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Shaping HR's Public-Policy Agenda

Several issues likely to be in the nation's public-policy spotlight in the coming months present HR professionals with significant challenges as well as opportunities.

Thursday, November 17, 2005
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What key issues await HR on, or just over, the public-policy horizon? To find out, the Society for Human Resource Management surveyed the legislative and regulatory landscape to identify the major challenges confronting employers and HR professionals in the coming years. Here are three, two of them closely related, that will loom large in the near future.

Health-Care Reform

Faced with constantly escalating costs, an ever-growing number of uninsured and an alarming incidence of serious errors in treatment, the health-care system in the United States is -- to borrow a medical term -- in "critical condition." And HR professionals, who are responsible for designing and implementing health-benefit plans that meet the needs of their organizations and their workforces, are key stakeholders in the outcome of efforts to fashion an affordable system that delivers high-quality health services to all Americans.

Skyrocketing costs are forcing many employers to shift a larger portion of premium costs to employees, institute higher deductibles and/or increase employee co-payments, actions that contribute to further swelling of the ranks of the uninsured, currently about 45 million Americans. The economic impact of the uninsured through lost productivity, absenteeism, turnover and increased health-care costs is estimated to be as much as $152 billion per year.

Another challenge facing the U.S. health-care system threatens the insured and uninsured alike. Although the United States spends more on health care than any other country in the world, the nation's health-care-delivery system is marked by serious deficiencies that adversely affect the quality of health services. According to the Institute of Medicine, up to 98,000 hospital patients die every year from medical errors, and roughly 7,000 people die annually from medication mistakes. Adapting modern information technology to health services would improve outcomes for patients and reduce costs for employers and employees.

Greater use of health information technology also would help improve access to data on health outcomes, allowing health-care consumers to evaluate the cost-effectiveness of services and procedures. Currently, this information is not readily available, a situation that hinders efforts to promote greater consumer involvement and accountability in purchasing health services.

After years of partisan debate over health-care reform, substantive proposals are beginning to emerge. While it's unlikely that legislators will introduce radical, system-wide changes before the 2006 congressional elections, we are beginning to see incremental reforms, such as those included in two bills on which Congress recently acted.

The Patient Safety and Quality Improvement Act was signed into law on July 29, 2005, after passage by bipartisan majorities in the House and Senate. This legislation will help improve patient safety by creating a voluntary and confidential system for health-care providers to report, without fear of legal repercussions, non-identifiable patient information on medical errors to patient safety organizations. These organizations would then forward this information to the Department of Health and Human Services, which would catalog the health information and identify regional and national trends in medical errors. This data collection will, in turn, lead to improved patient safety through dissemination of best-practices protocols and recommendations.

The Wired for Healthcare Quality Act bipartisan legislation that recently advanced from the Senate Health, Education, Labor and Pension Committee would help accelerate the process of shifting the health-care system from a paper-based format to a secure electronic format by developing standards for the transmission and storage of health information.

This important legislation would establish a public-private collaborative effort to develop standards on interoperability in the establishment of a health information network. Greater use of technology will help reduce costs and improve patient safety by reducing errors and inefficiencies in the delivery of care. Because health-information technology enjoys strong bipartisan support, it is another piece of legislation that will likely cross the finish line in the 109th Congress.

Another approach, mandated health care, has been popping up in one form or another since the early 1990s. One idea is the "play-or-pay" proposal advocated by some policy makers, which would require employers to either purchase health coverage for their workforce (play) or contribute to a government fund (pay). This mandate would be a financial burden for employers and would likely discourage many from offering coverage. Indeed, such proposals could lead to the collapse of the employer-based system.

HR professionals can drive improvements in health-care quality through their roles in designing and purchasing health plans for their organizations and through employee-education efforts. By leveraging their buying power with other purchasers, HR professionals and employers can increase demand for better quality care, which will help control the future cost of health benefits for employees.

Retirement Security

Retirement has become the focus of a major national debate, with Social Security at its center.

American workers have long counted on three sources of retirement income: Social Security, employer-sponsored plans and personal savings. Social Security is the only leg of this tripod administered by the federal government.

