Here are some proven ways to make your own life easier, and keep the firm protected.

Getting help from upstairs

No wants to go over supervisors’ heads, but when upper management is in your corner, it’s much easier to get supervisors to take policies seriously.

The good news: You have plenty of ammo to get the support you need from upstairs. A single foul-up can easily cost your firm big bucks – and it’s rarely due to a mistake by Benefits or HR. Here’s a dramatic example of how easily a situation can spin out of control when a supervisor acts on his own:

A Boston court awarded an employee with bipolar disorder $1.6 million — including nearly $856,664 for lost wages and retirement benefits – due to the firm’s handling of two medical leaves and his subsequent termination for poor job performance (Tobin v. Liberty Mutual).

What happened: The employee convinced the court that his employer failed to offer him the same amount of help it gave other workers with disabilities.

In reality, the firm approved two disability leaves for the employee. So the problem wasn’t with the firm’s policies. Rather, the issue stemmed from inconsistent enforcement by a supervisor. Not surprisingly, the root of the situation was a personality clash between supervisor and employee.

Shortly after he returned from the second leave, the employee was terminated. Meanwhile, another worker had received three similar assistances, with supervisor approval to take leave. The other employee was one whom the supervisor didn’t want to lose.

This situation could have been prevented if the company had enforced a uniform policy on mental disability benefits and re-entry to work. Instead, the supervisor was allowed to give more leeway to a favored employee to take leave to straighten out a personal problem than he did to one he disliked.

Situations like these are hardly uncommon, and many of them end in expensive settlements or drawn-out court battles. One of the hardest parts of being an HR/benefits manager is that you can’t protect your company without the cooperation of employees’ supervisors. 

In the real-life work world, there’s a triangular relationship between benefits/HR policies, upper management and supervisors’ behavior. A little fear goes a long way.

The more aware upper management is of the legal risks created by inconsistent enforcement, the more likely the company will take time to write and enforce consistent policies. 

In turn, the more supervisors realize their own jobs are at stake if they don’t communicate with HR/benefits about policy administration,  the more likely they are to act like you’re on the same team.

Three keys

Let’s go back to the example of a clash between a supervisor and an employee who takes leave for personal problems. There are three key facets to a successful policy for dealing with these situations, according to attorney Jonathan A. Segal:

• Disclosures. Require supervisors to report to HR and/or Benefits all voluntary disclosures of mental health issues, especially ones employees make when called in for disciplinary reasons
• Employee outreach. Have a written policy in employee handbooks requiring them – for their own protection – to come to HR or Benefits first if they think a personal problem could affect their job performance, and
• Inquiries. There should be a specific process for conducting medical inquiries to administer FMLA and disability benefits. It should always be done by HR/Benefits.

Some legal dos and don’ts when you’re handling inquiries: You can say, “We encourage you to go to the EAP to deal with your workplace problems.” Don’t say, “The EAP can help you with any personal problems.”

Reason: Legally, employers must accommodate only disabilities they’re aware of. The EAP, by its nature, focuses on non-workplace issues. But the key is the EAP provider, not you, shifts the emphasis to that area.

However, if you’re already aware there’s a mental health issue – such as for FMLA administration – you can legally ask the same sorts of questions of a therapist you would of a worker’s doctor for a physical health problem.

Compliance with HIPAA non-discrimination rules is a big challenge for wellness programs. The old rules were unclear about which incentives passed muster.

That’s all changed, with the new rules established by the DOL and U.S. Treasury Department. Here’s what you need to know:

‘Participation incentives’ are fine

As long as you structure incentives as rewards for wellness participation, the new rules provide a lot of freedom. All of these are fine under HIPAA:

• reimbursing all or a portion of the cost of fitness club membership
• financial rewards for undergoing health risk assessments so long as the reward is based on participation rather than test results
• encouraging preventive care by waiving co-pays or deductibles for these services (i.e., well-baby visits or prenatal care)
• reimbursing employees for the cost of smoking-cessation programs without regard to the result, and
• offering rewards tied to employees attending a monthly health education seminar or working with a health coach.

