HR Impacts - Healthcare Reform & Public Policy Mandates

We are watching the health care reform debate with keen interest. Not from a political perspective, although like most Americans we have personal opinions and preferences, but from an HR perspective. Ours is a pragmatic view gained from more than twenty years on the front lines in HR helping businesses of all sizes address significant changes in public policy. This experience makes us acutely aware of the risks and the challenges dramatic public policy shifts bring including consequences both intended and unintended. All of this public policy change must be analyzed, managed and solidly integrated into the revised business model to minimize disruption and stay in compliance.

The current healthcare debate illustrates the turbulence significant policy changes bring. While the present debate rages on, it is important to put it into historical context. The history of how health care policy came to be so closely linked to employment is an interesting one. Even prior to the 1920's there were proposals to enact some form of nationalized health insurance but the proposals failed for a number of reasons including low demand for medical care, low health care costs, and a medical community determined to avoid government intervention.

As medical care improved the demand for health care increased as did the cost. The first insurance programs were prepaid hospital plans, eventually leading to the formation of Blue Cross and later the Blue Shield programs in the 1930s. These early efforts required legislative changes to support their operation and much of the development of this private system was led by hospitals and physicians who wanted to avoid creation of a public insurance system. Insurance continued to evolve while remaining in the private sector, and Blue Cross and Blue Shield discovered they could address the issue of adverse selection by offering insurance to groups of employed workers. Thus the birth of the link between health care and employment that continued to evolve and grow stronger as public policy continued to support an employer-based health care system, including tax related financial incentives. Health insurance and HR remain firmly interconnected as a result and unless the entire employer-based healthcare system is completely eliminated and replaced by a public option that will remain true.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) first enacted in1985 was one such policy shift. COBRA was implemented to bridge the gap created when individuals and/or their dependents lose employer sponsored health coverage. Although COBRA policy is now well integrated into the fabric of our health care system it was a hotly debated public policy change when first proposed. Later a heated debate followed in California when CAL-COBRA brought employers with as few as two employees under the COBRA mandate. And again in 2008 we saw major COBRA change with premium subsidies mandated in response to the recent economic downturn.

Another major HR mandate created by a shift in public policy was the passage of the Americans with Disabilities Act of 1990. A direct descendent of the civil rights movement, this legislation had significant impact on employers as facilities, hiring and management practices underwent dramatic changes. Even after nearly 20 years we find organizations in need of guidance to ensure compliance with all of the complex regulations resulting from this public policy decision. Even when failure to comply is unintentional businesses can face serious consequences.

The creation of the Family Medical Leave Act of 1993 (FLMA) was a policy mandate that grew directly out of dramatic changes in the make-up of the workforce. Women often lost their jobs due to pregnancy and their role as caregivers had become increasingly complex as families struggled with challenges of protecting their jobs when faced with personal or family medical or care giving responsibilities. California and some other states also created programs supplementing or overlapping the Federal legislation, leaving employers faced with complex leave management issues. Again, a shift in public policy created complex challenges as organizations sought answers to a maze of regulations and YPP became the resource they relied on to assure they remained compliant.

These and many other public policy changes over the years have given YPP a great deal of hard earned expertise in implementing HR mandates created by public policy changes. Partnering with clients to manage these and other policy implementation challenges over many years has given us some insight on how an employer can best prepare to integrate policy changes with a minimum of disruption to the business.

So how do we navigate though the policy shift process? At YPP we take a multifaceted approach beginning with close attention to any policy debate that may impact HR. Such diligence ensures we have a comprehensive understanding of the issues and outcomes. Once we know a policy change is likely we perform a painstaking analysis to determine how clients will be affected. The final stage of the process is the development of an implementation strategy including procedural steps to incorporate the changes and timetables to ensure timely compliance. Policy development is never tidy, as the current healthcare reform debate demonstrates, and the target is always moving so we must be prepared to make many adjustments throughout the process.

Although the current situation is uncertain and the final outcome unpredictable we believe every organization can take steps to begin prepare for this or any significant policy shift to minimize disruption, especially during the implementation phase of the process.

• Stay informed, for instance trade associations or other professional memberships will provide more relevant information than the talking heads on cable news.
  
  

• Identify your team of experts and stay in touch. Their help with analysis and an implementation strategy will save time and prevent missteps.
  
  

• Check in with your HR team and get their perspective
  
  

• Know your current status, in this case your present health plan and what it offers.
  
  

• Plan your resource allocation including people, time and money.
  
  

• Consider outsourcing the transition so you can focus on the business of your business and minimize your risk of getting it wrong with the attendant penalties and frustrations.
  
  
  

Caution - Even Good Intentions May Violate Employee Rights

Sometimes an employer's best intentions will lead decisions or actions which unintentionally violate an employee's rights and can even lead to discrimination charges.

