Rising healthcare costs - Part II

I wouldn't consider reducing benefits because it's too hard to find great employees.

-- director at a high-tech Seattle-based company

(to see Part I, including the survey responses, click here)

1. Does your organization currently pay 100% of the medical premiums for employee, spouse, and family? If not, what percentages are paid?

I was surprised by how few respondents indicated that their companies paid 100% of the insurance premiums for employee, spouse, and dependents.

Apparently, I've been spoiled. I've always worked for small companies, and they've almost always taken care of all the incidentals. Those that did stand out in my mind as great companies. And not just from my point of view: They were also highly successful.

The sample is small--I've only worked for eight or nine companies in my 18-year post-gratuate career (and I haven't always had a spouse/dependent)--yet, I've sensed a trend: The most successful companies were those that focused less on managing income and expenses, and more on creative product development, competitive strengths, and a sense of community within the organization.

Income and expenses are important, of course, but secondary to the real work of running the business.

2. Does your organization have plans to reduce that benefit, particularly for spouse/family?

I was pleasantly surprised by the answers to the second question. A reduction in benefits, particularly while a company is turning a profit, is probably counterproductive.

It's true, health insurance premiums are sky high. Something has to be done. And a company should shop around for health insurance at a good rate. But what does it mean for a company to reduce the amount it pays by increasing the amount the employee pays?

It would be perceived as a pay cut, pure and simple.

It's true that the employee's portion can be deducted on a pre-tax basis, which would help. But it still has the exact same effect as a pay cut. And in my experience, a pay cut is a sign that it's time for employees to start searching for the life-rafts. Whether the company is profitable or not, the employee takes a small kick in a sensitive spot. Companies that make themselves more profitable by taking away money from their employees are really shooting themselves in the foot. After all, where does the company derive productivity, and where does the employee get money?

The most profitable companies I've worked for (as measured either by how rich the owners were by the time we parted ways, or by how immense the profit-sharing bonuses became over time) all followed what I call the "C-E-O Principle."

The What?

The following is a restatement of a "principle" I first put forward on Ward Cunningham's original wiki:

The C-E-O Principle:

In order to be truly successful, a company must foster a community of customers, employees, and owners. Decisions containing conflicting interests among these groups should be made in a way that favors those groups in the specified order: Customers, Employees, Owners.

I did get some grief from people who pointed out that CEOs are legally bound to serve shareholders (Owners). And apparently those naysayers were right: I just watched The Corporation, and learned that, indeed, CEOs really are beholden to shareholders and the bottom line. But that doesn't mean the principle is false, or (as some have claimed) illegal. Someone else on the wiki came to my rescue and pointed out that many CEOs have the freedom to follow their own instincts and experience in these types of decisions.

What I'm saying is that, in the long run, this is the best approach for the bottom line. And even though I've only once (okay, twice) worked for a company that was larger than 40 people and publicly traded, I'm apparently not alone in my beliefs.

There is the example of Hyperion's offer to give $5k to each employee who buys a hybrid car (mentioned in the wiki discussion). And how about Ray Anderson, CEO of Interface, who was interviewed in The Corporation? You may think he's gone bananas, but I can see pure clear-eyed common sense in his words and his expression: This man has somehow seen through the haze of corporate greed to a better way to run his company. (Actually, he credits his employees for nudging him towards his "epiphany.")

As far as I know, no CEO has recently been terminated or jailed for turning the organization into a better corporate citizen. If nothing else, it's extremely good PR. Consumers like to know that someone is watching out for the "little guy."

General Motors (GM) may be heading for bankruptcy down the road, but I had to buy my 2006 Toyota Prius sight-unseen because they're selling as fast as Toyota can make them. Sure, in a lot of cases consumer choices are driven by self-interest. But Toyota has turned self-interest and environmental concern into a benefit to their own organization. Toyota saw a need and answered it, years before anyone else. Good for Toyota, good for me, good for America, and good for the Earth. A "Win-Win" scenario, and it has the added appeal of being more than just an idealistic mirage.

