Demographics, Regulations Pose Challenge for Absence Management
2015 DMEC panel discussion on Amazon’s leave policy. Photo courtesy of DMEC.
Discussions at last week’s meeting of the Disability Management Employer Coalition in San Francisco focused on the impact of shifting workforce demographics amid current challenges and potential innovative solutions to disability management.
With people continuing to work later in life, four different generations now make up the American workforce, and each has different priorities when it comes to employer benefits and how they are delivered.
This, combined with changes in the regulatory and health care landscape, presents unique challenges for employers and absence management providers. Below are some of the major themes discussed at the annual conference:
The pace of regulatory change remains a constant hurdle for employers. Absences in accordance with the Family and Medical Leave Act, in particular, have left employers vulnerable to compliance risk.
Prior to June’s Supreme Court decision to legalize same-sex marriage nationwide, employers had to cope with a definition of “spouse” that fluctuated among the growing number of states that had legalized gay marriage.
Initially, couples that lived in states where same-sex marriages were recognized were viewed as spouses under FMLA. Now, there are no location restrictions on the definition of “spouse.”
That is just one example of how quickly regulations can change, challenging employers to keep their policies up-to-date and ensure there is no infringement of employees’ rights.
Employers also consistently struggle with FMLA compliance by miscategorizing leave under regular sick time, or by punishing employees for FMLA-protected absence by discontinuing health insurance coverage or failing to restore him or her to their former position when the leave ends. Some simply fail to educate employees about their rights under the FMLA.
Federal investigations are also intensifying, with the Department of Labor increasingly requesting information on leave use and conducting more on-site visits, according to Jeff Nowak, a partner at Franczek Radelet, PC, and author of the blog “FMLA Insights.”
Companies can strengthen FMLA compliance and reduce their exposure by conducting more self-audits of their policies and implementing internal protocols to make sure requests for leave are properly designated.
While the Department of Labor is working on an FMLA guide for employers, companies can strengthen compliance and reduce their exposure by conducting more self-audits of their FMLA policies and implementing internal protocols to make sure requests for leave are properly designated.
One upcoming regulatory changes to watch is an update to the Genetic Information Non-Discrimination Act and Section 501 of the Rehabilitation Act.
New legislation is also pending concerning accommodations for pregnant workers, following clashes between the Equal Employment Opportunity Commission and several companies over the treatment of pregnancy and related conditions as disabilities.
Managing Chronic Conditions
Addressing chronic conditions was a topic touched upon in several sessions. Studies from Liberty Mutual’s Research Institute for Safety show that chronic conditions affect 40 percent of the U.S. workforce.
An aging workforce and high rates of obesity and diabetes will only make chronic conditions more prevalent.
Chronic conditions pose problems because few surefire methods have emerged to manage them. Pre-placement exams can’t predict how a condition will develop over time, and the provision of wellness programs and behavioral therapy has shown no real impact in decreasing absence related to chronic conditions.
Sutter Health was able to cut lost days down by 8,632 in one year using a system that integrated leave management and return-to-work accommodations. The estimated savings impact was $2.75 million.
Training supervisors to facilitate return-to-work and oversee ergonomics improvements was one method that did make a material difference in decreasing lost time days due to chronic issues.
Research from Liberty Mutual showed that a supervisor training program resulted in a 27 percent decrease in lost time.
Providing on-site peer support to arrange care and accommodations for minor complaints also led to a 25 percent decrease in lost time.
Several speakers advocated seeking out methods of care that would address a worker’s injury or condition within the scope of their work environment.
Overall, hastening employees’ return-to-work by focusing more on “whole person care” emerged as a big shift for employers.
Zoning in on a specific injury without considering a worker as a whole ignores the unique interactions between the worker’s personal and occupational health risks, and his or her relationship with the workplace in general.
PG&E presented results from a new health plan built around the concept of treating the whole person, and found that focusing on preventive and primary care over specialty care reduced the number of ER visits and lost work days — saving about $1,918 in medical costs per employee in 2014.
Integrated Disability and Absence Management
While integrating disability and absence management, health and safety initiatives, and return-to-work programs remains a hot topic, most experts concede that widespread integration of those programs remains far off.
The complexity of the different pieces — FMLA, the Americans with Disabilities Act and workers’ comp — make coordination difficult.
Those who succeed at streamlining these resources, though, stand to significantly reduce absences and reap savings.
