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As employers continue to battle the rising costs of group health care, they are also endeavoring to manage a global workforce that is aging and shifting both demographically and geographically. They are contending to maintain compliance with ever-changing regulations and increased corporate governance, while simultaneously striving to boost their levels of productivity during a time when absence rates are rising and individual health is declining.

Companies of all types and sizes are turning to benefits adminstration program integration as a means to achieve success, acknowledging that, as employers, they need to do more with less and that proactive solutions will enable healthier and more productive employees. The Disability Management Employer Coalition (DMEC) has been promoting benefits integration for more than 20 years, and the culmination of all of these factors is finally causing notable change. According to Terri Rhodes, executive director of DMEC, consolidating programs like foreseeable maximum loss, short-term disability (STD), and workers compensation (WC) can reduce costs compared with operating several independent programs. Data from integrated leave programs can be analyzed to determine health and disability cost trends that employers should target for intervention.

This introductory discussion provides specific background to help employers determine where their programs fall within the integrated program spectrum, how they can prioritize issues to develop their particular programs, and which might factor into a phased approach. In the May edition, industry best practices and implementation will be reviewed.

The Spectrum of Options To Consider

Traditionally, disability management has consisted of programs and processes that seek to prevent disability, reduce the cost impact of disability, and provide mechanisms to promote maximum functional recovery and return to work. As employers have sought to accomplish this within their organizations, they have recognized the importance of integrating disability and leave management with other employee benefits, including WC, to maximize their efforts and improve overall corporate results.

Integrated Disability Management (IDM)

This refers to the concept of integrating various pieces of disability management to achieve cost and administrative efficiencies for the employer and a better or more streamlined “customer experience” for the employee. The typical programs included in IDM are a combination of short- and long-term disability (LTD), WC, and family medical leave (FML) administration. By coordinating these programs through a single source of intake, with immediate triage to the appropriate claims administrator, employers gain several benefits.

In addition, IDM programs typically encourage early intervention, provide opportunities for common case management across occupational and nonoccupational claims, and create an environment in which formal return to work programs can be implemented throughout the organization. Further, and perhaps the most importantly, this integration allows employers to track the data related to all of these areas and establish a baseline against which to measure themselves. This allows for trending to occur throughout the organization and subsequently prevention and improvement to develop over time.

Total Absence Management (TAM)

These programs incorporate all of the IDM programs and processes but expand on them to include all employee time away from work including sick time; leaves of absence (LOA) such as military leave, bereavement leave, jury duty, personal leave; and other paid time off (PTO) such as vacation or personal days. TAM programs consider all employee absence regardless of reason and provide a process and mechanism for identifying and managing the root cause of absence. The single source of intake referenced previously is expanded within TAM to include all types of absences and can begin day one and even earlier when considering intermittent leave. This allows timely communication to appropriate parties, which in turn arms supervisors and managers to plan proactively for absence, use budgets more effectively for replacement workers, and make the “present” team as productive as possible.

Health and Productivity Management (HPM)

This ultimately incorporates the health and wellness components into disability and absence management processes. In addition to the elements of IDM and TAM programs, it goes further to develop a common point of access for all absence and health promotion benefits. It incorporates targeted disease management programs; employee assistance programs (EAP); and behavioral health management processes, wellness initiatives, on-site health facilities, and important tools and information sources. Effective programs coordinate medical providers for group health and WC and result in appropriate employee screening for various health risks, ensuring triage to appropriate intervention programs. Full HPM programs typically utilize a data warehouse for comprehensive reporting and use of predictive modeling to run hypothetical scenarios for strategic planning across an organization.

Getting Started

Considering the depth and breadth of the options available to employers, it is not surprising that the most common approach to integration is phased, where employers develop a long-term strategy for integration but take practical and short-term steps to impact their most immediate issues. For some, the cost of group health care is at the top on their list and must be addressed before anything else can be considered. For others, compliance is the main issue and consistent administration the key. Reducing absenteeism and impacting presenteeism may be another focal point. Regardless of where an employer sits on the integrated spectrum, it is important to know that approximately 52 percent of employers have gone before them to integrate their programs in some manner and, of those without an integrated program (48 percent), 61 percent have plans to implement one.

Organizations that integrate benefits get started in one of two general ways:

Phase I—integrate disability (STD and LTD) with sick leave and FML administration; or
Phase II—focus on group health and incorporate health management initiatives such as wellness, EAP, and behavioral health and disease management programs.

Companies then expand their integration, with STD being the lever to coordinate with group health and/or WC and other leave program (LOA, PTO) integration next on the priority list to move employers toward a TAM approach. What this translates to is that employers often start with parts of IDM, move on to incorporate HPM, and then consider implementation of TAM to round out their strategies.

Disability, WC, and healthcare funding can also signal an organization’s tendency to integrate. Those that self-insure or use captive insurance to finance their programs are constantly looking for proactive methods and preventative approaches (e.g., early intervention, common case management, return to work) that integrated programs can resolve. This is important to note, given that 73 percent of employers self-insure their STD, 32 percent self-insure their WC, and 60 percent self-insure their healthcare programs. A greater number (84 percent) of employers insure (rather than self-insure) their LTD programs; however, that figure is starting to erode due to the onset of captive insurance company use for LTD programs.

It should be noted that integration also involves cross-functional coordination between risk and benefits. Having both of these functions report up within the same structure expedites this process. All parties must buy into the idea (top-down approach) to attain the highest level of success.