Of course I care about American jobs, and I groaned when I heard about Ford's huge layoffs. Let it be a message to American auto manufacturers: Follow the consumer's needs, not those of your oil-barron shareholders. If they follow this one simple rule of thumb, perhaps they will be the first to offer a sexy hybrid convertible, and I'll trade in my Prius!

Lowering the Stress of Business Travel

My boss, who also travels a lot, reminded me of the One Big Travelers' Lesson that I have neglected to post until now:

Your Flight Will be Late!

So take a deep breath, and plan for it. Expect it to happen, and you won't be disappointed either way.

I'm not always a patient man, but this is one area where I may have finally developed a bit of real patience. Here are some steps to take to keep your cool when you discover--at the gate, of course--that your flight is delayed by an hour or more:

1. Schedule the flight so that you arrive at least two hours before you actually have to be there. If the delay doesn't make you late for an appointment, you won't feel as stressed. Perhaps the rule of thumb should be two hours per time zone: The further you need to travel, and the more stops you make, the greater your chances of being delayed.
   
2. Schedule any layovers so that they are sufficiently long, otherwise you may miss your connection. But obviously not too long. See #1 for guidance. Usually one to two hours is plenty.
   
3. Bring plenty of things to keep you occupied during all the delays. I usually take some business related tasks (call the boss, work on the laptop, fill out some paperwork, read something technical) and some personal tasks or relaxing activities (bills, books, magazines, music, movies). These aren't things that I have to get done today. If they were, then I'd be stressed when delays didn't occur! Also, extended phone calls are very difficult at the noise-laden terminal, so I won't call an old friend, or a new client. I try to bring things I can do on the plane, so I won't limit myself to electronic stuff. Reading material is best. I bring my own, but I'm rather particular about the books and magazines I read. If you like the usual magazines, fine newspapers, or the latest best-sellers, you can probably find something at the terminal.
4. Bring snacks. Unless you've had time to scope out the best snacks and restaurants at your usual airports, you may get quite hungry. A small snack can keep you going--and keep you calm--during the delay. I usually bring or buy one small but complete meal to eat at the terminal or on the plane, and then dry stuff (granola bars, bananas, nuts) to keep me going. I pack snacks in my briefcase, so I can munch on something at any time.
   
5. When you hear that announcement, try not getting mad. Note that I didn't say "try not to get mad," but actually make an effort to keep from groaning, yelling, or cursing under your breath. Are you really surprised? After years of business travel, I'm not. These days, I often find myself smiling, thankful for the time to catch up on some reading.
6. If it helps you to feel self-conscious about your anger (which, for me, is a great way to learn how to let it go), keep this in mind: Seasoned travelers can recognize the newbies by how upset and vocal they get when the flight is delayed.
   

Avoiding Burnout

Let me tell you about my schedule during most of 2002. This occurred weekly, almost every week for a year:

Sunday morning I would take a taxi to the bus station and take a bus to SFO. I would then fly to DTW, rent a car, and drive to Ann Arbor. That was at least an eight hour day, door to door. And, Ann Arbor is on East Coast time.

Friday evening, I would leave the client's office as early as possible, drive frantically from Ann Arbor to DTW (20 to 40 minutes), drop off the rental car, sprint to my flight (and, if you've been to the new Detroit Northwest Airlines terminal, you know that this can be a literal 1/2 mile jog, worst case, which was also the typical case, due to Murphy's Laws of Travel). One time, when the flight was on-time, they were about to close the doors with me on the wrong side of the porthole. That was as close as I have ever been to being denied a seat on my flight.

If the flight was delayed, then--upon arrival in SFO five hours later--I had to sprint from the arriving terminal to the bus stop. (On those weekly DTW to SFO flights, I never checked luggage!) Fortunately, I never missed the last bus (at midnight), but I often missed the bus that I had planned to take at 11PM. Hurry up and wait, as the saying goes. To top it all off, the bus had multiple stops between San Francisco and Santa Rosa. There were times when I wouldn't get to bed until 3AM Pacific, 6AM Eastern, after spending a week trying to adapt to the Eastern time zone.

And Saturday was usually spent sleeping off the jetlag, and doing laundry.

