Nov
14
Benefits and Beyond - The Blog and Power Points
Filed Under Management and Beyond | Comments Off
This Blog is dedicated to update various chapters in my new text, Benefits and Beyond-A Comprehensive and Strategic Approach to Retirement, Health Care, and More (Sage, 2009), and to enrich its pedagogical content. Current Blog Posts are updated weekly. Power Points for many of the Chapters have been added to the Posts.
Professor Thomas E. Murphy
The Blog also includes some discussion of HRM and Global Management course topics that I have taught at Miami University and various business schools in Europe.
Nov
14
In the Courts: ERISA & SPDs - “ObamaCare” Heads for Supreme Court - Long Term Care (CLASS) will not be enforced.
Filed Under Management and Beyond | Leave a Comment
Okay, where do we go from here?
(1) ERISA and the SPD - U.S. Supreme Court
On May 16, 2011, the U.S. Supreme Court held that where the Employer’s SPD provided a more generous interpretation of retirement benefits that conflicted with those in the Plan Document, the Courts cannot hold that such miscommunications in the SPD constitute enforceable “terms of the plan.” A suit for compensatory damages by the misinformed Plan participants is not supported by Section 502 of ERISA. CIGNA v. AMARA. Another door for relief, however, was opened. The Court did, however, indicate that there could be “equitable” remedies available to the plaintiffs under ERISA. These could involve instances where there is injurious reliance by the participants on a miscommunication of Plan terms by the employer sponsor. In such instances, a Court can consider injunctive and other equitable remedies such as “estoppel,” “surcharge,” (monetary remedy for breach of fiduciary duty) or “reformation” of the Plan. The case was remanded to the original trial court for consideration of its findings. The Case will put new pressure on employer sponsors, their outsourced call centers handling employee request for Plan information, and TPAs to make sure that SPDs and other forms of participant communications conform to the terms of the Plan document. The case is expected to open new avenue of litigation where similar facts are present.
(2) OBAMA CARE (The Patient Protection and Affordable Care Act)
There are now several diverse opinions from the US Courts of Appeals concerning the Constitutionality of the Patient Protection and Affordable Care Act (PPACA) of 2010. On November 14, 2011, the Supreme Court agreed to review the constitutionality of the Act in March, 2012. A decision can be expected in the late spring. Here are some of the decisions that have created a conflict in the Circuits.
First, the US Court of Appeals for the Eleventh Circuit (Atlanta, Georgia) in State of Florida et. al. v. US Department of Health and Human Services ruled that the individual mandate included in the PPACA went beyond Congressional legislative authority under the Commerce Clause of the US Constitution. The mandate requires a fine in some instances for those who do not obtain insurance. The Court applied its ruling only to the individual mandate provisions of the Act. The litigation involved 26 States that sued the Secretary of Health and Human Services and others contesting the Constitutionality of the Statue; it was decided on August 12, 2011.
The opinion is in direct conflict with decisions by the US Courts of Appeals for the 6th Circuit (Cincinnati, Ohio) and the 4th Circuit (Richmond, Virginia.) The 6th Circuit held in a case titled Thomas More Law Center v. Obama, (June 29, 2011) that the law, in particular the individual mandate to acquire health insurance meets US Constitutional standards and does not go beyond Congress’ authority to regulate commerce under the Constitution’s Commerce Clause.
In September of 2011, the Court of Appeals for the 4th Circuit (State of Virginia v. Sebelius) reversed a decision by the District Court in Virginia that held the law’s individual mandate went beyond Congress’ power to regulate commerce and, therefore was unconstitutional (see analysis below). The 4th Circuit decision was based upon a procedural issue, namely that the Attorney General of Virginia did not have “standing” to challenge the law. It also ruled on a related case brought by Liberty University that its injunctive challenge to the “tax” (i.e. the non-compliance fines) portions of the law violated an anti-injunction statute which provide that the tax must be imposed before it is challenged. Since the fines for failure to acquire health insurance do not become effective until 2014, the challenge was nullified.
