Archive for July, 2010

Healthcare Reform: Six Critical Questions Employers Need to Answer

Thursday, July 29th, 2010

Last week I wrote about the many consequences of healthcare reform based on the prognostications of medical industry observers.  In this post I’ll share what I expect to happen with healthcare reform and six questions which I think employers need to start finding the answers.

My Prediction

Healthcare reform is so big and far reaching that no one can accurately predict the end result.  The literal language of a new law is never the last word.  Regulators are working hard to add meat to the bones.

Take this to the bank: your renewal and strategy meetings with plan advisors will be 50 to 80 percent different in coming years, and it will include tax, penalty, network, employee household income, essential coverage and plan viability issues you have never confronted.  I believe you can count on rules making it more attractive for some employers to pay the fine and to turn a plan over to the Exchanges, and to make the single-payer option more attractive (or necessary) to the public in future years.

An example is the recently issued rule defining “Grandfathered Plans,” making it unlikely any plan can meet the standard for very long.  Whether this is good or bad is less important than the effect on your own planning process.  Will the Exchanges become viable alternatives accepted by employees as substitutes for legitimate, mainstream employer plans?

I believe we will eventually face bifurcated healthcare: one for most of us defined by the “essential coverage” rules and offered increasingly by Exchanges; and one for some of us defined by supplemental plans providing better access to physicians and non-baseline services.

How to Prepare

An important role for company executives is to ensure a strategy for marketplace competitiveness into the future.  Longer-term thinking will be rewarded.  Begin seeking answers to these questions:

1) Will employer-sponsored healthcare remain a key part of your total rewards plan into the future?  What are the alternatives?

2)  Is it worth the contortions to remain grandfathered if you are likely to lose that status soon?

3) Will new supplemental benefits strategies, or even wage supplements in lieu of coverage, become the differentiator?

4)  If predications of a de facto single payer system come true in the medium term, what is the best transition plan for your workplace?

5) Does your size affect your decision-making?

6)  Is your benefits consultant up to the challenge of teaching you and considering all options and business needs? Put them to the test now and stay informed.

Healthcare reform is one of the major themes to be covered at CAI’s 2010 Compensation and Benefits Conference on Sept. 16-17 in Raleigh.  Please visit for additional information.

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Measuring the Impact of the HIRE Act

Monday, July 26th, 2010

It has been four months since President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, aimed at presenting hiring incentives to re-establish jobs lost throughout the recent recession. The HIRE Act focuses on two main incentives – the payroll tax relief and the worker retention tax credit – that reward your company for hiring workers quickly and keeping these employees for a long time, while offering you a chance to avoid the 6.2 percent Social Security tax. But is it really meeting its goals? So far, it’s hard to judge.

North Carolina businessman Andy Warlick, president and chief executive of Parkdale Mills in Gastonia, claims he recently hired 30 workers eligible for the HIRE Act tax exemptions, but he acknowledged he could not say the benefit was actually responsible for his decision to expand his staff, according to a New York Times blog.  He said he does appreciate claiming the credit because it lowers his operating costs and encourages him to keep his operations in America.

The Treasury department has credited 4.5 million workers hired due to the act and estimated savings to employers so far to be at $8 billion. However, Treasury officials are having a challenging time determining whether the tax credit actually induces hiring, rather than just being claimed for people who would have gotten jobs anyway. It also believes the program is not widely known to businesses eligible to participate in it.

If you are interested in finding out if and how your company is eligible to use this credit, read our previous blog on “HIRE Act Can Save Employers Money This Year.”  The program may be extended into the next year, but that plan will have to be approved by Congress, and the results from this year could determine whether that will become a reality.

For more details, please call a member of CAI’s Advice and Counsel team at (919) 878-9222 or (336) 668-7746.

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Future Effects of Healthcare Reform

Friday, July 23rd, 2010

We are covered in webinars and seminars about the Patient Protection and Affordable Care Act.  I attended several in recent weeks, and the most common answer to audience questions was “We don’t know yet.”  True  as that may be only months after passage, employers will need to make key decisions soon.  Consider these “big picture” predictions by medical industry observers as you think about the future of your group health plan:

  • Higher healthcare costs for employers and most patients, well beyond the additional risk from new enrollees
  • Better access for the previously uninsured with new access impediments for the insured
  • More employers will convert employees to part time to avoid mandates . . .
  • . . .  but watch for regulations complicating the exclusion of part-time workers from plans (remember, the goal is 100% coverage)
  • Much improved data collection and sharing; better use of evidence-based medicine
  • Higher medical equipment and drug costs
  • A rise in concierge medicine, private pay and direct reimbursement plans
  • Breaches in security of electronic personal health data housed in the “cloud”
  • Increased taxes from value added/national sales taxes and such
  • More outcome-based payment schedules
  • Penalties to hospitals for readmissions and hospital-acquired illnesses
  • Increased financial stress at community hospitals
  • “The end of self-insurance” in small- and medium-sized plans due to blunting or deleting its advantages over time
  • Increased subsidization of Exchanges
  • Eventual domination of Insurance Exchanges and Medicare; impractical to remain a “grandfathered” plan under new rules
  • Application of IRC Section 105(h) to non-grandfathered insured plans (discrimination testing and daily excise taxes) making it difficult to exclude categories of full-time employees
  • Micro-networks of physicians providing deeper discounts and limited choices
  • Fewer viable commercial domestic providers over time; more medical tourism overseas
  • Commoditization of healthcare and diminished professional status/pay for office-based physicians
  • Greater use of mid-level practitioners such as Physician Assistants and Nurse Practitioners

Sure, some of these predictions will turn out wrong and others will come into play.  We are taking today’s loose and complex system of doctors, insurers, pharmaceutical and equipment makers, hospitals, network pricing secrecy, etc. and adding significant central direction, data, light-of-day, penalties, incentives, limitations, minimum plan standards, new taxes and regulations.  Yes, the old loose system became unaffordable, but is the regulated one more efficient?  No one ever lost money betting on unintended consequences from large regulatory programs, so let’s hope some of them are good!

Next week I will share my predictions for healthcare reform and some advice for employers on how to prepare.

Note: I am grateful to all the seminar speakers and area professionals for their help, including Todd Yates of Hill, Chesson & Woody, Joel Daniel of Ogletree Deakins and Dr. David Marcinko.

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Important Steps to Follow When Hiring Employees

Wednesday, July 21st, 2010

Most companies feel that planning to hire new employees is an obvious indicator to the outside world of their success.  It shows their products and/or services are in such demand that they need a bigger pool of labor to maintain their output or increase it.  But sometimes hiring occurs without the reasons behind it fully being explored. When this happens it can cost your company a lot of money.

You need to keep the following steps in mind to reduce the risk of a bad hire. These are essential concerns when considering opening a position at your organization.

1)     Make sure you know why you need to hire the employee.

You should not be looking for someone just for the sake of filling a job.  Ask yourself these questions:

  • Will this position be needed for your company in the long term, or will its responsibilities change in the future?
  • If this is a new position, do you know why it was created and what its responsibilities entail?
  • Do you know the job duties to be performed by the employee on a daily, weekly, monthly and yearly basis?

If the answer is “No” to any of these, you need to rethink your decision for this new hire.  It may not be worth investing in a full-time or even part-time employee to fulfill what you need upon review. You may be able to achieve what you want with in-house talent or outside contractors.

2)     Know and follow federal and state guidelines for the hiring process.

Do you know the rules for what you can and cannot ask a job candidate during an interview regarding his or her life away from the job?  What about the state and federal forms you need to complete for the person when he or she is hired?  And are you ready to handle an employee who will cite North Carolina labor laws when questioning you about your policies?

Companies with full-sized HR departments know the answers to these questions, but even medium-sized ones often do not.  This ignorance can not only discourage good workers from joining your company, it can result in a lawsuit for you because you did not follow these laws or EEOC guidelines.

3)     Establish exactly what you want from a candidate in the available position.

You should have a definite idea about what minimal educational background and experience you want for someone to assume the role.  The same should apply to the salary and benefits you are offering – if the applicant wants more, how far are you willing to bend to meet the request without hurting the company? You should also know what kind of personality will fit well with your company’s culture, and what kind will not.  Assessments can be very useful in helping determine whether a job candidate is a good fit for your organization.

While it does help to have recommendations from your social network for a new employee, it should not be the sole determining factor in hiring the person.  Check the applicant’s references to get a sense of how he or she performed in previous positions. Also, background checks are a must for any employer that is hiring these days.

No one can guarantee that these steps will prevent a bad hire for a company. But by judiciously applying them, you will be greatly increasing the likelihood of finding an appropriate candidate for your job.

For more details, please call a member of CAI’s Advice and Counsel team at (919) 878-9222 or (336) 668-7746.

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Affordable Care Act

Wednesday, July 14th, 2010

You may have already heard about the so-called “tanning tax” that went into effect July 1, charging indoor UV parlors a 10 percent excise charge. That tax is part of several provisions that passed in the Affordable Care Act that became law in March, and some may apply to your company. They include:

The Small Business Health Care Tax Credit

Generally, employers that have fewer than 25 full-time equivalent (FTE) employees and pay wages averaging less than $50,000 per employee per year may qualify for this credit, targeted to help employers with low and moderate income workers afford to offer employees health insurance coverage. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, employers that have more than 25 individual workers may also qualify if some of their workers are part-time.