Conditional rewards OK if…

But what if you want to make the reward conditional on participants meeting specific health goals?

Example: Employees who achieve a cholesterol count under 200 get a 20% reduction in the cost of their health plan contributions pending results of an annual cholesterol test.

The feds say it’s OK under HIPAA to do this, too, but your plan must meet five additional requirements:

1. The reward can’t exceed 20% of the cost of employee-only (or, if you allow dependents to participate, employee-plus-dependent) coverage under your health plan.
2. The standards must be reasonable (e.g., you can’t limit rewards to folks who can run a marathon). The rewards also can’t be used as a backhanded way to negatively single out certain employees (e.g., rewards for all non-diabetics).
3. Participants must have the opportunity to qualify for the reward at least once per year (e.g., a smoker who fails to quit this year gets another chance next year).
4. Rewards must be available to all “similarly situated individuals.” In other words, you can’t make a company-paid weight management program available to certain employees but not others.
5. If, for medical reasons, it’s unreasonably difficult for an individual to satisfy conditions that are otherwise reasonable, you must offer an alternative. Example: A pregnant employee may not be able to meet certain standards, so you must offer her an alternative.

Negative incentives violate HIPAA

So what’s not allowed under HIPAA’s non-discrimination rules? Anything that punishes people for their health conditions or health risks. The final rules specifically prohibit employers from charging different premiums, contributions, co-pays or deductibles based on personal health factors such as obesity or smoking. However, it’s OK to reimburse these expenses based on someone’s participation in your wellness program, without regard to success.

In addition, the feds have added an important new non-discrimination rule: Employers’ health plans can’t deny benefits for treatment of injuries resulting from a medical condition, even if the condition wasn’t diagnosed before the injury.

For instance, some health plans have a “suicide exclusion” that denies payment for treating self-inflicted wounds from a suicide attempt. Now let’s suppose the employee suffers from clinical depression. Even if the depression was undiagnosed prior to  the suicide attempt, it’s illegal for your plan to deny benefits to this employee.

“Routine” COBRA administrative errors represent the greatest lawsuit risk for the vast majority of employers. One common misconception: If you outsource COBRA administration, the TPA is responsible for non-compliance and fines.

The feds disagree. Here are the four most common costly COBRA mistakes made by employers, according to consulting group Western Benefit Solutions.

1. Notification errors

By far, the most frequent slip-ups happen in sending initial and qualifying-event notices to folks within 44 days of COBRA eligibility. Problems can arise with an employer’s definition of a qualifying event.

Of course, termination – no matter who initiates it – is typically a qualifying event. Often-missed notices include situations in which:

• an employee’s adult child “ages out” of your health plan
• an employee lacks alternate coverage due to relocation
• an employee reduces his or her working hours (voluntarily or by the firm’s choice) and falls below the company’s threshold for maintaining health coverage by the organization
• Medicare entitlement
• an employee’s former spouse becomes COBRA-eligible after divorce or legal separation, and
• certain bankruptcy situations.

2. Record keeping

Get all COBRA correspondence in writing, and keep it in easily accessible files for seven years. Reason: COBRA is covered by ERISA. Well-meaning employers often get into trouble later when they go by an employee’s verbal acceptance or rejection of COBRA.

For your own protection, make sure the person still checks off the appropriate response box on their notice and returns it. Also, make sure you always send the notices by certified mail or have a system for proving it was sent to the right person at the correct address within the legally required time.

3. Making exceptions

Another common, well-meaning error is letting people slide on certain aspects of your COBRA policy.

Example: Someone asks for an extension to send in the enrollment paperwork or to let payment slide “just this month.”

While the person may have a legit reason for the request and you may be tempted to honor it, most experts caution it’s risky. Reason: Anyone who doesn’t get a similar break has a good case to sue and claim COBRA discrimination.