In November, 2011, the DC Circuit Court of Appeals upheld the individual mandate as a lawful exercise of Congressional power under the Commerce Clause and also not violative of the petitioner’s Constitutionally based religious freedoms. See: Susan Sky v. Holder.
————————–
Here is some background on the theories of the PPACA cases involving its constitutionality:
(a) The rationale for the mandate was to mitigate cost shifting arising when persons receiving medical treatment but are without insurance do not pay their medical providers. This results in uncompensated care delivered by providers who then shift these costs in the form of higher reimbursements to the insured. The government notes that cost shifting affects the overall costs of the health care market and that virtually everyone in the US participates in this market. So, the interests of Congress in making insurance more accessible is dependent upon affordability and is clear and is authorized by the Commerce Clause. The supporters of the law argue that the anit-cost shifting policy behind the PPACA does have a “substantial effect on commerce.” The Government also argues that the fines imposed on those who defy the mandate will help finance the other protections of the law such as the prohibition against the use of restrictive pre-existing exclusions.
(b) The theory challenging the constitutionality of the individual mandate is that Congress is not authorized by the Commerce Clause of the US Constitution; it goes beyond their authority to legislate. The challengers argue that the decision not to purchase health insurance is not an economic activity that is subject to regulation by the Commerce Clause of the US Constitution, and thus the law is an exercise of “prohibited police power to compel individuals to enter into private commercial transactions.”
Note: An issue for class discussion could be: can the PPACA of 2010 effectively survive without the individual mandate or is §1501 of the Act an integral and essential design feature which, if nullified, would make the entire Act unworkable?
Finally, the Health and Human Services Department decided that the long-term care provisions of the Act (CLASS) will not be enforced. CLASS was intended to provide long term care benefits to those individuals who voluntarily enrolled and agreed to pay the premiums. HHS, however, this month (October 2011) concluded that it was not financially sustainable and will not be implemented.
Last Revised: November 14, 2011
Aug
5
Medicare Reform and Affordable Care Act - 2 Class Exercises!
Filed Under Management and Beyond | Leave a Comment
Homework
(1) Medicare Reform - Which way is best?
For your homework, write a memo concerning the future of Medicare in the U.S. This should include a detailed analysis of its current fiscal state, its expected trends for the next 10 to 20 years, and an in-depth description and evaluation of the alternative solutions that will enable a continuation of some form of meaningful, government supported health care for the elderly.
Your paper should be more than a recitation and description of the issues and alternatives. It should include the supporting economic and social rationale for the various “solutions,” and original research sources, such as the Medicare Actuarial reports, Society of Actuary reports, reports from Congress, the President’s National Commission on Fiscal Responsibility and Reform, and other organizations that study and recommend public policies. Your memo should also contain a comprehensive analysis of the potential efficacy of each approach. The current Medicare Reform debate has been fueled by House Representative Ryan’s proposal on Deficit Reform and the 2012 Budget. Ryan’s proposed budget includes a dramatic new approach to Medicare. There is some reasonable expectation that as a result of the Congressional compromise and accompanying legislation pertaining to the increase in the debt limit and deficit reduction, that the select 12 Member Congressional Committee will look closely at both Medicare and Social Security reform. Thus, this homework becomes very relevant and timely.
Careful attention should be paid to the quantitative and qualitative impact the “solutions” will have on the problems and challenges of Medicare. It is important that the memo include your thinking, your ideas, and your analysis as well as that of the “experts.” I should note that in Chapter 12 of the text, I describe how Medicare works, and more importantly, from page 375 through 384, I discuss several approaches to Medicare Reform.
Your homework will be graded based upon the quality of your research, the comprehensiveness of your discussion, the relevance of your analysis, and the clarity and organization of your writing. You should write the paper so as to provide the reader with an in-depth and clear understanding of all of the challenges and purported solutions relating to the continuation of a government supported health care plan for the aged. Where information is obtained from other various sources you should provide end notes identifying the sources.
