Provider Insurance

Provisions of the Affordable Care Act

2010

NEW CONSUMER PROTECTIONS

• Prohibiting Denying Coverage of Children Based on Pre-Existing Conditions. The new law includes new rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition. Effective for health plan years beginning on or after September 23, 2010 for new plans and existing group plans.
• Prohibiting Insurance Companies from Rescinding Coverage. In the past, insurance companies could search for an error, or other technical mistake, on a customer’s application and use this error to deny payment for services when he or she got sick. The new law makes this illegal. After media reports cited incidents of breast cancer patients losing coverage, insurance companies agreed to end this practice immediately. Effective for health plan years beginning on or after September 23, 2010. Learn more about prohibiting insurance companies from rescinding coverage
• Eliminating Lifetime Limits on Insurance Coverage. Under the new law, insurance companies will be prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays.  Effective for health plan years beginning on or after September 23, 2010.
• Regulating Annual Limits on Insurance Coverage. Under the new law, insurance companies’ use of annual dollar limits on the amount of insurance coverage a patient may receive will be restricted for new plans in the individual market and all group plans. In 2014, the use of annual dollar limits on essential benefits like hospital stays will be banned for new plans in the individual market and all group plans. Effective for health plan years beginning on or after September 23, 2010.
• Appealing Insurance Company Decisions. The law provides consumers with a way to appeal coverage determinations or claims to their insurance company, and establishes an external review process. Effective for new plans beginning on or after September 23, 2010.
• Putting Information for Consumers Online. The law provides for an easy-to-use website where consumers can compare health insurance coverage options and pick the coverage that works for them. Effective July 1, 2010.

IMPROVING QUALITY AND LOWERING COSTS

• Providing Small Business Health Insurance Tax Credits. Up to 4 million small businesses are eligible for tax credits to help them provide insurance benefits to their workers. The first phase of this provision provides a credit worth up to 35 percent of the employer’s contribution to the employees’ health insurance. Small non-profit organizations may receive up to a 25 percent credit. Effective now. Learn more
• Offering Relief for 4 Million Seniors Who Hit the Medicare Prescription Drug “Donut Hole.” An estimated four million seniors will reach the gap in Medicare prescription drug coverage known as the “donut hole” this year.  Each such senior will receive a $250 rebate. First checks mailed in June, 2010, and will continue monthly throughout 2010 as seniors hit the coverage gap.
• Providing Free Preventive Care. All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. Effective for health plan years beginning on or after September 23, 2010.
• Preventing Disease and Illness. A new $15 billion Prevention and Public Health Fund will invest in proven prevention and public health programs that can help keep Americans healthy – from smoking cessation to combating obesity.  Funding begins in 2010.
• Cracking Down on Health Care Fraud. Current efforts to fight fraud have returned more than $2.5 billion to the Medicare Trust Fund in fiscal year 2009 alone. The new law invests new resources and requires new screening procedures for health care providers to boost these efforts and reduce fraud and waste in Medicare, Medicaid, and CHIP.  Many provisions effective now. Learn more

INCREASING ACCESS TO AFFORDABLE CARE

• Providing Access to Insurance for Uninsured Americans with Pre-Existing Conditions. A new Pre-Existing Condition Insurance Plan will provide new coverage options to individuals who have been uninsured for at least six months because of a pre-existing condition. States have the option of running this new program in their state. If a state chooses not to do so, a plan will be established by the Department of Health and Human Services in that state.  National program effective July 1, 2010. Learn more
• Extending Coverage for Young Adults. Under the new law, young adults will be allowed to stay on their parents’ plan until they turn 26 years old (in the case of existing group health plans, this right does not apply if the young adult is offered insurance at work). While the provision takes effect in September, many insurance companies have already implemented this new practice. Check with your insurance company or employer to see if you qualify. Effective for health plan years beginning on or after September 23. Learn more
• Expanding Coverage for Early Retirees. Too often, Americans who retire without employer-sponsored insurance and before they are eligible for Medicare see their life savings disappear because of high rates in the individual market. To preserve employer coverage for early retirees until more affordable coverage is available through the new Exchanges by 2014, the new law creates a $5 billion program to provide needed financial help for employment-based plans to continue to provide valuable coverage to people who retire between the ages of 55 and 65, as well as their spouses and dependents. Applications for employers to participate in the program available June 1, 2010 Learn more
• Rebuilding the Primary Care Workforce. To strengthen the availability of primary care, there are new incentives in the law to expand the number of primary care doctors, nurses and physician assistants. These include funding for scholarships and loan repayments for primary care doctors and nurses working in underserved areas. Doctors and nurses receiving payments made under any State loan repayment or loan forgiveness program intended to increase the availability of health care services in underserved or health professional shortage areas will not have to pay taxes on those payments.  Effective 2010 .
• Holding Insurance Companies Accountable for Unreasonable Rate Hikes.  The law allows states that have, or plan to implement, measures that require insurance companies to justify their premium increases will be eligible for $250 million in new grants. Insurance companies with excessive or unjustified premium exchanges may not be able to participate in the new health insurance Exchanges in 2014.  Grants awarded beginning in 2010.
• Allowing States to Cover More People on Medicaid. States will be able to receive  federal matching funds for covering some additional low-income individuals and families under Medicaid for whom federal funds were not previously available. This will make it easier for states that choose to do so to cover more of their residents. Effective April 1, 2010.
• Increasing Payments for Rural Health Care Providers. Today, 68 percent of medically underserved communities across the nation are in rural areas. These communities often have trouble attracting and retaining medical professionals. The law provides increased payment to rural health care providers to help them continue to serve their communities.  Effective 2010.
• Strengthening Community Health Centers. The law includes new funding to support the construction of and expand services at community health centers, allowing these centers to serve some 20 million new patients across the country.  Effective 2010.