For each year from now through 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011.

To determine if your business qualifies for this credit:

1)     Count the total number of your employees (not counting owners or family members). If fewer than 25, then …

2)     Calculate the average annual wages of employees (again, not counting owners or family members). If the result is less than $50,000, and …

3)     You pay at least half of the insurance premiums for your employees at the single (employee-only) coverage rate, then you may be able to claim the credit.

Health Coverage for Employees’ Older Children

Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various workplace and retiree health plans. These changes allow employers with cafeteria plans (plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits) to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of 2010 are eligible for the new tax benefit, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child.

Therapeutic Discovery Project Program

This program is designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support jobs and increase U.S. competitiveness. IRS guidance describes the process by which firms can apply to have their research projects certified as eligible for the credit or grant. Applications must be postmarked no later than July 21, 2010.

More information on the Affordable Care Act can be found at the IRS website at,,id=220809,00.html.

For more details on how the act affects your business, please call a member of CAI’s Advice and Counsel team at (919) 878-9222 or (336) 668-7746.

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Better Performance Management Starts with Better Hiring Decisions

Monday, July 12th, 2010

When people ask for guidance on designing their performance management programs, the main area of focus is invariably the employee evaluation process.  The question that seems to be on most people’s minds is, “What is the best way to design an effective evaluation form?”    While it is important to have an effective measurement instrument with which to evaluate your employees’ performance, it is only one part of a system for ensuring your organization hires, trains and keeps the best employees possible.  We should also spend time examining the hiring and selection process.

Hiring decisions are, in effect, problems.  By this, I mean you are making a decision with limited information involving doubt or uncertainty.  The best way to make a decision is to limit the amount of uncertainty involved in the process.  Through the use of applications, résumés, recommendations and interviews, you are hoping to decrease the uncertainty in the process and increase the probability that the choice you make will be the correct one.

However, we frequently make mistakes.  It is possible that we pass on a good applicant or hire a bad one.  These mistakes are bound to happen; we are not perfect.  A way to reduce the chance of error is to make a better system for collecting information for the hiring process—not just from the traditional means mentioned previously.

What may be the most important part of the entire performance management process is what can best be described as the control mechanism for the system.  Every organization has control systems that measure such things as defects, scarp, employee attendance, etc.   How many organizations have instituted a means to measure the effectiveness of their performance management systems?

When employees leave, some organizations do employee exit surveys.  But, how does that information serve the organization?  You know why they left, but how does that information help you improve the process?

Ideally, you would want to know information that would help you make better hiring decisions in the future.  Use turnover as a chance to collect information and diagnose where mistakes were made in the process.

When conducting the “autopsy” after an employee leaves the organization, some things to consider are:

  • Do you have a true understanding of what the job entails?
  • Are the job requirements— the knowledge, skills and abilities to do the job effectively—accurate?
  • Can you identify the mismatch between the applicant and the job?
  • Do we have the right people involved in the hiring process and making the final decisions?
  • What information may have led you to hiring that person in the first place?  Do we have any organizational biases in the hiring process?  (Educational level, for instance)

Effective managers and supervisors recognize that failure oftentimes can be useful in helping improve performance.  Use the information you collect from your “failures” to improve your hiring process.  Continuous improvement relies heavily on feedback, and this should apply to your hiring process as well.

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HR Success – Eye Care Associates

Friday, July 9th, 2010

Ranked among the top 25 largest U.S. optometric-optical practices, Eye Care Associates has 19 offices throughout central and eastern North Carolina. It has grown aggressively over the past three years, adding seven new locations and upgrading several more of its existing offices. Along with this expansion, it has retained most of its talent. That accomplishment resulted in the firm winning a 2010 CAI Ovation Award in the small employer category (companies with 250 or less team members).

A few years ago, Eye Care Associates Human Resources Manager Melissa Short often heard team members tell her they wanted to achieve, learn and experience more to be engaged in the company’s mission as part of its growth. At the same time, Eye Care Associates knew it needed to identify and develop high-potential team members as part of its expansion activities. The company had lost a few exceptional team members because of a perceived lack of advancement opportunities.

Short started brainstorming ideas for a program that would meet everyone’s needs, from the corporate management team, who found themselves with insufficient time to develop a large number of team members, to the supervising office managers who needed employees on site for patient care. Working closely with the company’s training manager, Lois Paul, and two experienced office managers, Short tried to balance those interests as she designed and created the Visionary Development Program.