(2) The Fail to Plan, Plan to Fail Imperative — Employer’s Strategy with Respect to Health Care Reform (PPACA of 2010)
You are the Finance/HRM executive of an employer with 100 employees. You currently offer a typical HDHCP (PPO) with an HSA to your employees. The Plan was initiated before March 2010. Employees pay tiered premiums, and when considering all health cost sharing features, a total of about 35% of the cost of the plan. You contribute $20 per month to each HSA and have a Wellness Program with cash incentives that are deposited in the HSA account. After reviewing the essential features and issues pertaining to the new law, which are included in a Post below, as well as other independent research you might peruse, prepare and submit for your CEO a “discussion memo” that will facilitate the development of a comprehensive, step by step health care insurance strategy and plan for each of the 4 years after passage of the PPACA. The memo can be written in outline form and should be designed to educate the CEO as to what you as an employer must do in each year up to and including 2014, the relevant issues and alternative choices that your company might make, additional data or information you might need, a reference(s) to the provisions of the PPACA applicable to your company, and, appropriate recommended actions the employer should take.
Note: your discussion memo will evaluated based upon the comprehensiveness of the issues discussed, the clarity of the writing, the quality of the analysis, and the practical value to a CEO who is responsible for compliance with the new law. See: the June 14, 2010 U.S. Interim Final Rules on Grandfathered Status.
Other Question for Discussion: Read more
Nov
18
New: Power Points of Affordable Care Act of 2010, and More
Filed Under Management and Beyond | Leave a Comment
Here are a set of Power Point slides made by me on September 23, 2010. The Power Point Presentation covers all of the basic provisions of the Patient Protection and Affordable Care Act of 2010.
If you’re interested in “lighter” treatment of the new Act, you might want to watch a Video made by the Kaiser Family Foundation that was just published on November 17, 2010.
In addition you can access my Power Points for the following Posts: “My View,” Chapter 8 (Improving Access to Quality Health Care - Do We Need Reform), as well as Chapters 4 (Retirement Plans-Evolution and Design), 5 (Retirement Plans for Small Employer and Retirement Planning), and 9 (Benefit Legal Compliance). These can be found in the respective Posts for the Chapters. More Power Points for other Chapters will be posted soon.
Sep
3
Discussion - Patient Protection and Affordable Care Act-Passed and signed March 23, 2010.
Filed Under Management and Beyond | Leave a Comment
The Posts on Health Care Reform are related to Chapters 6, 7, and 8 of the book, Benefits and Beyond.
This Post includes a description of the major points of the recently passed health care reform legislation. My purpose is to describe and explain these features for teaching purposes - not to provide a loose leaf benefit publishing service for benefit professionals. Also included will be some discussion points that Benefit teachers can raise in class after the students have read the Chapters and the relevant blog posts.
President Obama pushes health care reform in Congress
Patient Protection and Affordable Care Act of 2010
(Last revised: September 24, 2010)
Thomas E. Murphy
Highlights
This recently passed Act is intended to reduce the number of uninsured. The Act includes prohibitions against policy rescissions, having lifetime limits on health care spending, excluding any health related reasons for denying coverage (”guaranteed issue”), and denying or delaying coverage of pre-existing conditions. It also requires individual mandates to buy insurance and employer mandates to offer it. It creates state-based Insurance Exchanges where individuals and certain sponsoring employers can purchase health insurance presumably at lower costs. The major features do not go into effect until January 1, 2014.
The Congressional Budget Office estimates that 24 million persons will be enrolled in the Exchanges by 2019. The Act prescribes the essential design features (called an “Essential Health Benefit Plan” or “Essential Coverage“) and benefits that health care plans must provide. Individuals who cannot afford to purchase health care will be subsidized while certain small employers who wish to offer it may also receive tax credits. Persons who work for companies that offer health care but require cost sharing by participants that exceed government prescribed thresholds, may opt out of the employer plan and obtain insurance through an Exchange. Their employers must provide financial support for this coverage.
Medicaid eligibility is changed to accommodate more participants. The subsidies and increased access to health care will be financed by increases in payroll taxes for Medicare, taxes on certain industries, changes in several health care tax deductions, excise taxes on “Cadillac” health care plans, and fines paid by non-complying employers and individuals. The Act calls for major reductions in Medicare spending including provider reimbursements.
