The C-Suite Engaging HR

In the fall, our firm was approached by a national CEO organization to write an article for CEOs on confronting the rising costs of health care. This group had heard overwhelming feedback from their C-suite members wanting help reducing costs for their health care plans.

Health care reform is already having consequences beyond plan reorganization. PPACA is transforming the landscape of compensation, and, as a result, is inciting action in the leadership that had previously left health care to human resources. The C-suite, and particularly the CFO, brings unique abilities to the dialogue on benefits that can direct a company toward success. It is critical that management, both functional and executive, understands the implications of health care reform in 2014 and beyond.

Increased collaboration between Finance and Human Resources

The number one issue facing businesses today is ambiguity about the future around health care. Ambiguity in changing regulatory guidelines and rising costs causes executives to feel uncertainty about growing their businesses. Business Finance Magazine, in the recent article, “Bridging the CFO-HR Divide,” by Trent Beekman, notes that the average company diverts 1/3 of its finances towards human capital, including benefits. CFOs should be familiar with such a significant portion of company cost.

As health care costs rise year over year, CFOs are recognizing their fiscal responsibility to research the effects of PPACA on their companies. C-level executives (who may have traditionally only stepped in once a year to review rising plan rates) are engaging in the health care discussion. They’re finding that even after necessary cost shifting to employees, changing plans and reducing benefits, health care costs are higher than ever, and they want answers on how to combat this.

One of the answers is coming in the form of changing total compensation programs. Despite rising health care costs, benefits offering must remain competitive in order to retain high-value employees. Compensation strategy must be created with health care reform tax incentives and mandates in mind, and, to quote Beekman, “It will require an all-hands-on-deck mentality.”

Understanding the options

The implications of PPACA will be different for every company. PPACA is transforming the marketplace, both in benefits strategy and in employee opinion of benefits. There are myriad options to best set up a plan strategy for 2014 and beyond, while at the same time offering great coverage to retain top talent. For a company to stay competitive in the years to come, it is crucial that it fully comprehends these options at their deepest level. Finance executives may be more receptive than their HR counterparts to new benefit approaches that take advantage of new structures and incentives created by health care reform. The Business Finance Magazine article points out:

“Historically, CEOs and presidents have made all decisions on human capital expenditures [such as health care], and while they often consult HR as part of that process, more often than not, CFOs are kept out of the loop. Giving CFOs a greater presence and voice in the process could help ensure that such important decisions are more fully vetted.”

Benefits plans are like any other aspect of the business: someone needs to be steering the ship to make sure it goes the right direction. My dad always said, “If the boat misses the harbor, rarely is it the harbor’s fault.” Benefits planning requires more than just setting a budget at the beginning of the year and relying on a human resources team to determine the specifics. The C-Suite has plans for managing every other aspect of the business—a strategic road map is necessary for benefits, too.

Remaining at the forefront

Our company works with senior executives every day to help them optimize their investments in employee benefits. In doing so, we see that, across industries, regions and business sizes, business leaders don’t have the most basic working knowledge about the new structures and incentives embedded in health care reform. Everything else is inconsequential until executives truly understand the implications of health care reform.

As we have been saying for several months, we believe health care reform is the single greatest opportunity in our lifetime to get employers to think differently about how they allocate compensation to benefit programs. The entity (whether a consultant or a carrier) that helps the C-suite with a health care reform response plan will have an excellent opportunity to prescribe a package of products and services to better meet the employer's needs (and escape the potential “trap” of fighting over the scraps left behind after major medical decisions are made).

Now is the time for employers to recognize and implement changes that will set them apart from their competition. The Towers article points out that "savvy organizations need to act now to responsibly assess the business implications, model different scenarios and consider the impact of each reform option on their entire reward program." Leading employers will not be the last to figure out the implications of health care reform. If they are, they will no longer be leading employers.

