Reaping the Rewards of Benefits Integration
Discussions at this week’s Disability Management Employer Coalition conference held in New Orleans included measures for keeping employees healthy, injury free, and on the job.
Conference participants also reviewed risk reduction, ease of administration, and cost saving advantages obtained by integrating absence management and disability benefit programs such as workers’ compensation, the Family and Medical Leave Act, and short-term disability offerings.
Proponents say integration makes sense because of overlaps among the range of programs under which workers can be absent and the cost to organizations regardless of the reasons for missed work days.
They also point to potential compliance risks when the administration of programs is segregated and improperly aligned.
“There is hardly any situation where there is just one perfect claim going on,” said Karen English, a partner at Spring Consulting Group. “If someone is [out] on workers’ comp, they are probably on FMLA [and] STD. Then we have all our concurrent leaves going on. So keeping workers’ comp to the side can actually be viewed as a risk to your organization.”
Failing to integrate can lead to lost opportunities, such as the ability to appropriately minimize the amount of time employees spend away from the job by concurrently running FMLA leave with a workers’ compensation absence.
“Just as an example, if you have a workers’ comp claim and that person is out eight weeks for a surgery, if you don’t run it concurrently, you are allowing that employee to come back from that workers’ comp claim and then go out for 12 additional weeks of FMLA time,” said Trina Mouton, manager of disability management and wellness at CenterPoint Energy.
“So it is really advisable to run those concurrently,” Mouton continued. CenterPoint experiences a 2-to-1 return on investment from its efforts, she added.
Employers speaking at the conference cited their gains from integrating programs, although their results are also influenced by several efforts including implementing return-to-work programs.
“We compare ourselves to the hospital industry in terms of [employee restricted-duty days] and lost time,” said Jane Ryan, return to work recovery and claims services at Mayo Clinic. “Our lost time rates are actually lower than the national industry [average] and I think that speaks to the ability we have to keep people at work or return to work early.”
“There is not one silver bullet or only one way to integrate benefits delivery. Every company is so different.” — Karen English, partner, Spring Consulting Group
The paths that employers take to integration and the programs they integrate vary considerably depending on each company’s needs, speakers said.
“There is not one silver bullet or only one way” to integrate benefits delivery, English said. “Every company is so different.”
English will join DMEC’s CEO, Terri Rhodes, in a discussion on how to integrate workers’ comp, disability, and leave programs on Dec. 1, at the National Workers’ Compensation and Disability Conference® & Expo that will also take place in New Orleans.
At the DMEC conference held this week, meanwhile, other discussion topics focused on specific illnesses and corresponding wellness efforts for keeping employees healthy and productive.
Diabetes, for example, impacts employers’ profitability by driving medical costs that are 2.3 times greater than for people without the illness as well as by increasing employee absences and work disruptions.
“There is no question that diabetes affects the bottom line,” said Matthew Ceurvels, director of disability products at Sun Life Financial. “Productivity can be impacted by presenteeism, when an employee is working sub-optimally, by ad-hoc absences, and by long-term absences when employees go out on a disability claim.”
More employer disease management programs focus on diabetes than on other common illnesses like asthma or heart disease, Ceurvels said.
Diabetes care, for example, is a key component of a wellness program CNIC Health Solutions Inc. offers its workers, said Linda Benedict, human resources manager for the third party administrator of employee benefit plans.
CNIC Health Solutions’ employee wellness program’s overall offerings include a recreation center, free access to a CrossFit trainer, encouragement to engage in desk exercises, and online health assessments tied to biometric screenings that provide employees with private information about their individual risk factors.
As part of its health plan, the company also provides free monitoring and testing supplies for diabetes sufferers along with a third-party tracking service for the diabetes testing results.
“We also offer a discount on what the employee pays for their portion of health insurance premiums,” Benedict said. “That is one of the biggest components of our wellness program.”
The discount works as an incentive, providing employees with a 25 percent health care premium reduction, first for participating in the biometric screening, and then as they maintain a certain screening result level.
That led to a 23 percent improvement in employee health risk over one year, as measured by the biometric screenings.
The wellness efforts have improved employee engagement and morale, lowered workers’ comp losses and reduced absenteeism, she said.
“One key metric for us is that in the last year and a half, we have not had one FMLA leave,” Benedict said. “It has really limited FMLA leave for our employees because they are more engaged. They are taking care and looking at their metrics, and sharing them with their physicians. It is really starting to pay off.”
High ROI on Publicly Funded Stay at Work Programs
Publicly funded stay-at-work/return-to-work programs could help employers that may face reduced productivity from injured workers returning before they are at 100 percent of functionality, suggests a new report.
State and/or federally funded SAW/RTW programs could also save the governments themselves unnecessary expenses for injured workers who are laid off or cannot return to their jobs. While the authors focus on employees not covered by workers’ comp programs, the case can also be made for covered workers who do not receive the help they should.
