Creative management helps cut employee disability costs; case management and return-to-work programs are helping employers reduce expenses related to employee disability

Creative management helps cut employee disability costs; case management and return-to-work programs are helping employers reduce expenses related to employee disability – includes related statistics on disability in the United States

Nancy Varettoni

Case management and return-to-work programs are helping employers reduce expenses related to employee disability.

Last year, a 33-year-old man, who seemed to be in good health, collapsed. Tests showed he had a brain tumor. Six months later, though he was still undergoing radiation treatments, he returned to work as a financial aid officer with DeVry Inc., a private company that offers bachelor- and master-degree programs in business and technology-related fields. His short-term disability benefits had expired.

For Barbara Shereda, benefits manager for DeVry Inc., which is based in Oakbrook Terrace, Ill., this employee’s situation offers evidence that her company’s new approach to case management and increased employee awareness of disability issues may pay off, both monetarily and in improved employee relations.

Last October, DeVry’s long-term disability (LTD) insurer announced a 20% increase in its premium for 1993. This increase followed on the heels of a 25% rise the previous year. However, the insurer offered to reduce the proposed rate hike by 5% if DeVry agreed to undergo a comprehensive analysis of how it handled disability cases and implement the insurer’s recommendations for improvement.

DeVry is not alone in its efforts to manage disability costs more effectively. Companies such as Lacks Enterprises, a Grand Rapids, Mich., manufacturer of plastic components for automotive, computer, and other applications, and Lawrence Livermore Laboratories, which conducts defense, energy and biomedical research in Livermore, Calif., have also adopted strategies to reduce the number of work days lost to illness and injury and to control costs. While the exact amount of savings is not known, these employers believe that their efforts are giving them control in area that previously had been overlooked.

When compared with the total cost per employee for health benefits, disability costs constitute a small portion of an employer’s expenses, but disability costs are inching upward. The U.S. Bureau of Labor Statistics analyzes employers’ costs for employee compensation per hour worked. In 1991, the bureau found that the average total compensation, which includes salary, bonuses, insurance, savings plans, and other legally required benefits, was $15.40 an hour. Of that amount, 92 cents went to health insurance and four cents to sickness and accident insurance, which includes disability. In 1992, the figures increased to $16.14 for total compensation, $1.02 for health insurance, and five cents for sickness and accident insurance. In 1993, the cost for sickness and accident insurance has remained at five cents, but the figures increased to $16.70 an hour for total compensation and to $1.10 for health insurance.

To a degree, employers can control their disability experience. The Michigan Disability Prevention Study, conducted by the W.E. Upjohn Institute for Employment Research at Michigan State University in Kalamazoo, concluded that disability in the workplace can be controlled most effectively through safety diligence and proactive return-to-work programs. In the study, the policies and practices of 220 companies were reviewed. Employers that made just modest improvements in those areas experienced a 25% decrease in the number of workdays lost to injury or illness.

Identifying problems

“Our [disability] experience was horrendous,” said DeVry’s Shereda. DeVry’s plan covers 1,400 lives.

To determine how DeVry handled its disability cases, the LTD insurer interviewed employees, their managers, and other key personnel. The interviews among DeVry’s three divisions–the DeVry Institutes, the keller Graduate School of Management, and Corporate Educational Services–found no uniform system of reporting disability incidence to the home office from 23 locations throughout the United States and Canada. Similarly, there was no coordination among short-term disability (STD), workers’ compensation, long-term disability, and various state disability programs.

The interview process also revealed that when an employee took disability leave, there was little or no contact from the company. “When our people went out, they just floated,” explains Shereda. “That’s absolutely wrong.” Such isolation, she explained, reinforces a disability mindset.

DeVry is implementing the insurer’s recommendations, which included developing a disability mission statement and naming a disability coordinator to track cases throughout the company. Human resources personnel at all DeVry locations will be trained how to manage disability leaves throughout continued contact with the employee and close monitoring of the employee’s progress.

This plan complements a program DeVry initiated two years ago to gain better control over STD cases by having all claims reviewed by an outside vendor. Medical personnel, working with the employee’s doctor, recommend the length of the disability leave. DeVry pays the claim plus a $69 fee for each case.

Initial savings have come from the premium reduction for its LTD plan, Shereda says. DeVry’s broker was able to negotiate with the insurer to rescind the remaining 15% increase. DeVry has also saved about $30,000 by self-administering its STD plan. However, those savings are offset by the vendor’s fee plus the cost of the claims.

More significant, says Shereda, is that the outside review process has shortened disability leaves by 16.4%. Since the program started, 234 STD cases, with requests for a total of 1,935 weeks of leave, have been reviewed, and 1,617 weeks of leave have been paid.

