think I hope the new law fails. That is not the case. I do not agree with the legislation’s design. I originally hoped Congress would repeal it or the Supreme Court would invalidate it. I still hope it will be changed significantly (as outlined below).

But we are well past the time when anyone—even the staunchest Tea Party member—should hope Obamacare (formally known as the Affordable Care Act) fails completely. The quality of every American’s future healthcare is at stake. We are beyond the point when we could return to the healthcare system of the past.

In the short term, it is clear that we cannot return to the past for the reasons we have heard since President Obama asked insurance companies to consider reinstating their old plans, so he could keep his promise that if we liked our plans, we could keep them. (A promise that was never true, as the rapid decline in the number of grandfathered employer plans demonstrated in 2012 and 2013.)

Through the course of 2013, insurance companies blew up their old policies, provider networks, coverage options, premium levels, and every other aspect of their healthcare delivery systems to comply with the mandates of the ACA. Even if state insurance commissioners permitted healthcare insurance companies to reinstitute their old plans, most insurers could not do so before January 1, 2014. Even if they could, they would likely see adverse selection, with younger, healthier people selecting the cheaper old plans, and older, sicker people selecting plans that meet the ACA standards.

If we don’t get people enrolled in the insurance plans we now have, many families will suffer when they incur medical costs starting in January. But, it is also time to step back and reassess Obamacare.

We first need to recognize that healthcare insurance will only survive with some form of subsidy. For the past several decades, our healthcare system—as bollixed up as it has been—survived because of employer subsidies. Employees paid nothing or very little for their healthcare coverage. Even in recent years, employees have paid only a fraction of the cost of their coverage; the rest was paid for by their employers.

Government subsidies have supported the healthcare system also, in the form of Medicare and Medicaid, but employer subsidies have been what kept the young and healthy workers in the healthcare system and allowed the sick and elderly to pay less than their healthcare cost. Employer and government subsidies also led to the lack of consumer knowledge about healthcare pricing and quality, and the consequent overuse and wastefulness in our healthcare system.

It was an accident of history that led to the development of employer subsidies. We had an opportunity to correct that accident before the passage of Obamacare, which we let slip by. The failure of the Obamacare rollout gives us another opportunity to correct the past.

So, where do we go from here?

1.  Get People Covered: The first order of business should be to get as many people as possible covered under some healthcare plan—whether it be an ACA-compliant plan or a resurrected individual plan or an employer-sponsored plan. Republicans and Democrats, state and federal agencies should all work toward that short-term goal in the next month . . . and continuing until the March deadline.

HHS seal2.  Amend Obamacare: Both Democrats and Republicans recognize the ACA is far from perfect. Any other legislation of this magnitude would have gone through one or more rounds of “technical corrections” after its passage. Unfortunately, the acrimony around the passage of the ACA insured no technical corrections bills could be passed. Only Democrats voted for the ACA, when the Senate bill that was never intended as final legislation was rammed through the House. We now need a bipartisan replacement for Obamacare.

3.  Keep Parts of the ACA: Some of the Obamacare provisions are popular and should be retained. One of those is the requirement that young adults be permitted to stay on their parents’ coverage. Easier transfer between healthcare plans, regardless of pre-existing conditions also needs to be a component of future legislation, but how to keep insurers whole is the crux of the problem.

4.  Revise Other Aspects of the ACA:  Even the Obama Administration has acknowledged that some aspects of the ACA are unworkable. Implementation of some provisions has been delayed. Regulations have changed other provisions away from the clear language of the statute. Other provisions are wildly unpopular.

Here are some broad suggestions for reform:

  • Put all forms of health insurance on an equal footing: Allow all taxpayers to deduct their healthcare premiums, up to a maximum amount, regardless of whether healthcare is obtained through employment or on an open market. In addition, employer subsidies of healthcare costs should be taxable as ordinary income. Some employers will continue to provide healthcare plans, and others will convert that benefit to wages. Those that do neither will lose employees.
  • Permit a wide variety of insurance plans: Individuals should be free to purchase only catastrophic plans, to choose high-deductible plans, or to buy a wide variety of coverage and exclusions. They should be allowed to buy plans that exclude preventative coverage or certain types of coverage (psychiatric, substance abuse, maternity and contraceptive, etc.). Then we need to be willing to hold people accountable for their choices, but permit movement between plans at some price.
  • Provide direct subsidies to the poor and seriously ill: We should provide subsidies directly to the poor and the seriously ill to permit them to purchase healthcare coverage on the open market, and to make the transfers between plans as their healthcare needs change beyond their ability to pay. There should be a robust pool to fund these subsidies, paid for by premiums of those who are covered and by both state and federal governments. States should be allowed to change their Medicaid programs to integrate coverage for the indigent into the private market.
  • Repeal the individual and employer mandates: It would be better to repeal the unpopular individual mandate, but if any mandate is retained, it should be limited to requiring that people maintain catastrophic coverage or be taxed on their share of the pool needed to fund public subsidies. (Yes, call it a tax—that is what the Supreme Court said it is.) In addition, the employer mandate would no longer be necessary if private insurance would be taxed on the same terms as employer coverage.

In short, the type of healthcare insurance to buy should become a decision that individuals make, not the government. Insurers should be free to design policies that consumers want, and to price them at levels that are profitable. We should abandon the notion that the federal government knows what one-size-fits-all insurance programs are “best” for Americans.

If we do not abandon the central-planning model in Obamacare, we will drift—and I think drift quickly—into a world where healthcare is rationed by the lack of providers and by the government decisions on what services will be covered at what level, where fewer and fewer Americans have access to the doctors they want, and where the quality of care suffers.

Will Republicans and Democrats be able to compromise to reform Obamacare during the 2014 mid-term election year? What do you think?

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