The CHROME Compass is the leading platform to facilitate this response plan. Certified CHROME Consultants are in the lead position to take advantage of the opportunities created by health care reform. But, as my Dad always says, “Eventually, even the dummies will figure it out.” There is a window of opportunity here. Let’s not miss it!


Eric Helman
CEO and Founder
ContinuousHealth
www.continuoushealth.com

This article was first featured in the March 13th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

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What the McKinsey Report on Health Care Really Reveals

Originally published at Executive Street, a Vistage International blog.

Unless you were living under a rock this summer, you probably know that McKinsey & Company published a report titled “How US health care reform will affect employee benefits.” Amongst other findings, the study claims that 30% of employers polled plan to cut their group health care plans.

This caused a stir throughout the political arena, as Republicans cited the report as evidence of the negative consequences of Health Care Reform, and Democrats blasted McKinsey for not releasing their methodology. The real issue lies deeper, and is related to a topic about which I wrote previously on the Vistage blog, Executive Street. 

The Real Revelation

A June 24^th, 2011 editorial in the Wall Street Journal got me thinking about the root issue with the McKinsey report and most other media buzz about Health Care Reform. The editorial claims, “The furor says less about McKinsey than about the politically damaging reality of the new law.”  I’d go a different route.  I think the furor over the report reveals that across the board, decision makers don’t know anything (or at least enough) about Health Care Reform.

Upon release of the methodology, expert critics of the findings say that the survey was push polling, feeding questions to executives so as to cause them to give the right answer. Conversely, a Forbes blogger and many others feel that the survey was rigorous, prepared by a creditable research company. 

A Distraction, Not a Solution

Talking about “Shutting up McKinsey” (as the Wall Street Journal editorial stated) is, like so many things in the discussion about health care reform, a distraction. Whether or not the McKinsey results will be an accurate prediction of executive behavior, or if the survey did or did not meet the standards for academic rigor, might be newsworthy, but they miss the most important point. It is inconsequential until executives truly understand the implications of health care reform.

Our company works with senior executives every day to help them optimize their investments in employee benefits.  In doing so, we see that, across industries, regions and sizes of business, business leaders don’t have the most basic working knowledge about the new structures and incentives embedded in health care reform—and many don’t want to, as we mentioned in our last Vistage post when we referenced a survey that the WSJ’s CFO blog covered in May. That Journal article stated, “Of the 151 CFOs and executives of mid-sized companies… only 1 in 5 said they have actually given a great deal of thought to the health-care overhaul.” The backlash on the McKinsey report shows that statistic is probably accurate nationwide.

It is critical that executives do understand the implications of Health Care Reform in 2014 and beyond.  To quote the last paragraph of the now infamous McKinsey report:

Whether your company is poised to shift from employer-sponsored insurance or will continue to offer the same benefit package it does now, health care reform will change the economics of your workforce and benefits, as well as how your employees value coverage. Understanding these changes at a granular level will enable your company to gain or defend a competitive advantage in the increasingly dynamic market for talent [emphasis is mine].

Leading beyond 2014

It is irrelevant if McKinsey did or did not lead executives to a particular answer.  The fact remains that if you can be led, you don’t know enough.  If you want to know how your business (and your employees) will be impacted by health care reform, get some help. As Doug Elmendorf of the Congressional Budget Office testified before Congress on March 30, 2011, “Moreover, many of the effects of the legislation may not be felt for several years because it will take time for workers and employers to recognize and to adapt to the new incentives.” Leading employers will not be the last to know. If they are, they will no longer be leading employers.

Thanks for reading,

Eric

For more information about Health Care Reform or Dependent Eligibility Verification Audits, follow ContinuousHealth and Vistage member Eric Helman, CEO of ContinuousHealth, at @CHealthUpdate or visit www.continuoushealth.com. ContinuousHealth is an independent organization located in Atlanta Georgia that uses proprietary technology to help employers optimize their investments in employee benefits programs.  ContinuousHealth has performed over 250 Dependent Eligibility Verification projects. ContinuousHealth distributes its products through an exclusive network of certified Brokers and Consultants.