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CCH® BENEFITS — 09/15/11

Lost-Time Programs Appear Stable In Poor Economy

from Spencer’s Benefits Reports: The poor economy appears to have had little effect on short term disability (STD) and long term disability (LTD) programs. According to an Integrated Benefits Institute (IBI) study based on an analysis of IBI’s member data on more than 3 million claims for nearly 48,000 employers, LTD and STD programs remained essentially intact between 2008 and 2010, and the duration of disabilities was relatively flat.

New and closed workers’ compensation claims have dropped as a proportion of STD claims and LTD claims “continue to age on employers’ books,” the IBI noted. Also in 2010, employees tended primarily to take Family and Medical Leave Act (FMLA) leaves for their own medical conditions (nearly two-thirds overall, but 40% took continuous leave and 27% took intermittent leave). About one-third took FMLA leave to care for a family member with an equal proportion each taking continuous and intermittent leaves. In the case of FMLA leaves, “even though intermittent leaves are less frequent, they do represent a significant management challenge for employers because they tend to be disruptive as they are difficult to plan for,” the IBI observed. For analysis of FMLA experience, IBI examined only data for 2010.

Over the three-year period studied, STD claims rose overall by 6%, STD claim duration rose by only 2%, and STD claims costs rose by 7%. IBI speculated that this LTD cost increase may be due to higher wages of employees who remain at the companies after layoffs. For LTD claims, overall active claims rose just 2%, but the median costs for claims costs in 2010 jumped 26% from 2008 and for open claims costs, rose nearly 29%. “The flat lost-time trend [for LTD claims] versus a 10% increase in payments for lost time might indicate higher wage earners getting benefits for this claimant group or increases in maximum levels for temporary disability benefits,” the IBI said.

Review of 450 employers’ workers’ compensation experience during the three-year study period revealed that the proportion of claims involving only medical treatment were down from 83% in 2008 to 80% in 2010. The proportion of total costs for lost-time claims under workers’ compensation rose from 68% to 71% during the study period, yet closed claims as a share of all claims dropped nearly one-quarter, indicating that claims are open longer, but are not necessarily incurring more lost work time, the IBI noted. New workers’ compensation claims dropped dramatically and closed claims dropped, a reflection perhaps of smaller workforces.

Median lost work days for closed workers’ compensation claims involving lost-time benefits hardly changed from 33 days per year, but medical claims costs rose by 17% compared with a 10% increase for indemnity claims.

“Though much has been written recently about expected employer cost increases for health care, little has been said about the more serious threats to employer costs and business results if employers opt out of the healthcare system post reform and eschew working in partnership with their health plans and providers to manage workforce health,” the IBI report concluded. “Those that continue to view medical costs in a separate and distinct program silo do so at their peril.

“Research repeatedly has shown that the full costs of health—including absence, disability, employee performance and lost productivity—can often be greater than medical and pharmacy costs combined. Employers need to carefully consider these broader issues in decisions about exiting the health care system.”

For more information on the IBI study, Do Bleak Economic Times Mean Tougher Times for Employer Benefits Programs?, visit http://www.ibiweb.org.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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