2011

IMPROVING QUALITY AND LOWERING COSTS

• Offering Prescription Drug Discounts. Seniors who reach the coverage gap will receive a 50 percent discount when buying Medicare Part D covered brand-name prescription drugs. Over the next ten years, seniors will receive additional savings on brand-name and generic drugs until the coverage gap is closed in 2020. Effective January 1, 2011. Download a brochure to learn more (PDF, 3.6 MB)
• Providing Free Preventive Care for Seniors. The law provides certain free preventive services, such as annual wellness visits and personalized prevention plans for seniors on Medicare.  Effective January 1, 2011.
• Improving Health Care Quality and Efficiency. The law establishes a new Center for Medicare & Medicaid Innovation that will begin testing new ways of delivering care to patients. These methods are expected to improve the quality of care, and reduce the rate of growth in health care costs for Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). Additionally, by January 1, 2011, HHS will submit a national strategy for quality improvement in health care, including by these programs.  Effective no later than January 1, 2011.
• Improving Care for Seniors After They Leave the Hospital. The Community Care Transitions Program will help high risk Medicare beneficiaries who are hospitalized avoid unnecessary readmissions by coordinating care and connecting patients to services in their communities. Effective January 1, 2011.
• Introducing New Innovations to Bring Down Costs. The Independent Payment Advisory Board will begin operations to develop and submit proposals to Congress and the President aimed at  extending the life of the Medicare Trust Fund.  The Board is expected to focus on ways to target waste in the system, and recommend ways to reduce costs, improve health outcomes for patients, and expand access to high-quality care.  Administrative funding becomes available October 1, 2011.

INCREASING ACCESS TO AFFORDABLE CARE

• Increasing Access to Services at Home and in the Community. The new Community First Choice Option allows States to offer home and community based services to disabled individuals through Medicaid rather than institutional care in nursing homes.  Effective beginning October 1, 2011.

HOLDING INSURANCE COMPANIES ACCOUNTABLE

• Bringing Down Health Care Premiums. To ensure premium dollars are spent primarily on health care, the new law generally requires that at least 85% of all premium dollars collected by insurance companies for large employer plans are spent on health care services and health care quality improvement.  For plans sold to individuals and small employers, at least 80% of the premium must be spent on benefits and quality improvement. If insurance companies do not meet these goals, because their administrative costs or profits are too high, they must provide rebates to consumers. The rebate program will begin January 1, 2011.
• Addressing Overpayments to Big Insurance Companies and Strengthening Medicare Advantage. Today, Medicare pays Medicare Advantage insurance companies over $1,000 more per person on average than is spent per person in Traditional Medicare. This results in increased premiums for all Medicare beneficiaries, including the 77 percent of beneficiaries who are not currently enrolled in a Medicare Advantage plan. The new law levels the playing field by gradually eliminating this discrepancy.  People enrolled in a Medicare Advantage plan will still receive all guaranteed Medicare benefits, and the law provides bonus payments to Medicare Advantage plans that provide high quality care.  Effective January 1, 2011. Download a brochure to learn more (PDF)

2012

IMPROVING QUALITY AND LOWERING COSTS

• Linking Payment to Quality Outcomes. The law establishes a hospital Value-Based Purchasing program (VBP) in Traditional Medicare. This program offers financial incentives to hospitals to improve the quality of care. Hospital performance is required to be publicly reported, beginning with measures relating to heart attacks, heart failure, pneumonia, surgical care, health-care associated infections, and patients’ perception of care. Effective for payments for discharges occurring on or after October 1, 2012.
• Encouraging Integrated Health Systems. The new law provides incentives for physicians to join together to form “Accountable Care Organizations.” These groups allow doctors to better coordinate patient care and improve the quality, help prevent disease and illness and reduce unnecessary hospital admissions. If Accountable Care Organizations provide high quality care and reduce costs to the health care system, they can keep some of the money that they have helped save. Effective January 1, 2012.
• Reducing Paperwork and Administrative Costs. Health care remains one of the few industries that relies on paper records. The new law will institute a series of changes to standardize billing and requires health plans to begin adopting and implementing rules for the secure, confidential, electronic exchange of health information. Using electronic health records will reduce paperwork and administrative burdens, cut costs, reduce medical errors and most importantly, improve the quality of care. First regulation effective October 1, 2012.
• Understanding and Fighting Health Disparities. To help understand and reduce persistent health disparities, the law requires any ongoing or new Federal health program to collect and report racial, ethnic and language data. The Secretary of Health and Human Services will use this data to help identify and reduce disparities. Effective March 2012.

