Contributors

HRO in Heaven, Healthcare in Hell

HRO is going mainstream with new mega-contracts at DuPont and Unilever. But the new Medicare plan is giving HR another black eye—especially with retirees.

by Jay Whitehead

Consider this: more than $4 billion of new HRO contracts have been announced recently. And it’s not even April yet. DuPont and Unilever have led the pack. And there are several awaiting signature, big and small.

At the HRO World West Conference Feb 8-9 in Los Angeles, speaker after speaker clarified what is the new reality of the HR profession. HR is now about being highly responsive (and responsible) business partners. And HRO is facilitating that transformation. HRO providers from RPO to payroll to training to staffing to recognition to HRIS to call center to relocation to screening to consulting are all now much better—and much cheaper—than any in-house HR operation. Yes, I said better and cheaper than ANY HR OPERATION in North America.

While HRO has rapidly put order to the HR profession and started delivering extraordinary employer and employee services, the nation’s healthcare policies—specifically the new Medicare Prescription Drug plan—have just as quickly baffled employees, employers, and retirees alike.

When I interviewed former House Speaker Newt Gingrich for this magazine back in September 2004, he told me that he had two great passions: national defense and healthcare. “And as complicated as defense is,” he said, “healthcare is seven times more complex.”

The consumer-driven health plan was supposed to provide some clarity, but in 2005, only 2.3 percent of companies, representing 810,000 employees, offered health savings account-compatible plans. It is double that in 2006, according to the Employee Benefit Research Institute. HSA plan enrollment is three million, triple the number of just 10 months ago, according to America’s Health Insurance Plans, the trade association. But many of those are self-employed. Employers, large and mid-sized, are not feeling much relief from the consumer-driven health revolution yet.

But it gets worse. The January 1 debut of the administration’s new Medicare Prescription Drug program has created an administrative dog’s dinner for employers handling retiree benefits (more than 55 percent of employers with more than 500 employees). The system is so complicated that as of February 15, 29 states have stepped in, paying tens of millions of dollars for people’s pills. Only 3.6 million people have voluntarily enrolled out of 44 million eligible over 65. And now I understand why. A veteran New Jersey HR consultant recently called me, embarrassed. He couldn’t handle the drug coverage question of one of his retired enrollees. When he explained the situation, I was stunned by the complexity of the eligibility rules. In the old plan, the drug coverage rules were pretty clear.

In the new plan, I have to know the person’s income, the name of their plan—Medicare advantage or stand-alone—the plan’s drug formulary and the dosage. Damn. I have a degree in history from UCLA, with a little finance work at Harvard. And I don’t even stand a chance. Neither do most of the employees, retirees, and HR leaders.

The Medicare plan, signed last December 8, is a horse designed by committee (that’s the definition of a camel). Democrats wanted a plan where the Feds negotiated directly with drug companies. Republicans wanted competition between private insurance, HMOs, and Medicare to hold prices in check. The GOP won. The result features high prices, piles of paperwork, and prohibits importation of cheap Canadian prescription drugs. The February 15 Wall Street Journal reported that 60 percent of seniors say the plan is difficult to use, and 73 percent, including my mother, hate being cut off from Canadian suppliers. Even worse, users, including many of my family members, are shocked at the price hikes.

According to a December 2005 Families USA survey, prices under the new plan are 48.2 percent higher than Department of Veterans Affairs prices for 20 drugs. In a typical example, a person buying a year’s worth of the top five drugs (Plavix, Lipitor, Fosamax, Norvasc, and Protonix) through Humana—one of the largest healthcare companies—is $4,206 versus $2,433 for the VA, that’s 73 percent higher.

So HRO is fixing HR, but can anyone fix employer-sponsored healthcare? Here is the reality: Unless Medicare’s drug plan can be made simpler, HR will be thrown under the healthcare bus, along with tens of millions of hapless and helpless retirees.

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