Sutter Health, a nonprofit health system in Northern California, for example, was able to cut lost days down by 8,632 in one year using a system that integrated leave management and return-to-work accommodations. Over the course of that year, the savings impact was estimated at $2.75 million.
Future DMEC conferences will surely feature more employer success stories and pave the way for best practices for marshaling the data, resources and executive support to create integrated programs.
Thinking Outside the Absence Silo
Linking employers’ growing interest in worker engagement with an integrated disability management strategy can improve return-to-work outcomes following workplace injuries and non-occupational illnesses alike.
When engaged employees suffer an illness or injury they are more motivated than disengaged workers to return to the job, said Renee Mattaliano, VP and practice lead of workforce management at HUB International.
While that intuitively makes sense, the concept is also backed by quantitative research showing that engaged employees perform work tasks in a safer manner and rebound sooner from absence-causing illnesses and injuries.
A Gallup examination of 192 worldwide organizations with 1.4 million employees conducted in 2012, for instance, revealed that companies with engaged employees experience 48 percent fewer safety incidents, 37 percent less absenteeism, and a productivity increase of 21 percent, among other improved performance outcomes.
Sophisticated businesses in recent years have grown increasingly interested in worker engagement because of its impact on several components of corporate performance such as employee turnover rates, customer service satisfaction, and profitability.
A “Global Human Capital Trends 2015” report produced by Deloitte states that “this year, employee engagement and culture issues exploded onto the scene, rising to become the No. 1 challenge around the world.” Deloitte’s survey of businesses worldwide found that 87 percent percent believe the issue is important, while 50 percent called it very important.
“This year, employee engagement and culture issues exploded onto the scene, rising to become the No. 1 challenge around the world.” — Deloitte, “Global Human Capital Trends 2015”
Heightened business interest in worker engagement has included greater appreciation for its influence on absenteeism and disability management, said Karen English, a partner at Spring Consulting Group, an employee benefits and risk management consultancy.
“The concept is out there, it’s a matter of how much employers tie it all together,” English said.
Under one strategy tying employee engagement to absence management —whether absences are driven by workers’ compensation claims, short-term or long-term disability claims, or leave laws — HUB International advises employers to match the hiring of workers with roles that will specifically engage those employees.
To help employers do that, HUB International partners with Judgment Index, a company providing a predictive tool that helps businesses hire “the right person for the right job.” The tool “measures an individual’s judgment capacity as it relates to decision-making, stress management, how work is valued, and so forth,” according to a HUB paper on absence management.
The predictive tool, also named the Judgement Index, is neither an integrity test, a personality profile, IQ test, nor an emotional balance test, said Roger D. Wall, Judgment Index’s chief marketing officer.
The “values-based assessment” evaluates one’s judgment capacity and the strength of decisions they are capable of making, Wall said. It can help a prospective employer determine how motivated a prospective employee is and how well they fit a specific role, he added.
“We can tell you how motivated they are and what is their value of work,” Wall said. “If a person has a low value of work going into a work environment they are not going to be as engaged. And if a person becomes disabled (and) he doesn’t have a good value or work morale, he is going to be less inclined to go back to work.”
Completing the index takes a few minutes and requires subjects to rank or prioritize statements the subject deems most positive or agreeable.
Evaluating potential employees during the recruitment process with the goal of reducing absences or disability durations remains an innovative approach, said a disability-management consultant who asked not to be identified because they did not have corporate approval to speak.
For HUB International, applying the Judgment Index tool is a part of a comprehensive absence management approach that aims to integrate across workers’ entire “employment life cycle,” starting with their recruitment.
Employers are increasingly disregarding traditional corporate silos to develop comprehensive strategies for absence and disability management, HUB’s Mattaliano said. They are doing so by evaluating employee data regardless of whether it is generated by workers’ comp and disability claims, health and productivity measurements, group health outcomes or leave programs.
A Global Perspective
As any traveler knows, the world is full of uncertainty and dangerous places, where the challenges of simply trying to run a profitable business far from home are complicated by even greater risks, such as political violence, civil unrest, credit risk, corruption, expropriation of private assets by the government, and more.
Anyone doubting this need only take a look at current events. Some 70 percent of the world’s nations currently have serious corruption problems throughout their governmental and civil service framework. Nearly 40 percent of all nations are experiencing some form of significant civil unrest. Signs of economic distress are everywhere, from falling oil prices to Eurozone debt crises to economic slowdown in China.