INCREASING ACCESS TO AFFORDABLE CARE

• Providing New, Voluntary Options for Long-Term Care Insurance. The law creates a voluntary long-term care insurance program – called CLASS — to provide cash benefits to adults who become disabled.  The Secretary shall designate a benefit plan no later than October 1, 2012.

2013

IMPROVING QUALITY AND LOWERING COSTS

• Improving Preventive Health Coverage. To expand the number of Americans receiving preventive care, the law provides new funding to state Medicaid programs that choose to cover preventive services for patients at little or no cost.  Effective January 1, 2013.
• Expanding Authority to Bundle Payments. The law establishes a national pilot program to encourage hospitals, doctors, and other providers to work together to improve the coordination and quality of patient care.  Under payment “bundling,” hospitals, doctors, and providers are paid a flat rate for an episode of care rather than the current fragmented system where each service or test or bundles of items or services are billed separately to Medicare.  For example, instead of a surgical procedure generating multiple claims from multiple providers, the entire team is compensated with a “bundled” payment that provides incentives to deliver health care services more efficiently while maintaining or improving quality of care.  It aligns the incentives of those delivering care, and savings are shared between providers and the Medicare program.  Effective no later than January 1, 2013.

INCREASING ACCESS TO AFFORDABLE CARE

• Increasing Medicaid Payments for Primary Care Doctors. As Medicaid programs and providers prepare to cover more patients in 2014, the Act requires states to pay primary care physicians no less than 100 percent of Medicare payment rates in 2013 and 2014 for primary care services. The increase is fully funded by the federal government. Effective January 1, 2013.
• Providing Additional Funding for the Children’s Health Insurance Program. Under the new law, states will receive two more years of funding to continue coverage for children not eligible for Medicaid.  Effective October 1, 2013. Learn more

2014

NEW CONSUMER PROTECTIONS

• Prohibiting Discrimination Due to Pre-Existing Conditions or Gender. The law implements strong reforms that prohibit insurance companies from refusing to sell coverage or renew policies because of an individual’s pre-existing conditions. Also, in the individual and small group market, the law eliminates the ability of insurance companies to charge higher rates due to gender or health status. Effective January 1, 2014.
• Eliminating Annual Limits on Insurance Coverage.  The law prohibits new plans and existing group plans from imposing annual dollar limits on the amount of coverage an individual may receive.  Effective January 1, 2014.
• Ensuring Coverage for Individuals Participating in Clinical Trials. Insurers will be prohibited from dropping or limiting coverage because an individual chooses to participate in a clinical trial.  Applies to all clinical trials that treat cancer or other life-threatening diseases.  Effective January 1, 2014.

IMPROVING QUALITY AND LOWERING COSTS

• Making Care More Affordable. Tax credits to make it easier for the middle class to afford insurance will become available for people with incomes above 133 percent and below 400 percent of poverty ($43,000 for an individual or $88,000 for a family of four in 2010) who are not eligible for or offered other affordable coverage.  These individuals may also qualify for reduced cost-sharing (e.g. copayments, coinsurance, and deductibles).  Effective January 1, 2014.
• Establishing Health Insurance Exchanges. Starting in 2014 if your employer doesn’t offer insurance, you will be able to buy insurance directly in an Exchange — a new transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans.  Exchanges will offer you a choice of health plans that meet certain benefits and cost standards.  Starting in 2014, Members of Congress will be getting their health care insurance through Exchanges, and you will be able buy your insurance through Exchanges too. Effective January 1, 2014.
• Increasing the Small Business Tax Credit. The law implements the second phase of the small business tax credit for qualified small businesses and small non-profit organizations. In this phase, the credit is up to 50 percent of the employer’s contribution to provide health insurance for employees.  There is also up to a 35 percent credit for small non-profit organizations.  Effective January 1, 2014. Learn more.

INCREASING ACCESS TO AFFORDABLE CARE

• Increasing Access to Medicaid. Americans who earn less than 133 percent of the poverty level (approximately $14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid. States will receive 100 percent federal funding for the first three years to support this expanded coverage, phasing to 90 percent federal funding in subsequent years. Effective January 1, 2014.
• Promoting Individual Responsibility. Under the new law, most individuals who can afford it will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans.  If affordable coverage is not available to an individual, he or she will be eligible for an exemption.  Effective January 1, 2014.
• Ensuring Free Choice. Workers meeting certain requirements who cannot afford the coverage provided by their employer may take whatever funds their employer might have contributed to their insurance and use these resources to help purchase a more affordable plan in the new health insurance Exchanges.  Effective January 1, 2014.