But I'm not whining. I actually enjoyed that gig. I made a couple of good friends in Ann Arbor, and I made an obscene amount of money. But the stress was starting to wear me down.

What would I do differently today? I would certainly park my car near SFO. Eventually the bus fare got so high that off-airport parking became cheaper than taking the bus round-trip. At the time, I was very frugal: I was the business, so a dollar of business expense was nearly a dollar out of my own pocket. With my own car readily available, I wouldn't have to arrive on-time, and I wouldn't have to wait. Less expensive in terms of money, time, sanity, and life-expectancy.

Other things I would do differently today would be business-related: I now schedule Monday as a travel day, and I would try to plan to be elsewhere at least one week every two months, at a minimum. To that end, a consultant should try to have multiple clients. These are subtle reminders to the client that (a) you're not an employee, and (b) you have other sources of income.

But even if that other client turns out to be your family, and your projects are mowing the lawn and painting the guest room, you will thank yourself. I've noticed that the more money I made, the more "expensive" a week of unpaid vacation would seem. "Missed opportunity" we self-congratulating investors like to call it. What a load of crap! We serve the clients better when we take care of ourselves, too.

With the wonderful job I have now, we try to keep travel down to every other week. And we mostly succeed.

Rising healthcare costs giving you a coronary?

First: Many thanks to those who responded to the survey.

Here are the results of my small, informal, and unscientific survey of friends and colleagues, including (but not limited to) HR folks, executives and owners, and people in high-paying, high-tech jobs.

Fourteen people answered each question directly. Others provided interesting anecdotes, but didn't respond with values. I have included a little of both. First, the "statistical" answers:

1. Does your organization currently pay 100% of the medical premiums for employee, spouse, and family? If not, what percentages are paid?

Responses follow, with one paragraph per respondent. Where necessary, the answer has been edited to reflect the percent payed by the employer, not the employee. Where the response is a direct quote, I have added quotation marks.

1. Approximately 90% for the HMO plan, 75% for the PPO plan.
2. 60-80%.
3. 73%.
4. Approximately 85% for employee and dependents.
5. No. (This person's employer uses a tiered approach for families of varying ages and incomes.)
6. "100% employee. mumble% spouse (50?), child unknown."
7. 75%.
8. 100% for employee and 50% for dependents.
9. "We currently get 100% of the employee's medical and dental covered. There are upgrade plans, e.g., an improved medical plan and cancer insurance, which the employee pays group-rates for. Spouse and kids are covered at a rate that puts the company's overall expenses near the national average (for software companies?), which I think was 76%; I think the company covers something like 48% of the cost for spouse and family."
10. 75% for employee and dependents.
11. "Yes." I.e., 100%.
12. 100% for employee, 0% for dependents.
13. "We [the company] used to [pay 100%] until this January."
14. 100% for employee and dependents.

2. Does your organization have plans to reduce that benefit, particularly for spouse/family?

The same respondents, in the same order:

1. No.
2. Not sure.
3. Not sure.
4. No.
5. No.
6. No.
7. No.
8. "Two digit rate increases would trigger one of the following: put the contract out to bid to see if another carrier will cover us at more reasonable rates or ask the employees to contribute more of the cost. Another option that companies consider are the HSA (health savings plans)...a good option for new companies - and they have the added benefit that whatever the employee doesn't use can be accumulated for their use at a later date."
9. "I expect the family benefit to increase, and perhaps the employee benefit to decrease..."
10. "No, in fact we had no spouse or dependent coverage until a recent benefit increase."
11. No.
12. No.
13. "They just did."
14. No.

3. If you were to reduce such a benefit, would you do so only for new hires, or would you reduce the benefit for existing employees?

The answer from all who chose to respond to this question was that such changes would affect everyone. I was not surprised. Some respondents made me realize that, though there are no stupid questions, there are some that qualify as absurd.

In the interest of fairness we would make the change across the board for all employees.

-- HR executive, financial sector

We firmly believe in the "same rules and perks for everyone" philosophy...

-- COO, software consulting firm

Grandfathering equity morsels is one thing -- not health benefits.