By getting people back to work sooner, DeVry is saving on hidden disability costs, including expenses for hiring temporary workers and recruiting and training new employees, says Shereda.

Safety training

An ambitious safety training and awareness program helped Lacks Enterprises turn around a poor safety record. By cutting the number of accidents and by reducing their severity, the company saw a significant drop in the number of workdays lost to injury and related expenses.

Lacks began corrective action in 1989 after it was included on a list of employers with the worst safety records in the state that was compiled by the Michigan Occupational Safety and Health Administration (MIOSHA) and published in the Detroit Free Press, says Roger Andrzejewski, director of human resources.

However, bad publicity wasn’t the only motivation. A statistical analysis showed that Lacks’ safety performance lagged behind other manufacturers. In 1989, for example, Lacks’ incidence rate, the number of reported cases, was 44, about twice the state average of 22.5. The severity rate, a reflection of the number of days lost to injury, was 211.4, compared with the state average of 175.2. (To determine a company’s incidence rate, MIOSHA multiplies the number of recorded cases by 200,000, then divides the sum by the number of hours worked. To determine a company’s severity rate, MIOSHA multiplies the number of lost workdays by 200,000, then divides the sum by employee hours worked.)

Implementing safety programs at 10 plants in the Grand Rapids area was difficult. Andrzejewski explains. “People had no previous exposure [to accident prevention], except for wearing safety glasses,” he says. Now, there is a whole plant of safety experts.

Lacks’ strategy places responsibility for safety squarely with employees. Each plant has a safety committee of two management and six hourly employees that addresses workplace safety issues. Supervisors must know safety law and be able to spot hazards and accurately report accidents. Performance appraisals for plant managers include a section on their site’s safety record, and roving safety patrol officers scrutinize plant operations.

Injuries are evaluated and treated at onsite medical facilities. Often, employees can return tro their jobs immediately or to a less strenuous assignment if necessary. Previously, employees went to their personal physicians for treatment and often were out of work several days simply because they were waiting for an appointment. Under Michigan law, employees have the right to seek care from their personal physician if, after 10 days, they are dissatisfied with the company’s provider.

One year after the safety initiatives were introduced, accidents dropped 34%, the severity of injuries 42%, and the number of lost workdays 43%. Furthermore, the length of the disability period dropped sharply. Accident-related disabilities rarely exceed six months, Andrezejewski says. He could cite just one case in which an employee had been disabled on a long-term basis. In that case, the employee severed the tip of her finger while operating machinery. Physical therapy helped her gain use of the finger. However, she has been unable to overcome a fear of manufacturing plants. The employee is receiving job retraining at the company’s expense to prepare her for a job outside the manufacturing sector.

Andrzejewski says the rates have dropped, even though the number of covered lives increased by 300 to 1,300 in four years.

The corporate climate

At Lawrence Livermore Laboratories, which employs 7,500 people at facilities in Livermore, Calif., the company–not the treating physician–determines when an employee can return to work.

A doctor evaluates the employee’s condition and determines restrictions on activity. Based on that information, a supervisor can determine how job responsibilities can be adapted to the employee’s abilities, says Gene Dent, disability manager.

When an employee is sick or injured, the company immediately becomes involved in the case. Once an employee is out of work five days or more, the company contacts the treating physician. This tells the doctor that the company intends to actively participate in the effort to return the employee to work, says Dent. A staff doctor monitors the treating physician and prods those who are slow to provide information on an employee’s progress. Dent keeps in touch with the employee.

Some employees feel they shouldn’t return to work until they are fully recovered, Dent says. However, he pointed out that, depending on the nature of the illness or injury, the employee may never feel the same again. Therefore, company policy emphasizes that employees can return to work even though they may still experience some symptoms and that job responsibilities can be shifted to accommodate their condition.

For example, an employee was recently diagnosed with multiple sclerosis, a neurological condition. The progressive disease is characterized by tremors and poor coordination. The employee and supervisor discussed her physical problems, how they might affect her job performance, and what accommodations could be made. By bringing the situation out in the open. Dent says, the supervisor can provide the employee with the support she needs to stay on the job as long as possible.

Livermore Laboratories has also initiated steps to better document the results of its disability case management efforts, Dent adds. The creation of a centralized system to track cases companywide has heightened corporate awareness and helps the laboratories deal with employee disability cases consistently.

Though monetary savings are not available the laboratories experienced a 30% decline in the number of days lost due to illness or accidents from 1991 to 1992, Dent says. Dent also believes careful monitoring will help this company make informed judgments on how to handle expenses.

“Medical care is wonderful, but it’s not enough,” Dent observes. The objective of any program should be to help the employee deal with the problem and to return the employee to productive work as soon as possible.

COPYRIGHT 1993 A Thomson Healthcare Company

COPYRIGHT 2004 Gale Group