2015

IMPROVING QUALITY AND LOWERING COSTS

• Paying Physicians Based on Value Not Volume. A new provision will tie physician payments to the quality of care they provide. Physicians will see their payments modified so that those who provide higher value care will receive higher payments than those who provide lower quality care.  Effective January 1, 2015.

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Provider Insurance hires Julie Wetherbee as Marketing Manager

Emerging Face of Insurace Industy – Provider Insurance Group

Hires Fresh, Young  NESN  TV Talent

Julie Wetherbee adds new perspective to Provider’s dynamic marketing team.

Needham, MA.  July 21, 2010.  Provider Insurance Group is ramping up their marketing, social media and PR by bring a fresh perspective to their marketing team with recruiting a local TV talent outside the traditional insurance industry.  Provider welcomes Julie Wetherbee as she assumes the role of Marketing Manager specializing in social media, events and field sales support.

Wetherbee is a Magna Cum Laude honors graduate from Boston College with a B.A. in Communications and Pre-Law Minor.  Julie has over 7 years of marketing experience and great relationship marketing skills.  She is a master at event planning and working with top level CEOs as well as Boston’s most influential industry leaders.  Prior to joining Provider she was the Marketing Director for the Commonwealth of Massachusetts’ Office of Business Development, where she supported 7 industry directors with all of their marketing needs.  Her areas of specialty include MA bio tech/life sciences, manufacturing, renewable energy, defense, finance, technology and the arts.   Wetherbee also worked closely with the Governor and his office to bring new business to Massachusetts as well as promote and retain businesses within Massachusetts. 

Wetherbee is a familiar face around town.  In her spare time and weekends, she’s the co-host/entertainment/sports reporter for New England Sport Network – NESN’s Dirty Water TV which airs weekly on Saturday nights at 11:30 p.m.  Most recently she was featured in Boston’s Stuff @Nite Magazine April issue.   Some of you may also recognize Wetherbee from the Boston Celtics, where she was the former in-arena hostess.

 “There’s a hidden pool of young talent, like Julie, and experienced gen Xers with innovative thinking. As the Boomers retire, younger people are being groomed to take over. We’re not afraid to hire younger employees outside the insurance industry —they add great value in a challenged economy with their social marketing skills and fresh perspectives.  These are the people whom you want to pursue,” says Bill Darcey, CEO and President at Provider.  “It’s true that they aren’t likely to stick around for a decade or more, but if you understand how to motivate them, it’s a win, win situation. Capitalizing on the young talent outside the insurance market is one of the best business decisions we’ve made. We get exceptional results, without the baggage of old school thinking.”

About the Provider Insurance Group

Founded in 1945, Provider Insurance Group is a Trusted Choice insurance agency that has grown over the past 60 plus years into a world class, client focused organization. After a rigorous examination and fitness review of 17 quality points, Provider was awarded the Five Star designation, which is held by less than 1 percent of insurance agencies in New England. Headquartered in Massachusetts, Provider also has an office in Woonsocket, R.I. where it was voted ‘Best Place to Work.’

Provider Insurance Group Wins Rhode Island’s Best Places to Work 2010

Award-Winning Woonsocket insurance agency is recognized by the Providence Business News as one of the Best Places to Work offering flexible employment to achieve higher work-life balance.

Woonsocket, RI.  July 21, 2010.  The Providence Business News is proud to announce that the Provider Insurance Group is a recipient in the small companies (15-49 employees) category for ‘Best Places to Work in Rhode Island 2010.’ Winners have more than just progressive and responsive workplace policies in place, but the best companies in Rhode Island have an engaged workforce, retain existing customers and find new ones, drive profit growth even in these difficult times as well as keep turnover low and innovative behavior high.

Work Life Balance:  A Win-Win for All

For the Provider Insurance Group it’s the work-life balance that satisfies and motivates workers while helping them stay productive. Job development is an important aspect at Provider, where Provider encourages its employees to be licensed and offers bonuses for various designations.  The company will pay for education classes as well as any necessary fees for employees to obtain or renew their licenses.  Throughout the year, various leadership training and development programs are also offered, including webinars, speakers and motivational courses. 

“Provider also recognizes the importance of having a healthy balance between work and life, therefore, employees can earn the privileges of telecommuting, job-sharing and compressed –workweek options” says Bill Darcey, President and CEO of Provider Insurance.  “It’s all about working hard to play hard, so in addition, we have developed a work/life committee to plan events, activities and themed days. Lastly, we are so honored by receiving this award and we are happy that we are recognized for something we already believe we are and that is one of the Best Places to Work!”

Approximately 25% of the Provider Insurance Group employees in the company’s Needham, MA and Woonsocket, RI offices work compressed or flex hours through a variety of roles that include marketing, office administration and human resources.  Provider’s actively expanding this percentage and frequently posts opportunities for people who are looking for work life balance.  