-- Colleague, at a company whose name is now a household synonym for "search" ;-)

Other Respondent Comments

A friend, ex-employer (early 90's), and company president had this to say:

As you know, I used to pay full medical benefits.

There can be enormous differences in costs. For a young person, it may "only" be $100 or so per month. For [my spouse] and I, and a fairly high deductible ($2000 or $2500 I think) it is a little over $1000/month now. But what is even more scary is that increases are very rapid. I've had increases in this cost of over 20% year to year at times.

Be sure to look at Health Savings Accounts. They may encourage better use of healthcare.

Since over 1/2 my business is with doctors, I hear a lot about health insurance. At best, it is a horrible mess. The inequities and stupidity in the current system are incredible. I'd estimate that over 25% of all healthcare dollars go into administering the finances. That number might be as high as 50% in reality. I could go on a rant...

Universal coverage makes more sense to me than most alternatives. I think that has worked OK for the most part with Medicare. Extending it to all would make sense to me in the long-run.

Another old friend says:

At the law firm when I started there 7 years ago, we paid $20 a month for medical (hmo) and dental (100% covered plan). When I left this year, we were paying $30 a paycheck (or $60 per month)... and the deductibles had gone from $10 copay for doctors and $5 co-pay for prescriptions, to $25 co-pay for doctors and prescriptions.

At the LARGE company I am with now... it is even worse.

We pay $51 a paycheck.... and have a mediocre HMO to choose from.

The owner of a small insurance agency had this to say:

Regarding health benefits, I only provide coverage for [one employee] and not her dependents. The other two employees are covered by their husband's insurance. I assume we will continue paying her insurance at 100%.

Industrywide deductibles are going up and employees are being asked to contribute up to 40% of the premium. In some cases the premium for family coverage is $1600/month.

Employers can't keep up with the 20 - 30% increases they're getting every year.

A good friend and single mom who is holding down two jobs, school, and a teenager, responded to question #2 with this:

They just did [lower our benefits]...However, they did do one smart thing in the process, in order to keep costs down, they have single, single plus one (which works for domestic partners of either sex and single parents with one child).

I'm planning to give my own impressions of the survey results in a different post. (I want this one to stand alone, untarnished by my interpretations.) But I will end with a quote from a colleague and director at a high-tech Seattle-based company. The emphasis is mine:

I wouldn't consider reducing benefits because it's too hard to find great employees.

Satorix, the Nirvana Pill! (Part I)

You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland and I show you how deep the rabbit-hole goes.

-- Morpheus [Wachowski A. and Wachowski L. (1999) The Matrix.]

Could we, one day, invent a pill that gives people an enlightened state of mind? And, if such a "Nirvana Pill" were available, would you take it?

While catching up on some copies of Scientific American that must have arrived during an exceptionally busy time, I found an intriguing article by Scientific American's resident skeptic, Michael Shermer. The article was about seemingly metaphysical phenomena such as out-of-body experiences, and the sense of "oneness with everything" that long-time meditators occasionally experience.

Apparently, these phenomena can also be induced through external physical stimuli. Dr. Shermer tells us, "Neuroscientist Michael Persinger, in his laboratory at Laurentian University in Sudbury, Ontario, for example, can induce all these perceptions in subjects by subjecting their temporal lobes to patterns of magnetic fields. (I tried it myself and had a mild out-of-body experience.)" (Shermer)

The article explains that there is a small section of the brain critical to your sense of physical orientation. During meditation, this area quiets down, as it would while you sleep, and you may experience a sensation of floating, or perhaps, "oneness." No matter how real the sensation may feel, even the recipient's own descriptions often revealed an illusion of sorts. One woman said she could "see myself lying in bed, from above, but I only see my legs and lower trunk."

Ask yourself:

Did this brief article just debunk meditation? Or, worse, all spiritual pursuits?

What if all perception--our entire experience of life, in fact--could be altered via physical means? Where does that leave my trust of my senses, and my reality?

"Whoa!" ;-)

---

• Shermer, M. (March 2003). Skeptic: Demon-Haunted Brain. Scientific American <Click here for article>