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Designing a legal plan for your employees.

Designed to provide low-cost legal assistance for employees who could not otherwise afford attorney services, group legal plans are becoming an increasingly popular employee benefit. Companies that use the plans are finding that they offer many advantages for both themselves and their employees. For example, by providing attorney services that employees access through a phone call, companies can reduce the amount of work time employees miss searching for outside legal help. A recent study by management consultants LSK Associates revealed that 48.2 percent of approximately 1,300 respondents took some time off from work during the year in order to deal with legal problems. On average, employees missed 51.5 hours of work each year to attend to their legal matters, at a minimum cost of $412 to the employer for lost work time.

Because group legal plans give employees an efficient and inexpensive way to solve their legal problems, the use of the plans will also increase company morale and productivity. And with yearly premiums ranging from $85 to $200 per year, or $7 to $16 per month, companies will find that these plans are reasonably priced in comparison to other benefits.

However, since the plans are relatively new, many risk managers need to develop the ability to evaluate them properly.

Many providers of group legal plans offer products that contain a standardized menu of benefits. However, employers wishing to purchase a legal plan can negotiate with the providers in order to create a customized product for their employee group. Rather than merely choosing from a selection of standard legal plans, companies can develop a plan that contains the features that are best suited to their employees' needs.


Although the details of legal plans vary, they generally come in two types. The first, full-coverage, comprehensive legal plans, pay the cost of participating attorney fees for standard, perSonal legal matters. These plans offer, in some variation, coverage for domestic matters, wills and estate planning, traffic matters, consumer, debt and real estate issues, as well as some type of unlimited legal hot line service. Some comprehensive plans have scheduled maximum benefits, while others will pay the full amount of participating attorney fees. Generally, these full coverage, comprehensive plans are offered as an insured product.

For employers who wish to have a comprehensive plan but don't wish to pay a large initial fee, one option is to purchase a "bare bones" plan, which provides basic legal coverage for its members. Many employers believe that once they get a bare bones plan up and running, they can enhance the coverage in the future. However, there are problems with this approach. For example, legal plan providers are often reluctant to add expensive benefits such as coverage for bankruptcies, contested divorces or real estate refinancing to previously purchased plans. Therefore, as a general rule, employers will find that it is expensive to add benefits after the initial year.

The second type of plan, which is generally more limited in scope, is typically known as an access plan. These plans offer advice, consultation, letter writing, phone calls, self-help counseling and referral to participating attorneys for any further legal services. The participating attorney fees are not paid for by the provider and are the responsibility of the employee. Usually, the provider has a fee agreement with the participating attorneys - typically, a fiat fee or reduced hourly rate for standard legal matters such aS bankruptcy, wills and estate planning, and dissolution of marriage. Some plans will also offer an "hour bank," which covers participating attorney representation in administrative and court hearings. Unlike full coverage plans, in most states these limited ed services have been determined, employers should ask providers to bid on a core legal plan and on additional coverage options.


After determining the type of coverage needed for the legal plan, a careful review of other, often-overlooked issues will ensure the success and quality of the plan. For example, how employees access the legal plan's covered services will make a big difference in their opinion of the plan and, ultimately, their acceptance of it. With a direct access program - which is used only in comprehensive plans - covered employees can choose and contact any attorney participating in the plan. With this program, there is no screening process or attorney assignment. However, with the "gatekeeper" feature - which generally comes with access plans but also is used in some comprehensive plans covered employees must first review their problem with a hot line attorney who will assign a specific attorney if further services are required.

It is important to consider the makeup of the employee group when considering which access arrangement to incorporate into the legal plan design. While a gatekeeper arrangement might help to keep usage costs down, it can also appear to employees as a barrier to getting the services they need. Some employees, for example, will see the plan as less valuable if they can't call an attorney directly. Conversely, some employees may appreciate the gatekeeper arrangement, through which someone selects an attorney for them.


THE PANEL Most group legal plans deliver services via panels of participating attorneys. These attorneys have agreements with the provider to deliver covered services for pre-determined fees or reduced hourly rates. The attorney panel is the backbone of the legal plan and is critical in determining the value of the plan to employees. Legal plan providers will offer either an existing panel or will promise to develop a panel specifically for your group of employees.

Some providers try to sell benefits managers on the size of their panels, but size is not always the best gauge of quality. Some of the best attorney panels have low attorney-to-employee ratios. To ensure a quality plan, all aspects of the attorney panel arrangement must be carefully evaluated.