The chance to advance a rewarding career without putting family second is what first attracted Elizabeth Pereira, Client Account Manager, at Provider. “Working at Provider is a dream comes true,” says Pereira. “I love my career, but as a mother it doesn’t make sense for me to be away from my eight-month-old daughter forty hours a week. Here, I can have the best of both worlds – work and family.  For me, it’s the perfect balance.”

About the Provider Insurance Group

Founded in 1945, Provider Insurance Group is a Trusted Choice insurance agency that has grown over the past 60 plus years into a world class, client focused organization. After a rigorous examination and fitness review of 17 quality points, Provider was awarded the Five Star designation, which is held by less than 1 percent of insurance agencies in New England. Headquartered in Massachusetts, Provider also has an office in Woonsocket, R.I. where it was voted ‘Best Place to Work.’ 

State Retains 137 Rate Caps on Insurers

By Robert Weisman

State regulators wrestling with soaring health care costs yesterday held fast to a cap on prices for 137 health insurance plans up for renewal this summer, freezing rates at 2009 levels, while sending three insurers scrambling to supply additional data to justify their proposed double-digit rate hikes.

At the same time, four other insurance companies won single-digit rate increases for 63 plans sold in the so-called small-group market, which covers individuals and small businesses. The state Division of Insurance said those insurers showed more restraint in their rate hike requests than the other companies.

The highly anticipated decision on proposed premium increases for the three-month period ending in September — released early last night after daylong deliberations by state officials — contrasts with regulators’ earlier denial of 235 of 272 rate hikes proposed for the April-to-June period. Those rates were frozen at last year’s prices, and insurers have spent the past three months challenging the rejection.

It is unclear whether yesterday’s decision by the insurance division will have a long-term affect on Governor Deval Patrick’s campaign to rein in health care expenses.

State officials have said rate caps are needed to ease the burden of rising health costs on small businesses and working families in a fragile economy. But insurers have complained the state is forcing them to sell policies at a loss, undermining their financial stability. Last week, they were buoyed by a Division of Insurance appeals panel that overturned rate caps imposed on Harvard Pilgrim Health Care.

While none of the new rate proposals were rejected outright this time, Patrick administration officials said their request for additional information — including the amount of reimbursements the companies pay to different health care providers — left the burden squarely on the insurers to make the case for increases. The insurance division will have 30 days to rule on the rate hike requests once they receive the new data.

“We’re not blinking,’’ said Barbara Anthony, state undersecretary for consumer affairs and business regulation. “We’re doing our due diligence so we can stay the course. If the carriers can’t provide information to justify these rates, they’ll be disapproved.’’

Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group for health insurers, said yesterday’s ruling represented ongoing meddling in the insurance industry by Patrick. The governor has pledged to turn down premium increases he considers excessive. “This action by the Patrick administration to not approve rates will continue to cause chaos in the market,’’ Pellegrini said.

Insurance Commissioner Joseph G. Murphy yesterday asked Harvard Pilgrim of Wellesley, Blue Cross Blue Shield HMO Blue of Boston, and Fallon Community Health Plan of Worcester to provide additional information on their requested premium hikes before the state renders a decision on their proposals. Each insurer sought hikes for multiple products, all offering a mix of deductibles and copays for small companies and individuals.

The approved rates were submitted by Blue Cross Blue Shield of Massachusetts, Neighborhood Health Plan of Boston, and two Connecticut-based insurers: Aetna and ConnectiCare. Blue Cross Blue Shield is the corporate parent of HMO Blue. The higher rates took effect immediately.

Three other insurers — Tufts Health Plan, United Health Plan, and Health New England — didn’t submit rates for the summer period.

Executives at Blue Cross Blue Shield, the state’s largest health insurer, said they were evaluating the request for more data. But they were not pleased by the eleventh-hour request.

“We filed the rates with a huge amount of information on June 1,’’ said Jay McQuaide, vice president at Blue Cross Blue Shield. “And we haven’t heard boo from them. On the day the rates would be effective, we get a request for a lot of additional information. It raises the question of what the intent is behind their request.’’

Fallon executives said they didn’t receive the state’s request for more data until late yesterday. “At this point, we’re taking a look at the list of information they’re asking us to provide,’’ Fallon spokeswoman Christine Cassidy said last night. Harvard Pilgrim spokeswoman Sharon Torgerson said the insurer is reviewing the state request.

But a small business advocate applauded regulators for not bowing to insurers. “They’re signaling that business as usual for big health care cannot go on in this economy,’’ said Jon B. Hurst, the president of the Retailers Association of Massachusetts, which represents 1,300 small companies. “They have to understand that consumers and small businesses can no longer write a blank check.’’

After Murphy made good on Patrick’s promise to reject health premiums on April 1, six insurers filed a lawsuit seeking to reinstate their proposed increases.

Suffolk Superior Court Judge Stephen E. Neel turned down their request for a preliminary injunction on April 12, instructing them to exhaust administrative appeals within the Division of Insurance before returning to court. Those appeals continued through the spring and, in the first ruling, an appeals panel made up of three division lawyers last week overturned the Harvard Pilgrim rate cap.