Earlier this year, President Bush launched a campaign to sell his proposal for reforming the nation's principal retirement program. A key feature of the president's plan -- diverting Social Security funds to individual investment accounts -- sparked opposition in Congress and by groups like AARP, and produced widespread skepticism from the public.

While the administration's public campaign to sell Social Security reform has been temporarily suspended, Congress has been working behind the scenes on a variety of plans to address reform and preserve, in some form, the president's proposal for personal accounts. Stay tuned.

Supporters and opponents agree that Social Security faces a future financial shortfall that must be addressed, but they differ sharply on the timing, severity and solutions. The Social Security Board of Trustees says the program will start paying out more in benefits than it collects in taxes in 2017. Opponents of the president's plan say minor revenue increases and benefits adjustments, if made soon, can safeguard Social Security for much longer.

Adding urgency to the situation is the looming retirement of the baby boom generation that, in addition to creating a scramble to acquire skilled workers, will place additional stress on the nation's private-public retirement security system.

Personal savings -- 11 percent of disposable income 20 years ago -- have plunged to only 1.5 percent today. Less than half of private-sector workers have employment-based retirement plans, and most of these are defined-contribution plans such as 401(k)s, whose benefits depend on employees' investment choices. And traditional defined-benefit pensions cover less than 20 percent of current workers.

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Further compounding the problem is the state of the Pension Benefit Guarantee Corp., established by the federal government to underwrite failed private defined-benefit pension plans, which is itself facing insolvency.

Both Democratic and Republican leaders in Congress and President Bush have expressed strong support for shoring up the private retirement system of savings through employer-based options and individual savings. Even as the Social Security debate continues, there are bipartisan efforts in Congress to examine new approaches that promote retirement savings and investment, and help more Americans get on a savings track and stay on it.

And by year's end, the Department of Labor is expected to propose a regulation that would encourage employers to automatically enroll their workers in 401(k) plans. Automatic enrollment can be extremely effective in increasing 401(k) participation, especially among younger and lower-income workers. DOL says the new regulation would give employers that automatically enroll workers in these plans some protection from lawsuits if the investment options are "reasonable." Some employers, however, are reluctant to use automatic enrollment for fear employees whose investments lose money would sue.

Workforce Skills Shortage

Closely tied to the issue of retirement security is the potential skills shortage that will confront employers as millions of baby boomers retire. The U.S. Bureau of Labor Statistics projects a 10-million worker shortage in the United States by 2010. Facing the loss of key talent and organizational knowledge, employers must also meet the challenge of attracting and retaining qualified workers while coping with a critical "skills gap" in the U.S. workforce. In survey after survey, HR professionals report difficulty in hiring workers with the skills needed in today's knowledge-based business environment.

Closing the skills gap will require bringing together government agencies, educators, labor leaders and employers in a concerted national undertaking. The No Child Left Behind Act, signed in 2002, addressed educational reform at the elementary school level.

In January, President Bush highlighted the need to do more to prepare our high school students for the future. His fiscal year 2006 budget includes education proposals that would ensure that every high school student graduates with the skills-math and science in particular-needed to succeed in college and in a globally competitive workforce.

The president's education proposals are likely to experience smooth sailing in Congress. Lawmakers with very different views on tax, trade and labor policy agree on the severity of the problem and the need for better skills and training. The time is right for HR professionals to become actively involved in addressing this important issue.

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Health-care reform, retirement security and the potential skills shortage present HR professionals with significant challenges while offering opportunities to demonstrate strategic value. These issues are critical to the success of our organizations and the economic health of our nation.

They are also human capital issues -- in which HR professionals are expected to excel. Now it's up to us to do so.

Susan R. Meisinger is president and chief executive officer of the Society for Human Resource Management in Alexandria, Va. Acting on behalf of the human resource profession, she takes an active role in helping shape public policy. She was one of 13 members appointed by the U.S. Secretary of Labor to serve on the Secretary's Committee on the Future of the Workplace under the President's Council on the 21st Century. Prior to joining the society, she served as Deputy Undersecretary for the Employment Standards Administration in the U.S. Department of Labor.

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