We regularly see this happen when an employee returns from leave or notifies their employer of a pregnancy or other medical issue. Often the employer, either out of concern for the employee, business productivity, or company liability, wants to impose restrictions or limitations on an employee's job activities beyond what their physician has outlined or what is legally permissible. Even, in very rare instances, an employer will want to terminate an employee who is pregnant or otherwise limited by a medical issue because they do not understand the legal protections afforded to their workers or find required accommodations inconvenient or too costly.

In the case of a pregnancy or other medical issue an employer cannot allow personal bias, business productivity or even concern for the worker or your business to overrule the legal protections afforded employees. Seek professional guidance before limiting an employee's work activities or taking an adverse action against an employee who is pregnant or has a medical issue to ensure you fully understand the applicable laws and regulations. Sound advice can help you avoid unintentionally violating an employee's legal rights and the serious consequences that may follow.

We recently received this from Shepard Mullin, one of the leading labor law firms and YPP's employment law firm, illustrating just what can happen when an employer oversteps these legal boundaries.

Unsubstantiated Concerns Ruled Pregnancy Discrimination - A Cautionary Tale

The California Court of Appeal recently affirmed a decision by the Fair Employment and Housing Commission ("FEHC") finding that an employer discriminated against a pregnant employee in violation of the Fair Employment and Housing Act. In SASCO Electric v. FEHC, an extremely experienced female who served as a second captain of a yacht was terminated shortly after she informed her employer that she was pregnant. Her employer was admittedly disappointed by the news because he believed that "mothers do not want to work in the boating business." Moreover, he believed the employee's plan to work as long as possible during her pregnancy was "cavalier." Further, he had liability concerns (e.g., her exposure to chemicals and possibly falling on the boat which could lead to a miscarriage). These fears lead the employer to terminate her employment under the guise of a layoff.

The court held that the employer's paternalistic assumptions took away the woman's right to decide when during her pregnancy she should stop working and when she should return to work after her child's birth. In addition, it held that the "reduction-in-force" reason for her termination was a pretext because when additional help was needed, the employer did not attempt to recall the plaintiff and instead hired less experienced individuals. Accordingly, the court affirmed the award to plaintiff of back pay, even for the period of time the plaintiff's doctor would have restricted her work because the employer would have had an obligation to provide a reasonable accommodation (e.g., temporarily transferring her to a less strenuous or hazardous position). The court also affirmed the award of $85,000 for emotional distress damages and the FEHC's decision to impose an administrative fine as there was clear and convincing evidence of oppression and malice.

The SASCO Electric case serves as a good reminder to employers to tread carefully when dealing with pregnancy issues. Employers must not impose their own views onto expecting employees and instead should work with them to explore reasonable accommodations in order to avoid allegations of discrimination.

Book Review - Small Giants

A management consultant YPP works with recommended a number of business books for us to read recently. I have to admit, I am someone who generally finds business books either very dull or too simplistic; I don't want to read an entire book to glean a few truly new ideas or concepts that I haven't already come across in my years as a business owner. However, I have been very pleasantly surprised by our recent experiences with some of these, so Cindy and I have decided to launch the YPP Book Club. We'll provide you with our review each month of a business book that we believe is excellent and informative.

Our first review is Small Giants: Companies That Choose to Be Great Instead of Big. While this was first published in 2005, we finally just read it and were excited about it. We reevaluated our own growth goals several years ago and realized that we had no desire to become a very large company. For us to accomplish that meant a substantial change in what we consider the core of our business: our ability to know our clients, understand their business, and adapt services quickly to meet their needs.

Small Giants is about companies like YPP who have chosen to stay "small", but can still achieve success. The author interviews 14 diverse companies of all sizes, from 2 to over 1900 employees and a variety of industries, and then identifies the similar traits he found among all of them. "Success" for all of them includes sustained profitability, connections with their community, strong relationships with their clients, and engaging workplaces. Growth simply for the sake of growth isn't all that it's made out to be, and many small companies will lose what makes them Small Giants by trying to do that.

I do have to disagree with one aspect of this book. The author tells the story of a PEO owner who struggled with his business and believes that the only way a PEO can be successful is to become very large. I know this PEO owner and have the highest regard for his knowledge and business, which he has developed into one of the largest in the country, but I fundamentally disagree with the idea that companies in some industries have to become huge to be successful. The most successful PEO's in the country, defined as the most profitable, are smaller ones!


This well-written book should inspire thousands of entrepreneurs to reject a mantra of growth for growth's sake in favor of a passionate dedication to becoming the absolute best. Bo Burlingham reminds us of a vital truth: big does not equal great, and great does not equal big. -- Jim Collins, author of Good to Great

Reviewer: Sandra Dickerson, co-CEO, Your People Professionals.