Move Workers' Comp Out of the Silo

Workers' comp has historically been in one silo, with health programs in another. Smart companies are combining the efforts.

Over the last three-plus decades, employers have grappled with dramatic increases in healthcare and workers’ compensation costs, according to the Centers for Medicare and Medicaid Services. Workers’ compensation costs climbed more than 40% just in the last five years in California, according to the Oregon Workers’ Compensation Premium Rate Ranking Summary. At the same time, the lost time and productivity associated with injuries and illnesses add to the urgency to find a new approach to managing these costs.

Wellness programs that support and encourage employee health are popular, deployed today in more than 60% of companies with three or more employees, according to Kaiser Family Foundation and Health Research and Educational Trust research. While some believe that the benefits of wellness programs are overstated, all of the recent attention on wellness and the costs of healthcare and workers’ compensation warrants a new look at the bigger picture.

Employee health and its associated costs continue to be managed in a silo — separate from, and somehow unrelated to, workers’ compensation and "lost time" programs. Yet, these initiatives are related, and smart companies should be integrating data around workers’ comp, healthcare and productivity, to identify ways to support employees, thereby reducing costs, increasing productivity and ultimately resulting in a healthier workforce.

Breaking Down the Silos

In many organizations, group health plans and workers’ compensation programs are managed separately, often with finance responsible for workers’ compensation and HR managing the health plan. Because of the occupational/non-occupational nature of the claims — and the two distinct systems for their management — this historic division made sense when overall healthcare costs were a small component of organizational spending.

However, research is finding that viewing these programs — along with their corresponding components, such as safety, wellness, disability and leave management — as competing concerns in separate silos is short-sighted and counterproductive.

For example, based on recent research by Kaiser, we now know that smokers in the workforce are 40% more likely, and obese workers twice as likely, to have a work injury than non-smokers or leaner counterparts. Other corresponding data demonstrate similar links — obese workers who have a work injury generate seven times greater medical costs and spend 13 times more time away from work.

Organizing in traditional silos can create a hidden incentive to shift cost and risk to another internal program (“that injury happened on the job, didn’t it?”) rather than working together to reduce or eliminate the costs for the benefit of the company as a whole. Viewing these issues in a vacuum masks the true nature of healthcare costs, as is easily seen when data is analyzed in an integrated fashion. The traditional silos prevent organizations from (a) realizing improved productivity and the profit it brings and (b) maximizing the potential of internal efforts such as safety or wellness programs.

Taking an Integrated Approach

Kaiser Permanente has studied this approach and offers some startling numbers. Figures provided by the Workers’ Compensation Insurance Ratings Bureau of California (WCIRB) show the losses per indemnity claim nearly doubling since 1998, to a total of nearly $90 billion. The holistic view provided by new data enables Kaiser to look at employee health, workers’ compensation and workplace safety through a broader population health management lens.

Other insurance companies are starting to roll out programs that look at synergistic and more holistic opportunities for employee health to drive down costs, improve productivity, boost the bottom line and help employees enjoy better health. These programs help companies understand the total cost of health and safety by looking at the employee benefits and workers’ compensation costs, as well as absenteeism and "presenteeism" (an employee who is physically present at work but unproductive because of health problems or personal issues). These programs look at lost productivity, as well as identifying the specific risk factors that are driving up costs. By determining what can be modified, and creating specific action plans, employers are able to realize lower health costs, fewer on-the-job injuries and faster recoveries.

Let’s use smoking as an example. In addition to increased workers’ comp costs, numerous government and academic studies tell us that:

  • Smokers lose an average of 6.0 workdays per year — almost double the absenteeism of non-smokers;
  • Smoking exacerbates the effect of chronic disease on productivity;
  • Smokers are less likely to exercise and more likely to be heavier drinkers;
  • Smokers are estimated to spend between eight and 30 minutes a day in unsanctioned smoking breaks. This equates conservatively to more than 33 hours per year of lost time, just because of unsanctioned smoking breaks. At 15 minutes per day, the total lost productivity rises to 62.5 hours annually;
  • Lower direct healthcare and lost-time costs equal improved profit, as does greater employee productivity and morale. Combining these efforts strengthens efficiencies and drives greater profit improvement.

While the concept and math are simple, changing deeply entrenched organization models, long-standing procedures and practices and the outmoded personal attitudes and behavior they encourage and reinforce is challenging. But it can and should be done. By finding the right consulting partner, companies can tear down the silos and look at the world through a broader lens of integrated, holistic safety, health and wellness. Everyone — the organization, its people and the stakeholders — will win.

John Connell

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John Connell

John Connell is responsible for the leadership and overall growth and success of EPIC’s employee benefits consulting operations across the Western U.S. Before joining EPIC, Connell spent 26 years in consulting, management and leadership positions with Jenkins Insurance and Leavitt Group.

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