1 Casualty Actuarial Society Disability Management Strategies: Lessons Learned from Workers...

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Casualty Actuarial SocietyDisability ManagementDisability Management

Strategies:Strategies:

Lessons Learned from Workers Compensation and Lessons Learned from Workers Compensation and Managed Health CareManaged Health CareJeffery P. Jordt, J.D., L.L.M.

2002 Risk & Capital Management Seminar

July 8-9, 2002

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AgendaAgenda

I. Exploring Disability Management - Why?

II. Historical Perspective- Workers Compensation- Health Care

- Group Disability

III. Application of Lessons Learned to Integrated Disability Management

IV. How to Implement a Successful Integrated Disability Management Program

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Disability ManagementDisability Management

Definition:

The prevention of disability, the minimization of its impact on and cost to employers and employees, and the encouragement of rehabilitation and return to work for employees with disabilities.

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Incidence of DisabilityIncidence of Disability During the course of your career, you are 3 1/2 times more likely

to be injured and need disability income benefits than die and need life insurance (Source: Public Opinion Strategies)

Risk of long-term disability vs. risk of death Age 30 4.1 times more likely

Age 40 2.9 times more likely

Age 50 2.2 times more likely(Source: Field Guide 1998)

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Incidence of DisabilityIncidence of Disability

Probability of Disability* Occurring Prior to Age 65

AgeTo Any

One Person

One PersonOut of

Any Two Persons

30 .467 .716

40 .430 .675

50 .360 .590

*Disability defined as long term (at least 90 days).

(Source: Field Guide 1998)

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Employee Financial ConsequencesEmployee Financial Consequences

Most people have savings to cover less than six months of expenses. One’s savings could be depleted before Social Security Disability income begins to pay (Source: Business Almanac)

48% of all home foreclosures are the result of disability, while only 3% of all foreclosures result from death (Source: Housing and Home Finance Agency of the U. S. Government)

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Employer Financial ConsequencesEmployer Financial Consequences

Average Direct Costs of Disability

6.3%

0.06%

1.5%

1.7%

2.5%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Workers' Compensation

Sick Pay

STD

LTD

Total

Source: Watson Wyatt, Staying@Work 1999/2000

Percentage of Payroll

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Employer Financial ConsequencesEmployer Financial Consequences

Average Indirect Costs of Disability

7.9%

1.0%

3.8%

3.1%

0.0% 1.5% 3.0% 4.5% 6.0% 7.5% 9.0%

Overtime Costs

Replacement Employees

Workstattion/JobAccomodation

Total

Source: Watson Wyatt, Staying@Work 1999/2000

Percentage of Payroll

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A Historical PerspectiveA Historical Perspective

Workers Compensation

Health Care

Group Disability Insurance

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Workers CompensationWorkers Compensation

Industrial Revolution and social policy

Employers’ Liability Statutes

Workers compensation statutes

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Workers CompensationWorkers Compensation

Provide lost wages and medical care

Work related injuries and illnesses

Negligence and fault are not at issue

Employees surrender the right to sue employer

Cost passed on to the consumer

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Health CareHealth Care

Ancient Chinese

Early twentieth century

Managed care

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Group Disability InsuranceGroup Disability Insurance

Presumptive Disability Plans

Key Executive Plans

All Employee Plans Short Term Disability: Removes an employee from the workforce for

six months or less.

Long Term Disability: Removes an employee from the workforce for at least six months, until recovery, normal retirement age or death.

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Long Term DisabilityLong Term Disability

External Factors

Moral hazard

Subjective diagnoses

Shift in employment paradigm

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External Factors

Moral Hazard - When the insured has a compensable disability and chooses not to work and receive a disability benefit.

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28% 28%

105%

273%

0

50

100

150

200

250

300

Subs.Abuse

Psych.Disord.

CarpelTunnelSynd.

ChronicFatigueSynd.

Increase in Subjective Diagnoses*

*1987 to 1993.(Source: Peter A. Carroll, Implementing an Effective Disability Management Strategy, Compensation & Benefit Management Autumn 1995)

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External Factors

Shift in Employment ParadigmLack of job security

• Reduction in force

• Downsizing

• Rightsizing

• Outsourcing

Lack of career path

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Integrated Disability ManagementIntegrated Disability Management

Most Promising Models Include:

Disability prevention strategies

Single point of entry into the program

Aggressive case management

Early intervention

Return to work strategies

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Integrated Disability Management ModelIntegrated Disability Management Model

Disability Prevention Strategies

Seek to eliminate causes of illness and injury by correcting potential hazards. Preventative Medicine - public health promotion

Traditional Medicine - treatment and cure

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Single Point of Entry

Employee advocate

Triage cases

Arrange for appropriate services

Contact coordinator

“Being there”

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Aggressive Case Management

Interface with disabled employee, attending physician, supervisor and insurer

Treatment protocols

Duration guidelines

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Early Intervention

Proactive strategy

Prevents a short term illness or injury from becoming a long term one

Facilitated by aggressive case management

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Early Intervention, Cont.

Targeted Diagnoses Lower Back Pain Chronic Fatigue

Syndrome Psychiatric or

Psychological Disorders Early Pregnancy Claims

Blindness or Near Blindness Progressive Conditions Head Injuries Spinal Cord Injuries Partial Paralysis Strokes

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Return to Work Strategy

Employer must adopt and maintain a formal policy for alternative work opportunitiesLight duty assignmentsWork site modificationsPhased in progression to full-time, full duty assignments

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Return to Work Strategy, Cont.

Coordinated by case manager in conjunction withEmployeeAttending PhysicianSupervisor

Creates sense of affinity

Promotes feeling of security

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Return to Work Strategy, Cont.

Critical success factorsAlignment of organizational goals Integrated case management team

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Overcoming Barriers to Implementation Organizational Culture

Aligned objectives Caring attitude Social policy

Administration Integrated systems Linked database Low-tech solutions

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“How To”

Engage senior management support

Identify the business issues driving the need for change

Establish and articulate a mission and vision

Identify affected plans and organizational turf

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“How To” Cont.

Establish benchmarks

Draft concise request for proposal

Partner with selected vendor(s)

Communicate changes: up, down and across

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Top Ten Tips Top Ten Tips for Reducing Disability Costsfor Reducing Disability Costs1. Review and modify the disability management

program regularly. This is not a one-time activity.

2. Include specific disability cost management goals in each managers’ job description and performance evaluation.

3. Align disability management strategies with organizational strategies

4. Establish an attractive program.

5. Remember: early disability detection provides more cost savings opportunities.

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Top Ten TipsTop Ten Tipsfor Reducing Disability Costsfor Reducing Disability Costs

6. Coordinate all disability programs.

7. Make information accessible for tracking disability costs.

8. Target specific problems for the best disability management programs.

9. Develop benchmarks to measure disability management programs for cost savings.

10. Know the costs that need reducing.

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