When discussing their attorney panels, most providers will focus on the number of years participating attorneys have practiced law. Although an attorney's years of experience are significant, panel maturity the amount of time the attorneys have spent on the panel - is equally important. When a new attorney panel is created, there is often high turnover during the first two years of operation, which can create problems in the delivery of services. Since many of the panel attorneys have not previously participated in a group legal plan, they must go through an education process. These attorneys will have to learn how to perform certain functions relevant to membership in a panel, such as filling out insurance claim forms for payment of their legal fees.

Another set of problems can arise when attorneys remain on a panel .too long. Historically, many attorneys 3om legal plans as a way to build their practices while conducting a private practice on the side. As their private practice grows, some attorneys become less willing to provide legal services for reduced fees and therefore may regard their panel duties as a lower priority. The provider should identify these attorneys and, if possible, remove them from the panel in order to maintain the overall integrity of the plan. Providers should continually evaluate the panel members and scrutinize the procedures to ensure that the panel contains attorneys who are committed to their duties. To ensure a quality plan, providers should update data on participating attorneys on an annual basis. This would include maintaining and updating information on licensing, grievances filed and realpractice insurance.

Attorneys' areas of expertise may also affect the quality of service they can offer to a plan. For example, although a plan provider may tout the fact that many of its members are topnotch specialists in areas such as corporate law and estate planning for the wealthy, these attorneys will be of littie value for a group plan since most plan participants are middle-income individuals.

In some cases, the employee group may have special legal needs. For example, some employee groups willneed participating attorneys who are fluent in a specific language. Other groups may need attorneys who specialize in retirement issues, or who are immigration or real estate specialists. Additionally, if divorce is a covered benefit, there will have to be a sufficient number of divorce specialists on the participating panel.

Also, employers should be aware of the compensation agreement that exists with the participating attorneys. It is important to strike a balance between controlling attorney costs and maintaining high quality legal services. Attorneys may be paid on a per capita formula, a flat-fee basis or a reduced hourly rate. Hot line attorneys are usually paid on a per-capita or per-call basis.


The majority of providers offer a hot line service as part of the legal plan design. In order to avoid problems with this service, employers should carefully examine the hot line law firm's qualifications. Hot line attorneys must have experience in handling a large volume of phone calls and dealing with a broad range of personal legal matters. In addition, the hot line firm itself must have the ability to link up with the provider's billing and eligibility information systems.

Employers should also check the credentials of every attorney who will be assigned to the hot line. The legal hot line is on the plan's front line which means that it usually is the employee's first impression of the plan. To ensure long-term success, employers should make certain that the provider has an aggressive quality control program in place for monitoring the hot line's performance.

Employers should also know other details about prospective hot line firms. For example, is the hot line firm allowed to handle "spin-off" business generated by employee use of the hot line? What is the ratio of employees per hot line attorney? Can the hot line provide members with self-help and preventive law programs? What are the hot line procedures for referring members to participating attorneys? How long has the law firm been operating as a hot line, and does the firm have a reference list?


Since group legal plans are a relatively new employee benefit, solid implementation and communications programs are critical to ensuring their success. Employers should look for providers that have a proactive program that includes regular communication with participating attorneys, and the employer's administrative staff. The use of routine newsletters or other communication materials that highlight access and coverage issues and provide self-help and preventive law information will also enhance the value of the legal plan while facilitating cost control.

In addition, providers are developing innovative cost containment methods such as mediation and alternative dispute resolution (ADR) programs. Mediation can be used to reduce total benefit costs in complex legal matters such as contested divorces. And ADR programs, which can contribute to cost containment by reducing attorneys' fees, can also enhance the range of available options an employee has when confronted with potential litigation. Costs can also be

contained by limiting benefits with scheduled maximums, usage limitations, co-payments or deductibles, as well as through gatekeeper services.

Self-help and preventive law programs can also be used to control the cost of legal plans. Self-help programs include educating employees on how they can deal with minor legal matters, such as the filing of small claims actions, whereas preventive programs are aimed at encouraging empl6yees to contact the plan's hot line before pursuing help from an attorney for problems such as leases and contracts. These programs can be easily implemented via the hot line firm and will encourage employees to actively participate in their "legal wellness" and avoid costly entanglements with the legal system.

For employers, designing and implementing the best legal service plan for use as a benefit must involve more than selecting from among "off the shelf" legal plans. To create the best plan for the company's needs, it is critical to examine all options before selecting a legal plan provider. Many of the options are not actively promoted by legal plan providers; therefore, employers need to ask for them. Since adding features to legal plans can be difficult, expensive and disruptive to employees, employers should take the time up front to design a plan that makes the investment worthwhile in the long run.
COPYRIGHT 1993 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:growing use of group legal plans
Author:MacPherson, Catherine R.
Publication:Risk Management
Date:Apr 1, 1993
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