The biggest red flag is offering executive severance packages with special considerations for ongoing, firm-paid health coverage. Under ERISA, your COBRA policies must apply the same to everyone. And the IRS now takes direct aim at this sort of “hidden” severance compensation.

4. Lacking a disaster plan
COBRA lawsuits or government audits are terrifying – and tough to prepare for on short notice.
Experts recommend you establish a COBRA disaster plan. Create and follow these guidelines for what to include in every COBRA case file:

• initial notice and delivery proof
• employer notice to TPA, and
• written employee/beneficiary coverage acceptance or denial notices to you, the employer.

Should your firm ever get sued or audited, having these files handy make it much simpler to prove you’re in total compliance with COBRA.

U.S. doctors will perform an estimated 75.5 million elective surgeries this year. Some 35.5 million are outpatient surgeries, while another 40 million require a hospital stay of at least 24 hours. Odds are at least one employee on your health plan will go under the knife at some point in the next two years.

Reimbursing hospitals and surgery centers has become a major strain on insurance companies. As such, the costs are passed along to plan sponsors. Those with high utilization of surgical services get clobbered  when it comes time for policy renewal.

To some extent, there’s no way for plan sponsors to avoid taking the hit. After all, that’s why health coverage is such a valuable benefit to employees in the first place. When there’s a medical need for surgery — and if surgery can correct a health problem – it’s a justified expense. 

The problem is that some doctors are quick to recommend surgery to patients. Beyond that, improvements in diagnosis technologies have also served to increase the number of surgeries that get performed. As a plan sponsor, you have a couple of options to help mitigate these effects.

Second surgical opinions (SSOs)

If your health plan doesn’t require second surgical opinions (SSOs) prior to certain procedures, you may want to add this policy. With proper employee education, an SSO gives employees and their dependents an incentive to make sure the surgery is medically necessary.

Example: Patients who don’t get an SSO before the surgery may have to pay half (rather than, say, 20%) of the cost of surgery and anesthesia. But with an SSO, the plan may even waive the 20% coinsurance requirement.

The key: Make sure employees understand what elective surgery means. SSO lists often include serious operations like knee surgery, spinal surgery and hysterectomies. Many people don’t realize these are elective surgeries, even if one doc recommends it.

Eliminating dubious pre-op tests

Evidence-based medicine has become a buzz phrase in this era of consumer-driven healthcare. But what does it mean in real-life terms?

Where surgeries are concerned, it means there’s an opportunity for your plan to eliminate certain questionable pre-op tests before outpatient cases. According to Outpatient Surgery Magazine, these tests usually do little but drive up costs and cause the employee to miss work a day or two before surgery:

• chest X-rays and heart rhythm tests
• urinalysis, and
• blood testing.

Unless an employee’s medical history indicates that these tests are needed, many medical experts say they can be done away with.

The same thing goes for anesthesia care.Anesthesia-related costs can be held down if your company’s health plan favors lower-cost care that typically works just as well as higher-cost options.

For example, if someone isn’t at high-risk of post-op nausea and vomiting (PONV) there may not be a need to routinely cover use of high-cost PONV drugs.Young, female non-smokers are generally the highest PONV risk group, along with those who’ve had past histories of getting sick after surgery.

If your organization is weighing self-insurance – or has already taken it – here are three pitfalls that can create unexpected costs.

1. Unfavorable employee mix

It’s impossible to completely eliminate the risk of unexpected, high-dollar health claims. But here’s a guideline to lower your risk. Health claim stats suggest the “ideal” employee population for a self-insured plan is predominately young, non-smoking and male. If this doesn’t match your employee population, your costs may be higher.

Be aware that stop-loss insurance carriers often “laser” those employees considered higher risk. Lasering means that your company would have to pay out much more in claims for these employees before the stop-loss coverage kicks in.

2. Loss of network discounts

Some firms learned after the fact that going the self-insurance route caused them to lose providers’ network discounts they previously received under fully insured plans. When evaluating plan vendors’ administration-only options, ask:

• Will the vendor’s network alliances work in your best interests, cost-wise?
• Will the vendor only oversee claim payments or negotiate to build the best provider network, quality-wise, for your employees.