“Despite the clear benefits to workers and taxpayers, no federal agency is in charge of preventing job loss after injury or illness.”
“Millions of hard-working Americans leave the labor force every year, at least temporarily, because of injury or illness. Without steady earnings, these workers and their families often end up in public programs such as Social Security Disability Insurance, Supplemental Security Income, Medicare, and Medicaid. The resulting costs to state and federal governments are steep,” the report begins.
“But the public sector could help to reduce those costs by adopting strategies to help people stay at or return to work, rather than fall through the cracks of a fragmented system.”
The brief, The Case for Public Investment in Stay-at-Work/Return-to-Work Programs, was developed for the SAW/RTW Policy Collaborative, housed in the Department of Labor’s Office of Disability Employment Policy. The document is part of the collaborative’s efforts to promote positive SAW/RTW programs.
“Despite the clear benefits to workers and taxpayers, no federal agency is in charge of preventing job loss after injury or illness. And state workforce and vocational rehabilitation agencies have not traditionally focused on workers who are at risk of losing their jobs because of injury or illness,” the brief states.
“State-regulated workers’ compensation systems provide cash and medical benefits to workers who experience work-related injury or illness. But they do not help the millions of employees whose medical conditions are not work related, and they often fail to help even those who are covered.”
The authors looked at the costs and benefits of an early intervention SAW/RTW program at the state level. They compared the costs to state and federal governments, the injured worker, and employers for a worker returning after an injury in a state with a hypothetical SAW/RTW program to one with no such program.
“Under our baseline assumptions, the state government would save about $83,000 in net benefits for each worker who is retained rather than replaced, following the onset of long-term disability,” the report says. “About $71,000 (or 85 percent) of the net benefits to the state would come from higher tax revenues under the SAW/RTW scenario than under the no-SAW/RTW scenario. The rest would predominantly be a result of avoiding the costs of Medicaid and unemployment compensation.”
Such a program would save the federal government even more — an estimated $292,000 in net benefits until the worker’s retirement. Much of those costs would result from avoiding public assistance expenses with the rest from higher tax revenues. The injured worker under the scenario would gain about $422,000 in net benefits from keeping his job and the associated compensation.
“The state government would save about $83,000 in net benefits for each worker who is retained rather than replaced, following the onset of long-term disability.”
Retaining an injured worker would admittedly be an expense for the employer. While the costs of recruiting, hiring, and training a new employee would be eliminated, the anticipated loss of productivity for an injured worker at less than full capacity equates to an estimated $185,000 — mainly from the assumed 16.3 percent reduction in productivity. However, those costs could be lowered.
“States may need to make larger investments, including subsidizing the wages of those with greatly reduced productivity, to sharply increase the number of workers who stay in the labor force,” the report says. “But states may not be willing to make these investments unless the federal government or workers (possibly via a payroll tax) help pay for them.”
States already have a variety of ways in which to help foster SAW/RTW efforts. “The workers’ comp system can make regulatory, process or service changes to improve the SAW/RTW services for workers with job related conditions,” according to the collaborative. “Some states have reemployment subsidies until the workers return to 100 percent functional capacity.”
State governments can include aggressive SAW/RTW strategies in their Workforce Innovation and Opportunity Act plan. The act, implemented last summer, requires states to strategically align their workforce development programs.
Workforce agencies can help employees and employers identify and access SAW/RTW services, support development of, and state agency cooperation with, employment resource networks that facilitate SAW/RTW support, and leverage capabilities developed under the state’s Disability Employment Initiative.
Several states have tools in their short-term disability programs that allow wage subsidies or partial benefits for RTW. And state personnel agencies can help state workers by improving their access to evidence-based SAW/RTW services and improving incentives for workers and their managers to use SAW/RTW services effectively.
Washington State’s Model
A unique program in Washington State pays employers to help injured workers stay on the job. Stay at Work “is a financial incentive that encourages employers to bring their injured workers quickly and safely back to light duty or transitional work by reimbursing them for some of their costs,” the Washington State Department of Labor and Industries website states.
Employers may be reimbursed for 50 percent of the base wages paid to injured workers, as well as some of the costs of training, tools, or clothing the worker needs to undertake the transitional or light-duty work.
The program “has increased return to work and reduced workers’ compensation costs,” according to the SAW/RTW Policy Collaborative.
Buyers Beware: General Liability Outlook May be Shifting
The soothing drumbeat of “excess capital” and “soft market” to describe the general liability (GL) market is a familiar sound for brokers and buyers. Emerging GL trends, however, suggest the calm may not last.
Increasing severity of GL claims may hit some sectors like a light rain at first, if they have not already, but they could quickly feel like a pelting thunderstorm in others. A number of factors could contribute to the potential jump in GL prices for certain industry segments or exposures, possibly creating “micro” or niche hard markets in the short-term, and maybe even turning the broader market over the longer-term.
