One of the fundamental issues with health insurance reform, and the reason it has been so difficult to get done is that health insurance differs fundamentally from other risks.  One of the basic principles of insurance is that an insurer creates a mechanism to protect against a defined risk event, with a defined financial payout, by collecting an amount in advance from each policyholder that, along with investment returns, allows for the insurance company to make an adequate profit.

This plays out very well in insurance products like life insurance, auto insurance, and property and casualty insurance.  Life insurance is the simplest because the insurance company determines, for an entire policyholder population, when people are likely to die, and sets premiums to make sure it can pay out when people die.  Auto and property and casualty insurance work similarly, with the defined benefit being either the fair market value of the auto or the legal liability level of the policymaker.  Because the definition and scope of fair market value and the potential risk of legal liability have not changed very much over time, these are relatively stable risks to insure.

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In the September 7, 2009, issue of the New York Times, reporter Michael Lud wrote an article entitled “Out of Work and Too Down to Search On,” which essentially made the point that the economic environment is so bad that many people stop looking for work.

Unemployment is psychologically devastating.  I know: I was unemployed for several months in early 1979, when I left my law firm and was trying to secure another legal position.  I was asked to look for another job because I was told I would not be made a partner.  My stay on the unemployment rolls was brief, but terrifying.  As a result, I empathize with anyone who has lost his or her job.

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At a time when businesses are trying to reduce costs to continue to be profitable when revenues are either declining or flat, it is tempting to reduce spending on government advocacy, especially if a business believes that it is adequately represented by trade associations or coalitions.  Nothing could be riskier.  Let me illustrate my point by discussing the evolution of health care legislation.

Contrary to what is sometimes reported in the popular media, large, self-insured employers want to continue to control and manage their own health plans for their employees, and are unenthusiastic about the “single payer” system, which would take control of health care costs away from them, and place it with a government-owned organization.  While some employers think a single payer plan will reduce their health care cost outlays, this is probably not the case, and, more likely than not, they will pay more, except that it will be in the form of one or more kinds of taxes.  In fact, when I hear the comment that Toyota has an advantage over GM because Toyota does not have to pay health care costs, I am astounded that any intelligent person accepts this argument uncritically.  Someone, whether it is Toyota or another category of Japanese taxpayer, pays for the health care costs of Toyota employees.  While a single payer system spreads the cost over a larger population, the real driver of health care costs is not who pays, but how much is paid, based on usage and cost-per-unit.

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Given the recent attention to “millionaire’s tax” proposals, I have been asked about higher tax rates on high-income individuals.  Whether I support paying higher taxes depends on whether government is spending those tax revenues wisely.

We have many unmet societal needs for which increased government spending could be helpful.  In fact, we spend too little on public transportation, supportive housing for people ready to leave homeless shelters, but not ready to pay for market-rate housing, and cutting-edge medical diagnostic tests. 

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Last week, I was at a series of meetings in Washington, D.C. talking with members of Congress and their staffs about the recommendations of a coalition of which I am a member called the CEO Health Transformation Community.  One of the other members is Dr. Ray Zastrow of Quad Med, a provider of onsite corporate clinics based in Milwaukee.

Dr. Zastrow made a memorable comment many times during the day.  He said that Quad Med increased the quality of care, and significantly reduced its cost, by “slowing down the practice of medicine.” He said that Quad Med health care professionals are expected to spend 30 minutes with each patient even if they diagnose the problem in the first five minutes. He said that every visit to the clinic is a “teachable moment,” and the health care professional must take the opportunity to learn more about how the patient is feeling overall. (more…)

One of the deepest potential conflicts in every society is the conflict between the roles we have as workers versus consumers.  As a consumer, we want the best product or service at the lowest cost, and, if we have unique needs, we want those unique needs addressed at no additional cost.  We want the worker who is serving us to go the extra mile, and we only want to pay top dollar for exceptional service.

