Health Reform Or Not, HR And Finance Are In The Same Foxhole.
Health-care reform has been a catalyst for bringing finance and human-resources together to analyze potential effects on the organization.
There are uncertainties around reform, such as whether the Supreme Court will uphold the individual mandate and how this fall’s elections will turn out, but they are not unlike many other uncertainties that businesses face, in the view of Randall Abbott, a senior group benefits consultant with Towers Watson.
“Health-care reform is a business risk,” said Abbott, moderating a panel of finance and HR professionals at a recent health-care conference hosted by The Conference Board. “And regardless of whether you believe it will exist in its current form, be modified, or go away altogether, from a prudency standpoint HR, finance, and senior leadership need to be thinking about it from a scenario-planning perspective.”
Panelist Jon Lara, senior director of benefits finance at DirecTV, said the company’s finance organization has nudged HR into long-term thinking, “which dovetails nicely with health-care reform.” With reforms scheduled to take effect over the next five years, finance has talked to HR about creating a five-year business strategy for wellness initiatives designed to get buy-in at the company’s highest levels.
Such buy-in is far more easily achieved where there is an existing, high level of collaboration between finance and HR. “We’ve had so much collaboration, we don’t even think of each other as HR or finance,” Lara said. “We’re a benefits-strategy team, and everyone thinks with both of those sides of their brains.”
Intent on understanding what was driving DirecTV’s health-care costs, the company invested in a data warehouse. The benefits team broke out data by the major health services to understand how much of the overall cost was unit costs, provider costs, doctor costs, and anything else. That was followed by consideration of whether those factors could be influenced or controlled in any way. “We’ve gone through those kinds of discussions so many times now that it’s second nature for HR and finance to walk through the analysis together,” said Lara.
One thing the team realized was that it couldn’t seem to put a dent in employees’ emergency-room visits. The company has many call-center employees and installers who aren’t highly paid, schedule doctor appointments infrequently, and use emergency rooms for nonemergencies. The team realized that an onsite nurse center would pay dividends.
“It’s about demonstrating to senior management that some new spending or redeployment of spending is going to result in a happier, more productive employee without increasing our overall spend,” Lara said.
Another panelist, Scott Beekman, spent 15 years as a tax attorney and corporate director of taxation for a Fortune 500 company. “With that background, I’m a big believer in collaboration between finance and benefits,” said Beekman, now vice president of corporate services at American Financial Group. “We are data-driven in everything we do. We work with the finance people to analyze everything, because if you can’t measure it, it’s hard to manage it. A lot of the plan-design decisions we’ve made have been driven by that.”
For example, the company launched a high-deductible health-savings-account (HSA) plan in 2005 and later added a health-reimbursement-account plan, while retaining a traditional low-deductible plan. During the next few years, 75% of American Financial’s employees moved into the high-deductible plans. Finance and HR jointly analyzed the plans’ bottom-line costs, factored in an expected financial impact of health-care reform, and moved everyone to the HSA plan.
The trick was convincing the people who had been in the low-deductible plan that the HSA plan was actually a wealth-creation vehicle. “Anyone who runs the numbers knows that most plan participants do not have a lot of claims in any particular year,” Beekman said. “So the value of an HSA plan is risk pooling. The beauty of it is that employees also pool their own risks over a number of years. We promote that very much to the employees.”
The company shows employees quarterly how much wealth has been created within the plan. Last year, the first year the HSA plan became the de facto plan, the figure was $5 million, combining what employees and the company contributed. “That’s a lot of money,” said Beekman, especially compared with what’s created in the 401(k) plan. Read the rest of the terrific article by David McCann for CFO.com here.