Bottom line: You should get the same kinds of plan designs, networks and discounts as a fully insured plan.

3. Wasteful reinsurance contracts

If the language of your reinsurance contract doesn’t match your health plan’s summary plan description, you may be paying for coverage you don’t need and can never use.

It’s also key to make sure your firm has enough money in reserve to cover run-out claims and other costs that may occur before reinsurance will cover payments. Best practice: annual audits of your financial reserves.

But what about health conditions that changing one’s diet and exercise routines won’t necessarily help to prevent?

Specifically, there’s no other employee health threat that costs organizations more – in both financial and human terms – than cancer.  The average expected employer cost for a newly diagnosed cancer patient’s treatment is $83,084.

What’s more, typical wellness programs have little effect on preventing cancer. And cancer is also the No. 1 cause of employee absences of 30 or more days.

Some good news

Employers nationwide have put their heads together and issued a series of four concrete action steps any firm can use to fight cancer among employees and their dependents. The employer coalition, called the CEO Roundtable on Cancer, recommends:

• Employee health-risk assessments. This is the most important first stept of getting any cancer-prevention program off the ground. The assessments should look both at family history and lifestyle issues such as smoking.
• Cancer screenings. Best practice is to pay the cost for your at-risk employees to get screened for everything from skin to colorectal cancer. If even a single case is diagnosed early, it can prove to be a big money - and grief - saver in a very short period.
• Employee cancer education. Companies need to let employees know cancer prevention is a major goal for everyone at the company. Employee education has a cumulative effect, so plug your cancer-prevention resources early and often, and
• Selective use of health coaches. If you can’t afford a wellness program that gives everyone access to a health coach, consider a coach for people with three or more risk factors on
  a health-risk assessment.

Whatever you’d pay for these services would be far cheaper than a single preventable cancer case at your organization, finds the coalition.

Consider accreditation program

In conjunction with the American Cancer Society, the CEO Rountable coalition created a “Gold Standard” accreditation for firms that establish and enforce these and other key prevention policies.

Other key steps: banning smoking on your premises and having smoking cessation, diet and nutrition programs. Long-term, accredited firms could enjoy premium discounts as health insurers begin to recognize the certification.

Any organization with short-term disability benefits walks a fine line. On the one hand, you want to help employees who are legitimately in need.

On the other, you can’t afford to open the firm’s wallet any wider than necessary. But is there a magic number for how much short-term leave to cover?

Yes, a new study says. The ideal salary-replacement percentage is 70%.

Not too much, not too little

At 70% coverage, beneficiaries have enough money coming in to tide them over, while still having an incentive to get back to work as soon as they’re ready. What happens if you cover more or less than 70%? The study finds:

• employees tend to return too fast (increasing the risk of long-term disability) as coverage dips below 70% of their income, and
• absenteeism costs (and disability premiums) go up significantly when the employer covers more than 70% of the worker’s income.

Financially speaking, nice guys finish last, according to the study.

The employees of firms that cover 100% of the person’s income stay out on short-term disability 20% longer than those offering 70% coverage.

Won’t your firm make up for the difference with increased loyalty and productivity? Not necessarily.
The increase in retention and productivity is small, and doesn’t add up to enough money to offset the added expense of covering someone’s entire income.

Meanwhile, employers that cover 50% or less of the employee’s income often wind up losing more money than they save. Productivity and retention rates drop, and too many folks come back before they’re ready. The result: Higher long-term costs.

Eight is great

For the same reasons, the ideal take-effect date for disability benefits is the eighth day of leave. If the benefits take effect too soon, people who are well enough to return to work have an incentive to milk the system.

But any later than eight days, and many of the folks in need avoid taking disability for financial reasons.

There’s a common belief that employees prefer health reimbursement accounts to health savings accounts.  The reason, of course, is that employers fund HRAs. Employees pay for HSAs themselves.