The philosophy with regard to data usage is also important when it comes to integrated programs. Provider capabilities, tools, and employer access points have become very sophisticated, as have employer goals in combining data and information into reports and analytics that are measurable and actionable. Employers using data to manage their integrated programs are already incorporating overall employee benefit costs into their integrated program analysis, including the use of data warehouses and predictive modeling to run scenarios and set strategy for plan design. Self-service tools have also risen in importance, as employers expect their supervisors and managers to have real-time access to absence information so they can proactively manage employee schedules and plan for replacement workers when needed.

Finally, DMEC advises companies to be prepared to commit considerable time and resources to program integration, partnering with their absence and disability vendors. Patience does pay off, but it takes at least 12 to 18 months to develop an integrated program; however, once implemented, the results mentioned above can be recognized within a year.
One Size Fits All

Employers of all sizes are increasingly adopting a more integrated approach to help them administer different types of occupational and nonoccupational leaves while using integrated data to create healthier workplaces, therefore modifying their risks. These program improvements can simultaneously rein in costs, provide significant savings, and increase employee productivity.

The propensity to integrate is highest among larger organizations, where the majority of employers with 10,000 or more lives tend to combine at least a few of their benefit programs. This is primarily due to employer sophistication, internal prioritization of objectives, and product availability where insurance companies and third-party administrators (providers) have been successful in targeting large employers in the past. However, as the market has matured, providers have gained experience with their models, and employers are more aware of their options, causing a down market shift. Employers with 5,000 to 10,000 lives are already integrating as much as their larger counterparts, and those with 1,000 to 5,000 lives are integrating more than one might expect. Employers with 500 to 1,000 lives have actually realized they need integrated programs the most and are already integrating or have plans to integrate group health with disability or absence management over the next few years.

STD and LTD are by far the two benefits most outsourced to the same vendor. Both experienced significant increases over the previous 2 years, suggesting a move by employers to utilize existing relationships with current vendors to outsource the management of leaves. WC, group health, and EAP programs all show about the same rate of outsourcing services to the same vendor.
Advantages and Barriers

There are several advantages to integrating benefits programs, some of which are financial and others more operational. From a financial perspective, employers that integrate generally experience savings of at least 10 to 15 percent of direct program costs or between .25 and 1.00 percent of payroll, depending on the programs integrated. This would include direct and indirect costs.

By other measures, employers are able to reduce disability days by between 10 and 35 percent, improve return to work rates by at least 6 percent, and experience return on investment for the programs they put in place ranging anywhere from 3:1 to 15:1. Once a program has been in place for 6 months or more, they are able to demonstrate reduced lost time, decreased incidence, and lower absence rates.

From an operational perspective, employer ability to effectively track claims and absence and move toward viewing the big picture—that is, how employee behavior is affecting the health and productivity of the workforce—is key. Integrated strategies afford the capacity to establish effective return to work programs, early intervention, and prevention measures, which in turn improve outcomes of illness and injuries and result in fewer absences for the organization.

At the same time, simplicity of the process and increased employee satisfaction commonly result from integration. Reporting claims or incidences through one mechanism (e.g., 1–800 number or Web portal), receiving clear notification of rights and processes, and dealing with fewer parties than they would have under other circumstances are examples of what can be accomplished. Employer supervisors, managers, and human resources and corporate representatives are usually impressed with the process as well, because they can turn to consistent administration across a number of programs and a common process to instruct employees to follow one source of information.

Finally, compliance with federal and state laws is yet another advantage that cannot be stressed enough. When it comes to FML, specific challenges that organizations encounter due to employees taking FML as a result of a chronic condition (e.g., ongoing injury, ongoing illness, and/or non-life threatening condition) are tracking of intermittent leave (73 percent), chronic abuse of intermittent leave by employees (66 percent), and morale problems for employees asked to cover for those out on leave (63 percent).

Managing the requirements of the Americans with Disabilities Act (ADA), the Occupational Safety and Health Act, and other important regulations is also better handled through a combined approach and a data-driven structure that tracks activities and measures outcomes on a continual basis.

Barriers to integration are few. Some employers see no compelling reason to change, do not want to switch vendors, or, ironically, perceive that the costs to integrate are high. Some have not been approached—by their broker, consultant, insurer, or internal peers—about integration or feel their company is not suited to it.
Future Trends and Conclusions

While disability integration concepts have been around since the early 1990s, the expanded holistic approach is now critical in assisting employers to maximize productivity and employee health, both physical and mental. Industry experts, including the DMEC, continue to predict that integration is the next trend that organizations should be tracking to improve results and competitiveness. The demand for customized IDM solutions that address the needs of both risk management and employee benefit departments continues to increase. More employers are realizing that the impact of federal employment laws like the ADA and the Family and Medical Leave Act and even the Affordable Care Act must be considered for WC claims, along with an increased focus on return to work. These IDM programs are clearly the future pathway to the next generation of cost control, increased productivity, and profitability.

References:

Disability Management Employer Coalition (DMEC), Tools of the Trade: A Compilation of Programs and Processes for the Absence, Disability, Health, and Productivity Professional, 2009.

Disability Management Employer Coalition (DMEC) and Spring Consulting, 2013 Employer Leave Management Survey, January 2014.

“Recap: 13 for 2013 Emerging Issues for Employers.”

“Total Absence Management Helps Employers Control Costs,” Business Insurance, August 12, 2013.

Insurance Thought Leadership, “Workers’ Compensation Issues to Watch in 2014.

Marcia Carruthers