Appeals by Blue Cross Blue Shield, Tufts Health Plan, and Fallon Community Health Plan are pending, with decisions expected over the summer.

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Employer Liability for Employee Cell Phone Use on the Rise

by Rita Osborn

Your IT manager is driving to work talking to you on her cell phone. She’s quoting figures about the purchase of a new e-mail server when you hear a crash.

“Gotta go,” she says. “I’ve just rear-ended a minivan.”

While it’s common for your employees to use cell phones to conduct business while driving, if their conversations distract them and cause an accident, is your company liable?

As an employer, should you prohibit employees from making cell phone calls while they’re driving? Can you minimize your liability with such restrictions?

While there are no definitive legal guidelines, here are some suggestions on how businesses might best approach this issue.

Wireless-related accidents
Stephanie Faul, a spokeswoman with the AAA Foundation for Traffic Safety, said studies on cell-phone use while driving usually focus on whether an accident is caused either by holding the cell phone or driver inattention.

For example, a February 1997 study published in the New England Journal of Medicine found that the risk of a collision was four times higher when motorists use a cellular telephone. The study also noted that hands-free units provided no safety advantage over hand-held units.

In November 1997, John M. Violanti, a criminal justice professor at the Rochester Institute of Technology, published a study on cell phone-induced traffic accidents in the British journal Public Health. The study examined traffic accidents in Oklahoma, the only state with an accident report that notes the presence of cell phones and whether they are used at the time of an accident.

Violanti’s study found that wireless phones were involved in just “two-tenths of 1 percent of crashes in the last year studied.” And those accidents involving cell phones were more likely in urban areas than on rural or suburban roads.

He concluded that, “The reasons for traffic accidents are causally complex, and cellular phones may be but one of many factors involved in driver distraction.”
The Cellular Telecommunications Industry Association says there are more than 85 million wireless subscribers in the United States. That number is continuing to grow, making it more important than ever to understand the way people are using these phones.In 1997, the CTIA asked people to give the most important reason why they used a cellular phone. Seventy-nine percent responded because of the additional safety and security provided by a cellular phone, and seventeen percent said a cellular phone provided a business convenience.

Here’s what the CTIA recommends for safe calling while driving:

1. Make sure your phone is positioned where it is easy to see and reach. Be familiar with the operation of your phone so that you’re comfortable using it on the road.

2. Use speed dialing to program frequently called numbers.

3. When dialing manually, dial only when stopped. If you can’t stop, then pull over, dial a few digits, reenter the flow of traffic, and then survey traffic before completing the call. Better yet, have a passenger dial.

4. Never take notes while driving.

A cell phone policy may minimize liability Michael A. Stiegel, a member of the Leadership Council of the American Bar Association’s Section of Litigation, said determining who would be liable in an accident involving your employee who was using a cell phone isn’t easy.

“An employer is liable for the wrongs of an employee if an employee is negligent,” Stiegel said. “And negligence means failing to act in a reasonable manner.”

As an example, Stiegel outlined two scenarios and the repercussions if an employee had an accident while using a cell phone:

1. The company has a policy prohibiting employees from using a cell phone while driving and will fire them for violating it. If the employee violates the policy and has an accident, the company’s liability is questionable but not eliminated.

2. If the same company can’t prove in a court that it enforces that policy, the company could be liable.

What steps can an employer take?

While a definitive cell-phone policy may look good on paper, Stiegel contends that it would likely not be honored and could be impossible to enforce. He recommends that employers accept the risk and establish a policy that tells employees to exercise care and caution when using cell phones.

His suggestions are in line with a 1991 study on the use of cellular phones by the National Public Services Research Institute . Researchers James McKnight and A. Scott McKnight found “all forms of cellular phone usage lead to significant increases in the establishment of non-response to highway-traffic situations and increase in time to respond.” They also found that “prior experience with cellular phones appears to bear no relation to the distracting effect of cellular phone use.”

This study recommends that:

1. All cell-phone users be advised not to engage in intense phone conversations while their vehicle is moving.

2. Businesses whose employees regularly carry on transactions by means of cellular phones might advise, or even direct, that protracted dealings over the phone be avoided while the user’s vehicle is underway.

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Vacancy: Know the Risks

One very visible result of the economic downturn is an increase in commercial vacancies across virtually all categories—and that could be leaving owners far more exposed than they realize.

How bad is it? By the second quarter of 2009, the vacancy rate for office space increased to 15.5 percent, according to recent analysis from CBRE Econometric Advisors (CBRE). Downtown office vacancies increased to 11.7 percent, while suburban rates to 17.6 percent. Vacancy rates among retail and industrial commercial properties are also rising. According to CBRE, the national industrial vacancy rate rose to 13 percent in the second quarter of 2009—its highest level since 2003. Rates among the nation’s retailers rose to 12 percent.

And the worst of it may be still to come. At least one property research organization, Reis, predicts that the overall vacancy rate for U.S. office properties could rise to 17.6 percent, the highest since 1992.