Here are some specifics. Not all of the provisions of the Act are included.
Individual Mandate
Effective January 1, 2014, citizens and legal residents must obtain an essential health care benefit (or, more specifically, “Essential Health Benefit Plan.”) Failure to do so will result in fines described below. Read more
Aug
3
My View - Health Care Reform
Filed Under Management and Beyond | Leave a Comment
Click here to View Power Points on this Article and Chapter 8.
August 13, 2011
The PPACA is law and the relevant government Departments are issuing rules and regulations concerning the Act’s meaning and compliance. There are, of course, Court challenges to the law that are apparently headed for the US Supreme Court for final resolution. While I wrote this brief piece as an “alternative” to the “Obama approach” on reform, I believe it is still relevant as a lesson on misdirected public policy. The problem with respect to health care in the US is that it is too expensive. Lack of affordability has led, in some instances, to a lack of access. If one examines the reality and the data, any effort at reform should be directed at the issue of affordability. We have the institutions to deliver health care for the employed, the individually insured, the aged, and the poor. All of these systems are suffering from the high costs of health care. That should be the primary target for reform. It was not. My view is that the recently passed Patient Protection Act of 2010 is not health care reform; it is “access reform.” Our first priority should have been and still should be to make health care fundamentally more affordable; that will enable us to responsibly extend access. As one health care professional told me: “Our health care in the US is like a broken bridge - it’s much too expensive. Why would we put more cars on this bridge?” The PPACA, as can be seen in my Post “Discussion - PPACA of 2010″), is a law that is both incredibly and unnecessarily complex. It is also exceedingly off what should have been the targeted objective - affordability, and while good intentioned, it is a failure of the public policy making function. Its Constitutional foundation is also in jeopardy as a result of litigation wherein one US Court of Appeals panel called it “breathtaking in its expansive scope.” While some provisions of the PPACA do relate to cost reductions, they are mere “trimmings” that surround its core: changing eligibility standards for Medicaid, imposing mandates for individuals and some employers, providing subsidies for those who cannot afford health insurance, reforming “insurance abuses,” requiring states to create gatherings of health insurance plans where individuals and some employers can buy insurance, and artificially reducing some health care Medicare provider reimbursements. It does not focus on the fundamental principle that competition among providers - not insurance companies - who are selected by patients and their payers based upon demonstrated efficacy, quality, and overall value of their treatments — and will inevitably lead to substantially more affordable health care.
My hope is that students can continue to debate an approach to health care reform and learn from examining the issues. I welcome your comments. I should note that the Mayo Clinic’s Health Policy Center has produced a unique and interesting approach to health care reform. You can review it by clicking on the preceding link. TEM (4 October 2010) Read more
Aug
1
Using Data and Metrics - A Value Proposition for Benefits
Filed Under Management and Beyond | Leave a Comment
What is the financial return?
Benefits and the Allocation of Capital - last revised August 24, 2010
One of the unique features of Benefits and Beyond is Chapter 10 which discusses how sponsors of benefits should use data and metrics to measure the effectiveness of the various benefit plans. Should the benefit be offered? What is the optimal design? How should it be financed? Using a capital budgeting analysis, what are, for example, the financial returns of a new Wellness Program?
The analysis in Chapter 10 would apply to both discretionary and mandated benefits. How do stock options or restricted stock affect, if at all, productivity? Will the retirement plan provide adequate retirement income? Will it cause employees to stay longer? If not, what design changes might enhance these results? What impact do your benefits have on the quality of hire, retention, attendance, and productivity? How can Six Sigma be used to evaluate your benefit designs? How would you calculate the financial returns of a new company sponsored day care center? Does your health care plan help to make employees more healthy? How would you evaluate the effectiveness of the medical providers in your networks? How could such an analysis improve the cost effectiveness of your health care plan? Using surveys, competitive data, financial measures such as Net Present Values, Return on Investment, and effectively mining your Human Resources Management Systems can provide a more objective analysis of potential benefits and their respective designs.
