Managing Health Care Reform Decision Making

Last time, we discussed how the demands of health care reform are getting HR and finance to work together in closer collaboration.

Now, let’s take a look at why health care reform-related decision making will require cross-functional input and discussion. Remember, the health insurance exchanges are coming on line and companies must make the so called "pay-or-play” decision in just 24 months. Is it better for the company to continue to offer its employees health insurance (play)? Or is it more advantageous to eliminated health benefits and pay the resulting penalties (pay)?

These questions are as fundamental as they are complex? The good news is that CFOs understand the strategic implications of these decisions. However, CFOs only bring part of the necessary insight and perspective to the table when discussing these issues. After all, these decisions have tremendous implications for total rewards strategy, workforce planning, and risk and compliance.

Any process that is led by the CFO or finance alone may not factor in all of these issues. Companies need to consider carefully who should be sitting at the table during these discussions and decision making. “HR tends to have more of a black-and-white view when it comes to deciding whether to continue to offer employer-sponsored benefits,” says Randall Abbott, a senior consulting leader with Towers Watson in Boston. "However, there are a range of ways that companies can continue to 'play.'" For example, companies may find it advantageous to encouraging some employee groups to explore the health insurance exchanges rather than purchasing insurance offered by their employer.

In addition to HR and finance, these discussions should include representatives from the general counsel's office and, possibly, the CEO in some cases. For example, Abbott notes that some of the approaches that companies may want to consider will require careful vetting by legal counsel to identify and resolve any potential business and legal risks involved.

The point is that unless these discussions are cross functional and include a range of perspectives, data and information, the company could find itself with an inadequate answer to the pay-or-play question. "This is a total business issue," says Abbott.

Many finance executives have witnessed firsthand the discord that can result among other stakeholders when one department takes the lead in analyzing a specific issue and forming a conclusion. Moreover, if each affected department spends time and resources on its own rather than as part of a collaborative effort, the effort could be counterproductive because it may not encompass all of the business issues involved. Indeed, if finance or HR take that sort of approach to making decisions about health care reform, it could blow up in their faces. "You don't want to have collisions between different viewpoints happen in front of senior management" at a time when you should be presenting a holistic solution, says Abbott.

For example, Abbott notes some discussions he has had with CFOs about whether health care reform-driven increases in unit labor costs beyond a certain threshold will cause companies to consider moving jobs overseas. Another key issue for CFOs, particularly those in low-margin high turnover organizations, is whether to encourage part-time workers to migrate toward the health insurance exchanges. Both of these situations have profound implications on the overall workforce plan and must be discussed and considered from all angles.

By encouraging a strong debate now about these issues well before the key provisions of health care reform take hold, companies are more likely to develop the right solution for the business, its shareholders and its employees.