This 14-week intensive program identifies and tests high-potential team members while providing them with a strategic and more in-depth view of the organization. It consists of job shadowing, increased company involvement, and work on special projects. Eye Care Associates’ upper management team is actively involved in this process, mentoring employees and spending time with participants to educate them on their roles. Only a small group of team members – usually four or five – can participate in any four-month period when the program occurs.

The Visionary Development Program resulted in multiple benefits for Eye Care Associates, including:

  • Excellent retention among participants (15 out of the first 16 chosen for the program have stayed with Eye Care Associates, with the one leaving only for health reasons)
  • Improvement of the management team’s professional and interpersonal relationships with participants
  • A stronger pipeline of internal candidates for succession planning and expansion plans
  • Increased employee engagement and participation
  • Improved individual performance results
  • Innovative ideas from participants that would likely have remained undiscovered without the program
  • Increased credibility and respect for the management team by among program participants and their peers, as a result of witnessing their knowledge level and work volume firsthand
  • More confidence from the management team in participant abilities, resulting in more involvement of participants in special projects
  • Additional support to the management team that may have saved in administrative costs
  • The establishment of a true stepping stone for future advancement in the company

Eye Care Associates plans to revise and tweak the Visionary Development Program in the future to reap additional returns. This is a great model that other employers can replicate in their workplaces. Engaging employees more in the success and operations of the company is a great way to improve talent retention. For additional information about the Visionary Development program, contact Short at

CAI recognizes North Carolina companies for innovative HR/People solutions with Ovation Awards during its annual HR Management Conference in February.  If you’d like to be considered please send a 2-3 paragraph description of your program to  The description should summarize the business need, describe how the solution was implemented, and highlight the measurable and/or forecasted business results.

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Seven Things N.C. Employers Need to Know about EEOC Charges

Wednesday, July 7th, 2010

Recently, CAI members had the opportunity to learn more about Equal Employment Opportunity Commission (EEOC) charges during our Ask the Expert programs.  The EEOC enforces Title VII, which prohibits discrimination or harassment based on age, disability, genetics, national origin, pregnancy, race/color, religion, or sex.  Title VII also protects employees from retaliation for complaining about discrimination or participating in an investigation.

EEOC officials Thomas Colclough, Jose Rosenberg and Tina Burnside took questions from the audience and provided insight on the EEOC investigative process. Some of the key points from the presentations include:

1. Categories of Charges. The EEOC prioritizes charges as category A (charges that fall within the national or local enforcement plan, or other charges that will likely result in a cause finding), category B (charges that require additional information to determine the merit of the charge) or category C (charges suitable for dismissal).

2. Employer Notice. If a charge is filed against an employer, the employer will receive a Notice of Charge form from the EEOC within 10 days.  The Notice of Charge will include the name of the employee making the charge, the nature of the charge, what action is required by the employer and the date that a response is required.

3. Mediation Option. Mediation is free and conducted by EEOC mediators or contracted mediators, and the parties (employer and employee) decide on the course of action (facilitated by mediators).  There is no decision on “fault.”  The mediator drafts an agreement based on the negotiated settlement by the parties, and all parties sign the agreement, which is binding.  Unsuccessful mediation will result in the charge going back into the investigation process.  Category A charges are not eligible for mediation.

4. Investigation Process. The investigation process may include a request for a Position Statement, Request for Information (RFI), a Fact-Finding Conference, witness interviews, document review, on-site investigation, predetermination settlement discussions (if EEOC finds fault by the employer), and/or subpoena.

5. Position Statement.  Employers are normally given 30 days from the date the Notice of Charge is mailed to respond to the EEOC with a Position Statement.  The Position Statement is one of the most critical documents the employer submits to the EEOC.  Employers should spend time developing the Position Statement to answer each issue raised by the charging party.

6. Conciliation. If the EEOC determines there was merit to the charge after the completion of the investigation, a Letter of Determination will be issued to the parties to invite them to participate in conciliation.  The settlement may include damages such as back pay, front pay, hiring, reinstatement, promotion, reasonable accommodation, attorney’s fees, and non-monetary relief like training, as well as a provision not to discriminate.  The conciliation agreement includes a provision prohibiting the charging party from disclosing details about the settlement.  These agreements are binding and enforceable in court.

7. Settlement. Settlement of the charge may be made at various points in the process.  If settled after a lawsuit is filed, the settlement is not confidential.  In this case, the EEOC settles by Consent Decree, and the court monitors the agreement for three years.

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