Despite such geopolitical risks, the world still needs its businesses to continue running amid dangers that range from warfare and terrorism to punishing economic conditions caused by international sanctions, to simple graft and hostility toward foreigners.
For global and multinational companies, keeping an eye on their political risk profile is as important as handling worker safety, environmental impact, products liability, or any other insurable risk. Thankfully, political risk exposures are insurable as well, and Starr Companies is there to provide its clients with robust political risk insurance coverage, a suite of unique support services that truly is second to none, and the ability to educate clients on how to manage their political risk.
Political risk hazards generally fall into one of the following categories:
Breach of Contract and Non-Honoring of Financial Obligations
These related hazards involve the failure of a local actor to uphold their contractual or financial obligations to a foreign investor, and the inability or unwillingness of local authorities to intercede on the foreign investor’s behalf. This is perhaps the most common form of political risk hazard, as it is a major problem in any environment where there is substantial economic instability and/or corruption.
Confiscation of Property
Also known as “expropriation,” “ownership risk” and “nationalization,” this is when a government seizes property or assets without compensating the owners for them. An overt example of expropriation would be a revolutionary government seizing an office building or a factory belonging to a foreign-owned corporation. An example of creeping expropriation would be a series of successive events by a government to gradually deprive an investor of their property rights.
This is when the local laws change in such a way as to constrict foreign investors’ economic activity in some way. It could range from creeping expropriation to changing taxation or labor laws that might simply make it far less profitable or far less efficient for a foreign entity to operate in a local jurisdiction.
Inconvertability of Currency
Also known as “transfer risk,” this is when a government takes action to prevent the conversion of local currency to another form of currency, making it difficult or impossible for foreign investors to transfer their profits elsewhere. This tends to happen in countries undergoing some kind of political crisis, like when Zaire—now the Democratic Republic of Congo—declared a new national currency in 1980.
Property or income losses stemming from violence committed for political purposes, including, but not limited to declared and undeclared warfare, hostile actions taken by foreign or international forces, civil war, revolution, insurrection and civil strife (politically motivated terrorism or sabotage).
Kidnap and Ransom
Political violence might also manifest itself as a kidnap, ransom and extortion hazard, but that is typically covered by a separate, specialized policy.
To protect against these risks, insurers can provide comprehensive and custom-tailored political risk solutions, which at a client’s request can be broadened to cover investment contract repudiation, currency inconvertibility and political violence. Such policies typically last for periods of 5 to 10 years. Protected assets for this coverage include fixed assets (e.g., a factory, farm, warehouse or office), mobile assets (e.g., harvested natural resources, raw or manufactured inventory or mobile equipment), leased assets (e.g., aircraft, watercraft or construction vehicles) and investment interests in assets abroad (e.g., money dedicated to funding a foreign project, held in a host country bank and subject to expropriation).
Kidnap & ransom coverage protects company personnel and family by providing financial reimbursement for such an event. Depending on the insurer, some K&R programs also provide independent expert consultancy before and after a potential act of kidnapping, ransom or extortion.
Great insurance coverage isn’t enough to adequately protect against political risk, however. Businesses need extra support to stay on top of their exposures, and to know what the latest geopolitical developments are.
Starr Companies, for example, does this through Global Risk Intelligence, a specialized team of political risk experts with long-standing backgrounds in national intelligence and international affairs. GRI delivers to Starr clients a unique risk advisory service that spans the gamut of commercial property & casualty exposures. GRI also produces two assets that are extremely helpful. The first is the Executive Intelligence Brief, a world-class monthly analysis of ongoing geopolitical developments (especially in emerging markets) available exclusively to a carefully selected readership of top executives. The second is the Global Risk Matrix, a quarterly ranking of the overall political security risk of every country on the planet.
The world’s geopolitical landscape is changing at a remarkable pace, with new risks and uncertainties arising in even the unlikeliest of places. And yet, as business becomes ever more globalized, insurers can provide their clients with tailored coverage to absorb the losses that stem from political turmoil. By finding the right insurer, with the financial strength to cover their risks as well as the analytical acumen to help turn risk into opportunity, businesses can create partners in prosperity anywhere in the world.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Starr Companies. The editorial staff of Risk & Insurance had no role in its preparation.