From an insurance perspective, vacancy is considerable concern. Vacant buildings are more susceptible to certain types of damage, and for this reason, most commercial property insurance policies include a vacancy condition that significantly limits or, in some cases, eliminates coverage if the building is damaged.

For example, most policies eliminate coverage if the property loss to the vacant building is caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft. If something else causes damage to the vacant building, such as fire or windstorm, most policies automatically reduce the loss payment by 15 percent. This reduction is in addition to the policy deductible; further increasing the owner’s out-of-pocket expense.

A major concern with the vacancy condition in most commercial property policies is exacerbated by the fact that a majority of building owners do not understand how the policy defines vacancy. In most policies, building owners are at risk of the vacancy condition and its potentially devastating limitations if less than 31 percent of the building’s square footage is rented or used to conduct customary operations and/or used by the building owner to conduct customary operations. (It’s important to note that buildings under construction are not considered vacant.)

As an illustration, consider a four-story office building. Each floor is a separate suite and each has identical square footage. ABC Company occupies the bottom floor. Due to declining economic conditions, three of the building’s four tenants move out, leaving ABC as the building’s sole tenant. Even though ABC is still there, they only occupy 25 percent of the building. Most commercial property policies now consider this building vacant due to the fact that total occupancy has fallen below 31 percent.

The vacancy condition in the policy is not effective immediately. Rather, the building owner typically has an allotment of time, usually 60 days, for occupancy to increase to greater than 31 percent. If after 60 days tenancy is still below 31 percent the vacancy condition is applied to subsequent losses and will be so until tenancy increases. Further, the building owner’s commercial property insurance policy may be non-renewed upon expiration and the owner may have to purchase a special policy designed for vacant buildings. Such a policy is typically harder to obtain, more restrictive in terms of coverage and may be more expensive then a standard commercial property insurance policy.

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The Growing Risks of Social Media

By Kathleen Ellis

Asked why he robbed banks, Willie Sutton famously replied: “Because that’s where the money is.”

Something similar can be said to explain why companies are paying more attention to social media these days — because that’s where the consumers are.

Global consumers spent more than six hours per month on social networks in March, more than twice the level a year earlier, according to The Nielsen Co. As more and more people join social networks, companies are increasingly aware that they also need to have a presence on these sites.

Because social networks are used by people around the world and the content posted to these sites can circle the globe in an instant, companies need to think globally when they think about both the rewards and the risks associated with social media.

While social networks are essentially borderless, laws, regulations and sensibilities are local and vary from one country to the next.

To make the best use of social media and minimize the risk of a loss or a lawsuit, companies that expand outside the United States need to understand the legal and regulatory environments of the local markets.

The Growth of Social Media

Globally, social networks and blogs are the most popular online category when ranked by average time spent, according to a December survey by Nielsen. Facebook is the heavy hitter of social media with 206.9 million unique visitors in December 2009, according to Nielsen. Some 67 percent of global social media users visited the site during that month.

The United States has the largest number of social media and blog users, with 142.1 million unique visitors in December, according to Nielsen. But that doesn’t mean that it’s strictly a U.S. phenomenon. After the United States, the largest number of social media and blog users were in Japan, Brazil, the United Kingdom, Germany, France, Spain, Italy, Australia and Switzerland.

Although the United States had the largest number of social media users, Australia led in average time per person spent, with the average Australian spending nearly 7 hours on social media sites in December, according to Nielsen.

With so many people visiting social networking sites such as Facebook and Twitter, it is hardly surprising that ad spending on social networks is also increasing. Nielsen estimates that ad spending on social networks and blogs in the United States more than doubled to $108 million in August 2009.

In addition to spending money on ads on social networks, companies are signing up for accounts and fan pages and putting out content of their own. More than 79 percent of the Fortune Global 100 companies are using at least one of the social media platforms, according to “The Global Social Media Check-Up” released in February by global communications and public relations firm Burson-Marsteller. The report found that 65 percent of the Fortune Global 100 have active Twitter accounts, 54 percent have Facebook fan pages, 50 percent have YouTube video channels and 33 percent have corporate blogs.

Social Media Brings Risk as Well as Opportunity

As companies increase their presence on social media, they increase their interaction with consumers, engaging in conversations that break down traditional barriers to communication. But at the same time, they also open themselves up to new risks as well.

Because social media is about consumers having conversations — with each other and with companies — businesses no longer have total control of the message the way they once did.

In its 128-page report “Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon” released in May, international law firm ReedSmith noted that there are three unofficial “I love Starbucks” pages and more than 500 “I love Starbucks” groups. But, the report noted, for every “I love Starbucks page or group, there is an “I hate Starbucks” group or “Starbucks sucks” page.

In this new environment, the corporate brand and reputation are at risk as consumers give voice to their thoughts and experiences on social media sites. Companies are also at risk of failing to comply with the various laws and regulations that relate to content posted on social media.

Although the European Union has harmonized laws in many areas, these laws have been implemented differently in every country, according to ReedSmith.

