How to keep health care reform from eroding employee productivity Featured

5:11pm EDT February 21, 2011
Skip Simonds, Practice Leader for Absence and Disability Management for the Western Region, Towers Watson Skip Simonds, Practice Leader for Absence and Disability Management for the Western Region, Towers Watson

Legislators were undoubtedly well-intentioned when they set out to reform the nation’s health care system, but the lawmaking process often creates collateral damage, and this time the silent casualties may include your company’s absence and disability programs. The bill mandates specific provisions that weaken an employer’s ability to manage employee health, and ultimately their attendance and productivity. Because HR professionals are focused on revising the company’s current health plan and mitigating the upcoming cost increases, there is little time and focus remaining to manage absence and productivity.

“Employers can take some simple steps now to protect productivity while their attention is diverted between now and when the law takes full effect in 2014,” says Skip Simonds, practice leader for Absence and Disability Management for the Western Region at Towers Watson.

Smart Business spoke with Simonds about the impact of health care reform on employer absence and disability programs and the action steps that will help keep employee productivity intact.

How does health care reform weaken existing absence and disability programs?

The primary goal of health care reform was to provide benefits to a broader segment of the U.S. population and control costs, but it’s created additional administrative burdens for employers, and limits their ability to manage employee health by allowing employees to opt out of the company plan or purchase coverage in state-run pools. Employers have been able to drive substantial gains in productivity, because they’ve designed plans that influence and reward specific employee behaviors. And data shows that taking a holistic approach and creating complementary health, wellness, absence, workers’ compensation and disability programs is the best way to control costs while limiting abuses and absenteeism. If you remove a few pieces of the puzzle, you diminish the efficacy of the entire program. To make matters worse, the changes come on the heels of recession-induced staff reductions, so HR has limited resources to deal with the problem.

How should employers adapt current programs to drive productivity?

Switch to a paid time off (PTO) plan instead of allotting specific time for sick leave or vacation. PTO plans shift the burden and cost of managing incidental absences onto employees and boost productivity by reducing the use of unplanned sick days for questionable reasons. Studies show that employees are more likely to work through marginal illnesses and avoid taking ‘mental health’ days so they can save their time off for vacations. If you don’t switch to PTO, consider boosting the effectiveness of your current program by offering a bodacious prize for perfect attendance. One company increased perfect attendance from 10 percent to 50 percent of the employee population by entering the names of perfect attendees into an annual drawing for a new car. The car cost $40,000, but the incentive reduced lost time expenses by $450,000.

What other changes should employers consider?

Create an economic incentive for employees to return to work by reducing the short-term disability benefits from 100 percent to 60 percent or 66 percent of income. Simultaneously if supervisors are resistant to providing transitional work, charge the costs of that light duty to their cost center regardless of who provides it. The best way to reduce absenteeism and disability costs is by making sure that everyone has some skin in the game.

How can employers focus on this problem with limited HR staff?

Outsource the management of FMLA to an insurance company or third-party provider. Engaging a knowledgeable partner is like getting a free staff member, and an outsider has the freedom to quiz medical providers and find alternate treatments that reduce the need for missed time. Outsourcing also allows HR to focus on more important issues, and our experience shows that it increases compliance with a very cumbersome law that allows employees to take time off intermittently. This is especially true in California with its myriad of mandated leaves. A recent three-year study showed that intermittent benefits accounted for 19 percent of all FMLA taken, and employers with integrated FMLA/disability administration had lower costs than employers without integration that included 22 percent fewer lost work days and 36 percent fewer repeat users.

How can employers use data to boost the effectiveness of absence and disability programs?

Outsourced providers generally offer robust data collection, which illustrates the close link between employees’ utilization of sick time, short-term disability and workers’ compensation. Review the data on a quarterly basis to spot trends and hold vendors accountable to provide recommendations that will improve your program and results. Only 11 percent of employees that file medical claims also file lost time claims, but those employees drive 53 percent of medical and disability benefit dollars; so a decrease in disability costs can yield an even larger decrease in health care costs. But what’s most troubling is that 96 percent of CFOs say they understand the connection between employee health, lost time and productivity, but 78 percent don’t receive any meaningful data to help them analyze or manage the situation. Suffice to say that employers stand to reap tangible savings by simply collecting data and reviewing it on a regular basis.

Skip Simonds is the practice leader for Absence and Disability Management for the Western Region at Towers Watson. Reach him at (818) 623-4576 or skip.simonds@towerswatson.com.