The worker role can be made consistent with our consumer role with exceptional management by those who lead the workers providing us with the products and services, whether those leaders are managers or, in the case of a unionized work force, union leaders.  Too often, however, the path of least resistance for a product or service provider is to design or allow the design of their processes for the convenience of the worker at the expense of the consumer. 

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In the Sunday, December 28, 2008, New York Times, professor Alain Enthoven has a cogent op-ed piece entitled “Health Care With a Few Bucks Left Over.”

In his piece is a compelling argument that our current health care system, neither the patients nor the providers are rewarded for cost-effective, high-quality health care.  He believes strongly that giving more provider choices to health insurance plan participants, particularly large, efficient multispecialty group practices, would significantly reduce health care costs. (more…)

As I have transitioned toward retirement from Pitney Bowes, I am gratified by the many letters and calls I have received from present and former employees.  What has been striking is the degree to which people valued the small favors I did for them.

One executive remembered that I had increased the employee benefit for adoptions from $800 to $2,000, which helped him and his wife adopt two children.  Another remembered a small contribution I made to an MS fund-raising drive for multiple sclerosis.  Still another remembered help I gave her to get the company to make it easier to get support for hearing-impaired employees.  Many remembered condolence, congratulations, or recognition letters I sent, or even a conversation in which I told an individual that he or she was highly valued.

Probably one of the most heartfelt expressions of gratitude I receive year after year was from parents whose children had received college scholarships or other support from the Company. What these stories and others tell me is that, for all the attention organizations pay to compensation and major benefits, leaders underestimate the role small favors play in driving organizational loyalty, engagement, and performance.

As we move into more difficult economic times, we will not have as much money to pay as much as we used to pay.  What we need to do better is to match our total reward and remuneration system with what people value.  Very often, executive compensation committees agonize over making sure companies pay competitively, and overpay executives in the process, without really achieving the loyalty and retention they hope to get.

Having talked to many executives who have left Pitney Bowes, their initial explanation is that they received a better offer and, sometimes, they have gotten a promotion in the process.  However, after we talked for a while, I usually learned that they just did not feel adequately valued by the Company, and that their feeling of being undervalued caused them to take the call from the outside recruiter.

While there are some mercenaries out there, there are far fewer than organizations believe, and we need to figure out how to make remuneration more flexible and less standardized to meet individual needs.  In 1993, I drove the introduction of flexible benefits at Pitney Bowes, but I believe that we have more opportunity than ever to add highly-valued, but low cost, benefits for people.

If an organization does a great job delivering customized benefits valued by the largest numbers of their employees, the organization generally has lower, not higher, labor costs.

Those who oppose these programs often point out the risk of recognizing an employee that others believe is not deserving of recognition.  For example, see the Employee Recognition, Rewards, Awards, and Thank You Ideas article from the Human Resources section of About.com.

Clearly, good recognition processes cannot overcome poor performance management, particularly if the leader supports the wrong people and undervalues the right ones.  My point is that, once a leader is able to figure out who needs to be rewarded and recognized, there is a much wider range of tools available than are used today.

Some people to whom I have made this point respond that individuals still value W-2 income because they cannot pay the rent or the mortgage with the kinds of benefits I have described.  I reply to these people as follows:

• People who are living paycheck to paycheck will generally not get out of a big financial hole by getting an extra percentage point of pay increase. If they want to improve their lot in life significantly, they need to get skills development that enables them to qualify for promotions.
• There are benefits that work to reduce the cost of living for people. For example, our credit union is a wonderful tool for helping employees and their families get more affordable mortgages.
• People have varying levels of need. For someone who is a second income in a family, their reason for working at a company may be the medical plan, rather than the salary they receive. Finding a way to give the person a better medical benefit might actually be more valuable than a salary increase.

We need to be far more resourceful in thinking about rewards and recognition to stretch organizational resources further and deliver more value to people in the process.