These laws and regulations can be grouped into several key categories:

• Advertising and Consumer Protection

• Defamation

• Privacy/Employee Use of Social Media

• Securities Disclosure

Advertising and Consumer Protection

Companies can get into trouble with their advertising and other content on social media in a number of ways — with false or misleading advertising claims, by attempting to improperly influence bloggers to write favorable reviews of their products or by improper use of user-generated content (UGC), which is often used for promotions and contests.

The European Union and the United Kingdom have a number of regulations to guide advertising and consumer protection practices. The European Union, for instance, has several directives that regulate misleading and comparative advertising as well as unfair business to consumer commercial practices, according to ReedSmith. In the UK, the Advertising Standards Authority regulates all forms of advertising, sales promotion and direct marketing, including advertising on social media.

False advertising and word-of-mouth marketing on social media is another concern. In the UK, the Consumer Protection from Unfair Trading Regulations 2008, includes a general prohibition on unfair business to consumer commercial practices. The regulations also legislate against misleading actions/omissions as well aggressive commercial practices.

Another relevant UK regulation is the Business Protection from Misleading Marketing Regulations 2008, which prohibit misleading advertising and set out rules for comparative advertising, according to ReedSmith.

Defamation

In the United States, the First Amendment provides broad protection for free speech. Other countries, however, are not as vigorous in their defense of free speech.

In England, for instance, the outcome of a defamation case is decided by balancing the right to free speech against the right to reputation, according to ReedSmith.

As a result of the greater protection given to reputation in comparison with other jurisdictions, the UK has become the forum of choice for many defamation claimants, the law firm says.

Privacy/Employee Use of Social Media

Social media also opens up new opportunities for privacy violations and for inappropriate disclosure of confidential information, such as trade secrets, intellectual property or confidential employee information. Inappropriate posts on social networks also could lead to claims of a hostile workplace environment.

According to a June 2009 survey by Proofpoint, an e-mail security and data loss prevention company, 18 percent of the 220 companies surveyed said they had investigated a data loss event via a blog or message board in the last 12 months.

Seventeen percent said they had disciplined an employee for violating blog or message board policies, while 9 percent reported terminating an employee for such an event.

Companies also experienced problems with data loss on social networks — 17 percent versus 12 percent in the prior year. Eight percent reported terminating an employee for such a violation compared with only 4 percent in 2008.

Short message services such as Twitter also presented a problem for companies, with 13 percent investigating an exposure event.

Securities Disclosure

Businesses are allowed to disseminate market-sensitive information to investors and the public by electronic means under English law, according to ReedSmith.

The problem comes in connection with what is said. Unauthorized disclosure of market sensitive or insider information or attempts to manipulate markets would put companies at risk with securities regulators.

Risk Management

To manage these risks, companies must establish and expand social media policies to help guide corporate activity and thinking in this area. But in spite of the rapid increase in their use of social media, very few companies have a social media policy in place.

Although 74 percent of respondents in an Ethics and Workplace survey by Deloitte in May 2009 said they believe social networks make it easier to damage a company’s reputation, only 17 percent of executives said they had programs in place to monitor and mitigate the possible reputational risks related to the use of social networks.

Less than a quarter said they have formal policies on the use of social media.

While companies appear to be lagging when it comes to developing social media policies, there is no turning back the social media tide. As younger generations enter into the workforce in coming years, they will be even more plugged in than the employees of today.

Businesses also need to be prepared to act quickly in the event of a public relations crisis, where time is of the essence. In today’s wired environment, information travels quickly and companies no longer have the time to go through a rigid and lengthy internal review process before issuing a response or a retraction.

To minimize the risk of a loss or damage to the company’s reputation, companies can take a number of steps:

1. Develop a comprehensive “new media” policy. The policy should establish the ground rules for all employees — not just those in marketing — on communicating online, including social networking.

2. Establish a social media point person. There should be at least one person, if not a team, in charge of overseeing the company’s social media activities and responding in the event of a crisis.

3. Review every country’s laws and regulations related to social media. Even within the European Union, laws can be implemented differently. Don’t take legal or regulatory compliance for granted.

4. Review insurance coverages to see whether they provide coverage for risks arising from social media. General liability policies have very restrictive coverage regarding advertising injuries. Even so, there may be coverage under a number of policies, including directors and officers, errors and omissions, property, fidelity bond, fiduciary liability, as well as general liability. Cyber liability policies also may respond in certain cases.

Agents and brokers also need to gain a better understanding of social media risks and ensure that clients have developed a comprehensive policy to manage these risks.

When choosing an insurer, companies should look for a carrier that has extensive international experience, a strong branch network and a reputation for reliable, quality loss control and claims services. The insurers also should be familiar with the rules and regulations that pertain to the countries where the multinational has operations and have expertise in the area of social media.

Every day, more and more people are joining social networking sites, reading blogs and following Tweets. Companies need to have a presence on social media to reach consumers where they are and to respond to their concerns as well.

By developing policies in advance and researching local laws and regulations, companies can minimize the risk while taking advantage of the opportunities presented by social media.

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