“There are trends we’re seeing that will play out slowly. Industries that carry more general liability exposure will and have been hit first and hardest, but it won’t apply across the board initially,” said David Perez, Senior Vice President and Chief Underwriting Officer, for Liberty Mutual Insurance’s National Insurance Specialty operation. “There is ample capital in the market today, which allows a poor performing account to move its policy frequently from carrier to carrier. Poorer performing classes, however, will likely face increased pricing for GL policies and a reduction in capacity.”
The good news for buyers is that they can take action today to lessen the impact these trends and the evolving market may have on their GL programs.
David Perez on the state of the GL market.
Medical and Litigation Trends Drive Severity
One factor increasing claim severity is the rising cost of health care, driven both by greater demand and by medical inflation that is growing faster than the Consumer Price index.
The impact of rising medical costs on commercial auto is well-known. Businesses with heavy transportation exposures are finding it more difficult to obtain coverage, or are paying more for it.
That same trend will impact general liability, just on a slower and more fragmented basis.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk.”
— David Perez, Senior Vice President & Chief Underwriting Officer, National Insurance Specialty, Liberty Mutual Insurance
“It takes longer for medical inflation to register through the tort system in general liability than it does in auto liability (AL) because auto claims are generally resolved more quickly,” Perez said. “But the same factors affecting severity in AL also exist in GL and as a result, it’s foreseeable that we will not only see similar severity trends in GL, but they may in fact be worse than we’ve seen in commercial auto.”
Industries with greater exposure to severity in general liability claims should be the first wave of companies to notice the impact of medical inflation.
“Medical inflation will drive up costs across the board, but sectors like construction and product manufacturing have a higher relative exposure for personal injury lawsuits.”
The impact of medical inflation on the GL market.
Beyond medical inflation, two litigation trends are increasing GL damages. First, plaintiffs’ lawyers are seeking to migrate the use of life care plans—traditionally employed only for truly catastrophic injuries—to more routine claims. Perez recalled one claimant with a broken thumb and torn ligaments who sought as much as $1 million in care for the injury for the rest of his life.
Second, the number of allegations of traumatic brain injuries (TBI) in GL claims is growing. It can be difficult to predict TBI outcomes initially and poor outcomes can be expensive and long tailed.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk,” notes Perez.
Changing Legal Landscape
Medical inflation and litigation trends are not the only issues impacting general liability.
Unanticipated changes in court interpretations of policy language can throw unexpected pressure on GL pricing and capacity.
Courts sometimes issue rulings interpreting policy language in a manner that expands coverage well beyond the underwriter’s original intent. Such opinions may sometimes have a retroactive effect, resulting in an immediate impact on not only open, but also closed cases in some circumstances.
Shifts in the Marketplace
In addition to facing price increases, GL brokers and buyers will be challenged by slightly shrinking capacity due to consolidation and repositioning among carriers in the marketplace. “Some major carriers have scaled back their GL writing, resulting in a migration of experienced senior management. As these executives leave, they take their GL expertise and relationships with them, resulting in fewer market leaders and less innovation,” Perez said.
“Additionally, there are new carriers coming into the business that may not have the historical GL loss data to proactively identify trends or the financial strength and experience to effectively service their GL customers and brokers. Both trends make it important for brokers and buyers to work with an insurer that is committed to the GL market and has the understanding and resources to help better manage risks impacting customers.”
Last year saw a high level of mergers and acquisitions in the insurance industry. Buyers should take advantage of that disruption to re-evaluate their needs and whether their insurers are meeting them. Or better yet, anticipating them.
What’s a Buyer to Do?
Buyers—and their brokers— should look to partner with insurers that can spot emerging trends and offer creative solutions to address them proactively.
What should buyers and brokers do, given the trends facing the GL market?
“Brokers and buyers should value insurers that have not only durability and a long history in the general liability business, but also a strong risk management infrastructure,” Perez said. “Your insurer should be able to help you mitigate your specific risks, and complement that with coverage that works for you.”
Beyond robust GL claims and legal management, Liberty Mutual also provides access to one of the insurance industry’s largest risk control departments to help improve safety and mitigate both claim frequency and severity.
In addition, notes Perez, “Even if a company has a less than optimal loss history in general liability, there can be options to provide adequate coverage for that company. The key is to partner with an insurer that has the best-in-class expertise, creativity, and flexibility to make it happen.”
By working closely with their insurers to understand trends and their potential impacts, brokers and buyers can better prepare for the possible GL storm on the horizon.
To learn more about Liberty Mutual’s general liability offering, visit https://business.libertymutualgroup.com/business-insurance/coverages/general-liability-insurance-policy.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.