Using the approach and analyses in Chapter 10 puts the sponsoring department within the enterprise to capably compete for the capital needed to fund such benefits. The author has both professional and academic experience in this topic. See: Schwarz, J., & Murphy, T. (2008, April). Human capital metrics: An approach to teaching using data and metrics to design and evaluate management practices. The Journal of Management Education, 32(2), 164–182; Murphy, T., & Zandvakili, S. (2000, Spring). Data and metrics-driven approach to human resource practices: Using customers, employees, and financial metrics. Human Resource Management, 39(1), 93–105;
Jul
28
This Post includes Power Points for the Chapter 1 (Introduction to Benefits), Chapter 2 (HR, Economics, Principles, Actuarial Concepts), and Chapter 3 (Life Cycle Events) to the Book, Benefits and Beyond.
Jul
29
Benefits and Beyond Updates/Power Points - Chapters 4, and 5.
Filed Under Management and Beyond | Leave a Comment
(Last Update on this Post, December 21, 2010)
Bear or Bull?
Capital Markets Slide and So Do Benefit Plans
As we point out in Chapters 4 and 5, capital markets play a key role in financing retirement benefits. The employer sponsoring a defined benefit plan relies on these markets to help finance retirement income for its employees. The employer-sponsor assumes the investment risk. In defined contribution plans, it is the employee who assumes this risk. In an economic recession coupled with huge losses in the capital markets, the employers’ and employees’ risks are significantly increased. Some estimate that $900 billion in pension assets were lost by employers sponsoring defined benefit plans during the recession of 2008-09. Wall Street plunged again after Standard and Poor’s downgraded US debt obligations in August 2011, creating more angst among DCP participants and DBP sponsors. It recovered within several days. In an August 11, 2010 article in Forbes.com, Kenneth Hackle predicts that a coming shortfall in pension funding, and a legal obligation to properly replenish the plans will significantly affect corporate cash flows, earnings, and credit. See: Corporate Pension Bomb Set to Explode. There are some interesting issues that will no doubt arise in the workplace as a result of the dependency on capital markets that affect the financing of pensions and other benefits. For example, in the public employee pension arena, local and state governments are wrestling with how to avoid huge deficits that will occur when they attempt to make their DBPs financially solvent. Should they cut benefits, increase taxes, change investment strategies?
There has definitely been a flight from equity investments among many DBP sponsors. They are looking for more safe investments. As large pension funds leave equity markets and hedge funds remain with an increased share of market ownership, the result will be more volatility in the capital markets. See: Pension Funds Flee Stocks, WSJ, October 18, 2009, A-1.
Jul
28
Benefits and Beyond Updates: Chapters 6,7, and 8.
Filed Under Management and Beyond | Leave a Comment
There is a new “supply side” business model spreading across American. It can be found in supermarkets, drug stores, and shopping centers. It is the mini or little clinic that serves basic health care needs at very low costs. See for example, The Little Clinic that is owned and operated by The Kroger Co.Typically staffed by Nurse Practitioners, who can make basic diagnoses, prescribe some medicines, give physicals, and provide some minor to moderate treatments, these clinics are open in the evenings and on weekends. Most services are covered by health insurance, and can provide a cost effective solution for the expected overwhelming demand on health providers that will result from the new Patient Protection and Affordable Care Act. They also provide a more convenient and rational service than the typical emergency room where many seek costly treatment for minor ills.
Emergency Room
We have identified websites where, in most cases, the referenced article originally appeared. Often, however, the URL for the article has changed. In this case, you can use the topic or the title of the piece to search the publisher’s site for the specific article. In other cases, you might be required to copy and paste the URL on your browser window to locate the referenced article.
_______________________
Correction in Chapter 6, at page 160: change the footnote 1 in the Vignette concerning Max to read: “The assumption here is that Max would be reasonably satisfied . . .” Delete the name “Tom.”
Clarification in Chapter 6, at page 175: change the 2d last sentence of the 2d full paragraph to read, “For example, the employer may decide that employees will pay about 40% of the total health are costs.” The sentence mistakenly refers to “60%.”