How a Healthy Workforce Makes the Workplace Safer and Lowers Workers' Comp Costs
Workers' compensation insurance costs are a concern for most organizations, especially when coupled with the steady, dramatic increase in group medical insurance expenses during the past 30 years. While employers strive to keep the workplace safe, hazard-free, and in compliance, workers' compensation continues to be a significant financial challenge when it is not effectively managed. In reality, worker health and safety can be an employer's most controllable expense.
In most organizations, Human Resources manages group health plans, while the Finance team handles workers' compensation programs. The occupational/non-occupational distinction between the claims – along with two very separate systems for their management – means their interrelationship is going unrecognized and unmanaged. Most companies continue to view these programs - along with their corresponding components, including safety, wellness, disability, and leave management – as separate, often competing concerns.
These traditional "group health" and "workers' compensation" silos create an incentive to shift risk, and its cost, to another internal program ("that medical problem was caused or aggravated on the job, wasn't it?") – rather than working together to reduce or eliminate the exposure and related cost, resulting in a benefit of total employee safety, health and wellness and the company as a whole. New research and supporting data increasingly tell us that taking this view is shortsighted, counterproductive, and costly.
Reframing the Workplace Safety Conversation
This research from Kaiser Permanente shows that keeping the workplace safe from hazards and in compliance is just one piece of the puzzle – and, in fact, managing employee health risk factors can be a very effective tool in driving down workers' comp costs and keeping employees safer in the workplace. For instance, consider that smokers are much more likely to have a work injury, that diabetics incur higher workers' comp medical costs when injured, and that obese workers are twice as likely to have a work injury, incur higher medical costs when injured, and require more time away from work.
Insurance companies are taking notice and starting to roll out programs with a more holistic view of employee health management. These new health management programs combine workplace safety programs, such as education on proper lifting and preventing slips and falls, along with tailored programs to help employees manage chronic health conditions that are impacting workplace injuries and associated workers' comp costs, such as excessive weight, high cholesterol, smoking, stress, and hypertension.
These programs use sophisticated new benchmarking and data analysis tools to help employers understand where and how employee health issues impact occupational injuries at a client company. A dedicated team helps determine total costs of health and safety and measures how the company compares against industry peers and best-in-class companies. It then identifies the most preventable cost drivers and determines which are modifiable, and the team can take a leading role in helping companies help their employees manage chronic conditions through customized programs.
These can include expert consultants in wellness, benefits, and risk management who can design plans and campaigns around building awareness, planning and goals, and continued education and motivation. The right insurance team can take a "360-degree" view of overall employee health, identify the risk factors that are driving health- and safety-related costs for an organization, and design a comprehensive employee program. This program would target traditional occupational safety concerns, such as safe lifting techniques and preventing on-the-job injuries, and address those chronic health conditions that are driving up workers' comp costs.
When you consider findings from Kaiser that show obese workers spend 13 times more time away from work than non-obese workers and that workers under stress incur 24 percent higher health costs, you can see a good case for taking a 360-degree view of employee health management. This new thinking identifies the intersection of employee health and workplace safety. Custom programs address the right ongoing medical care needed to reduce sick days around a chronic condition – such as diabetes or heart issues – and work to improve management of an employee's chronic condition, which then lowers both the costs around condition management and the chance of a workplace accident.
Integrating Employee Health and Workers' Comp – The Why and the How
The division between workers' comp and employee health benefits was easy to ignore when overall health care costs were a smaller component of organizational spending. Now, increases in the costs of both systems are driving insurance organizations to identify and offer more effective integrated approaches. Employees can realize higher levels of well-being and companies can enjoy improved productivity – and the profit it brings – by maximizing the potential of internal efforts such as safety or wellness programs.
If your organization is managing these programs separately, you aren't seeing the broader opportunities. If your wellness program can help employees stop smoking, you will reduce workers' comp claims costs while also dramatically improving productivity through fewer lost workdays due to injury, and reclaim more than 60 hours of lost time due to the elimination of unsanctioned smoking breaks.
Kaiser Permanente is one company looking to reframe the workplace safety and employee health conversation. It reviewed studies showing that smokers are more likely to have a workplace injury1, that diabetics incur five times higher workers' comp medical costs when injured2, and that workers' comp claims rise with workers' BMI (Body Mass Index)3. The research determined that an integrated health plan model could lower costs by better managing chronic health conditions. Kaiser committed to the idea that a culture of high performance is interdependent with a culture of well-being, and it adopted a "Population Health Management" mindset. Rather than focusing separately on workers' comp issues (injury reduction, return-to-work rates, risk pool management) and employee benefits issues (benefit strategies, rate negotiation), Kaiser is taking a wider view and utilizing comprehensive health data to provide a whole picture of health promotion and prevention, integrated care management, quality outcomes, and health and injury impacts on productivity. Kaiser believes clients that combine chronic health condition management with workplace safety programs can reduce absenteeism by 28 percent and reduce workers' comp claims by 30 percent, while also reducing overall workers' comp claims costs. An early Kaiser-conducted study on a major retail client showed a care delivery system that integrated employee health and workers' comp resulted in 40 percent less litigation and 43 percent fewer days away from work.
The concept and math are pretty simple: lower direct health care and lost-time costs and greater employee productivity and morale equal improved profit. Combining these efforts delivers stronger efficiencies and results and even greater profit improvement.
Looking to the Future
A recent Integrated Benefits Institute survey of CFOs across the country reported that senior financial executives now view health as impacting financial performance – both directly (health care expenses, sick-day absences) and indirectly (opportunity costs, staffing inefficiencies). Despite the increasing awareness, however, many organizations lack the data needed to both fully understand and assess the extent of this impact and create a business case for workforce population health improvement.
Through personal experience in a number of successful integration efforts, we've identified these basic steps an organization should follow to capture this potential for improvement:
- Create a joint working group. Gather colleagues from separate programs into a facilitated workshop to identify available data and create trust within previously "competitive" divisions. Aligning interests and breaking down historic barriers takes time. Working together to create a common business case for workforce improvement can help to build this trust.
- Identify external partners who will support these efforts. Typically, health plans, workers' compensation insurers, brokers and consultants, wellness vendors, etc. are competing for available resources. Many employers find greater success by letting their brokers/consultants join the working group. A larger broker with a history of integration can easily make integrated management efforts a component of the scope of services.
- Implement data collection programs that include all of the leading indicators of health. Review wellness data, actual treatment, and productivity data. Your broker/consultant should do most if not all of this for you.
Curt Perata has more than 30 years' experience in the insurance industry. As managing principal for EPIC Insurance Brokers and Consultants' Property & Casualty Division, he expands the company’s brand and expertise in Business Insurance and Risk Management. Visit www.epicbrokers.com for more information.
1. American Lung Association, 1/05/10
2. Coventry Workers Comp Services, 2010
3. NCCI Holdings, 2011
Posted by Curt Perata on Mar 24, 2015