Written by Adam Compton, Senior Vice President of Client Services, Hays Companies

As we seek to make sense of absence and other benefits that serve to manage risk, it is critical that we no longer consider them each in a silo, but rather as part of an integrated package with health and other voluntary benefits. Let’s break down those walls and look at how to consider the critical interplay of your employee benefits.

The Influential Extremes

If you break one thing, it often breaks another. But inversely, if you fix one thing, it can positively affect another.

When it comes to insurance and risk management, much of an employer’s success depends on its ability to identify which systems are directly correlated to each other. For example, if a company has an excellent safety program, we often see the company is also likely to have a robust and high-performing health and welfare plan.  Now flip that around. A poor safety program can mean other programs, such as medical, disability, presenteeism, and absenteeism, aren’t performing optimally.

80/20? More like 90/10

There’s a common rule in our industry that follows the Pareto principle. The Pareto principle states that 20% of the individuals cause 80% of the outcomes. However, in the medical and pharmacy claims space, that statistic has evolved. Now, 10% of the people drive 90% of the outcomes. Simply put, a few people drive the majority of claims for an organization.

If we’re looking at the future, that trend isn’t likely to reverse since costs continue to skyrocket for the most expensive claims. These expensive claims include cancer, hemophilia, premature births, heart disease, transplants, multiple sclerosis, and congenital deformities.

Expensiveness is Contagious

We see common trends amongst employers when they identify the “average cost” of an employee. The average cost of an employee includes items such as payroll, taxes, retirement, medical plans, risk (workers’ compensation), non-medical health, and welfare plans (i.e., dental and vision). Most employees, often 90% or more of the employees in a company, cost the organization a consistent, known amount. This large group of employees does not stray far from the predicted cost for medical plans or risk management.

The focus, and challenge to your own organization, is understanding the cost impact of the remaining 10 percent of employees. We call this small group the “influential extremes.”  It is not uncommon that this smaller population can cost six to ten times more than the average cost of an employee. That increased cost stems from employees, and their enrolled family members, who are high-cost claimants.

Interestingly, some companies show that high-cost claimants may also be high utilizers of your workers’ compensation, disability, and pharmacy plans. For example, an employee was injured on the job and was unable to get surgery since the current medical conditions needed to be treated before the employee could actually fix the workers’ compensation claim. What commonly happens in scenarios like this is that the initial injury continues to impact other things like disability, absenteeism, productivity, and presenteeism while also causing costs to rise in the health plan and workers’ compensation. So as one thing is broken, it trickles down the line and increases costs someplace else as well.

While injuries and illness may seem disconnected, controlling costs in one area can reduce costs across the company.

What Can Employers Do?

1. Break Down Walls

Employers can build a successful and winning health insurance plan that permeates into other areas of their business by starting to integrate departments that might often be segmented. If you’re having a strategy or renewal meeting regarding your health and welfare plan, invite your workers’ compensation expert or risk manager.

Also, understand that if you make a change in one program, it will often influence the other. We often find if high deductible health plans are put in place, there’s an increase in workers’ comp claims as people look for that first dollar or no-cost coverage for basic care that may be available through workers’ comp and not through their health plan. As workers’ comp claims increase, that directly filters into your disability product and may also increase leaves of absence. However, replacing a high deductible health plan with a robust medical plan can decrease the number of new workers’ compensation claims.

2. Integrate Your Data

If possible, implement an integrated data system that uses information from multiple areas of your company, including your health plan, workers’ comp, and disability product. The ability to correlate the data and dissect it may aid your business in identifying which types of individuals or parts of the business drive most of the cost across multiple areas of your business.

3. Communicate Openly

Then comes communication. Use opportunities like a benefits guide to share that integrated service method. You can include information on costly data points, such as members with chronic issues, to educate employees on how they can reduce their personal health risk by getting a basic checkup every year.

There is also positive success in training the trainer and organizing monthly or quarterly management meetings to directly share key strategies in educating employees on caring for their health or following best-in-class safety practices. We often find it best to deploy a one-pager of information to guide the managers in training and provide a deliverable to their team.

Small Action is Still Progress

Sometimes the greatest action comes by shortening the distance between thinking and doing. You can act today by simply opening lines of communication that might not have existed before. Coordinate plans between your executive level, your risk management team, your leave of absence team, and your benefits manager and start talking. Find as much data as possible and build strategies to coordinate your internal data over the next one to three years to build on benchmarks and activity. Find leaders or employees who are interested in breaking down barriers and set up a quarterly meeting with these individuals so you can share ideas, identify issues, and work toward success. Together, you can begin to make a meaningful difference to your employees’ health and the company’s bottom line.

This document is provided for general information purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Readers are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise.

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