But a recent study suggests that employees see things differently. A study of 130 organizations with multiple health plan choices - including an HRA and HSA — found that more workers chose the HSA over the HRA.

The reasons: portability and versatility. Unlike an HRA, employees can take an HSA with them if they
leave the organization. And, for HRAs, employers set the rules for which medical services employees can and can’t be reimbursed for.
With an HSA, the account’s use is entirely up to the employee and can be accessed via a credit/debit card tied to the account.  Unfortunately, some folks misuse HSA funds and use the money for non-medical purchases (in response, Congress is weighing a proposal to put tighter controls on people’s access to HSA money).

A recent study suggests many employees are even willing to pay much – or all – of the cost themselves.  Roughly 35% of firms with wellness programs focus on providing workers with convenient access to weight loss resources.

A poll of 1,352 employees by the Strategies to Overcome and Prevent Obesity Alliance found that many people would gladly chip in for the cost of the program if they believed it would help them lose weight. What employees want:

• confidential support and counseling
• access to a professional nutritionist or personal trainer, and
• onsite exercise programs.

Until recently, only big companies were able offer such programs as part of their wellness benefits.
But the fastest growth of these programs in the last two years has been in smaller firms (sometimes with as few as 50 full-time employees).

The majority of firms split the cost with employees. Typically, workers pay up to about 25% of the cost. But some plans are fully employee paid.

Studies show that when it comes to choices about when, where and how to seek out care, most people make emotional decisions, not rational ones.  When people ask their doctors questions about their care, it’s far more likely to fall along the lines of “Will I be OK?” rather than “How much will it cost?”

There’s also a tendency for people to follow their doctor’s recommendations. Think about how long it’s taken to educate employees to ask about the availability of generic drugs and teach them that  generic provide the same benefits as name brands (especially ones that are advertised on TV).

When cost of care does enter into people’s minds, it often arises in ways that employers DON’T want: avoiding care altogether out of fear of not being able to afford out-of-pocket costs (i.e., deductibles).

Most employers are aware of these obstacles. The problem has been overcoming them. Usually the employee education burden falls directly on the shoulders of already overstretched HR/benefits managers.

It used to be that employee education meant teaching employees about the health (and other) benefits available to them and how to access them.  Today, the task also includes the responsibility of teaching folks how to research their own care and interact with their doctors. Finance types rarely appreciate just how difficult this chore really is.    

Sensitive subjects

Here’s an example of the difficulty HR/benefits faces in playing the role of teacher:  When discussing the need for preventive care (one of the hallmarks of consumer-driven healthcare), is it your responsibility to discuss potentially sensitive subjects?

Much like medical benefits themselves, medical practices constantly evolve. In the last couple years, several medical boards and regulatory groups revised their guidelines for preventive healthcare. One of the most controversial changes in the guidelines: providing routine sexually transmitted disease (STD) screenings for adolescents.

Not every carrier has elected to add STD tests as a standard preventive-care benefit for employees’ dependents. But, among others, many Blue Cross plans now provide first-dollar coverage for the screenings.  What should YOUR role be in teaching employees that the benefit is available to their dependents? Do you:

• simply pass the info along, without further context or explanation, in an e-mail or memo?
• rely on employees who need the info to find it in the benefits newsletter the carrier sends out?
• deal with the discomfort of telling employees to talk the sensitive issue over with their teenage kids and their doctors?

Any of these approaches has the potential to backfire. From a purely financial/consumerist point of view, we know that the first two options rarely work.  But what employer wants to risk resentment (or worse) from employees by recommending they tell their teenagers to get tested for STDs?  

Bottom line: It’s easy for the bean counters to stress the cost-saving advantages of preventive care. It’s easy for social advocates to say this sort of education is part of corporate responsibility. These people aren’t the ones who deal directly with your employees.   Frankly, we’d love to see one of THEM volunteer to lead a discussion on  STD screenings at your annual health plan meeting.