Connecting Health Risk, Absence & Lost Productivity Michael Klachefsky September 21, 2018 Connecting Health Risk, Absence & Lost Productivity Michael Klachefsky

September 21, 2018 Agenda Health care reform and its connection to absence/disability management What is productivity? How does productivity get lost? Absence Presenteeism What can employers do about it? 9/21/2018

Health Care Reform and Absence/Disability Management September 21, 2018 Health Care Reform and Absence/Disability Management

Health Care Reform Changing the role of employers September 21, 2018 Health Care Reform Changing the role of employers As health care reform is implemented, employer sponsored health care is certain to change Regardless of the strategy employers choose, there is no way to avoid the impact of workforce health on company costs Employees with high health care costs drive increases in absence High rates of absence result in high income replacement benefit costs, e.g., Disability plans Sick leave Salary continuance For some employers, the direct and indirect costs of absence may rival health care costs Dropping employer-sponsored health care in 2014 and beyond doesn’t immunize a company from health care costs 9/21/2018

September 21, 2018 Connecting Health Risk and Absence Health risks impact absence and productivity Percentage of time lost due to health problems Source: Boles et al. (2004) 9/21/2018

September 21, 2018 What is Productivity?

Definition of Productivity September 21, 2018 Definition of Productivity Rate at which goods and services are produced with targeted high or acceptable quality 9/21/2018

How Does Productivity Get Lost? September 21, 2018 How Does Productivity Get Lost? 9/21/2018

30% 70% 70% Personal Health Costs Productivity Costs September 21, 2018 Personal Health Costs Medical Care Pharmaceutical costs 30% Productivity Costs Absenteeism Short term Disability Long term Disability Presenteeism Overtime Turnover Temporary Staffing Administrative Costs Replacement Training Off-Site Travel for Care Customer Dissatisfaction Variable Product Quality Productivity Costs Short term disability Long term disability Presenteeism Absenteeism Overtime Turnover Temporary staffing Working slow Late deliveries Replacement training Customer dissatisfaction Variable product quality 70% 70% 1 2 Iceberg of Full costs from poor health Iceberg of full costs from poor employee health (2,3): Loeppke, R., et al., "Health and Productivity as a Business Strategy: A Multi-Employer Study", JOEM.2009; 51(4):411-428. and Edington DW, Burton WN. Health and Productivity. In McCunney RJ, Editor. A Practical Approach to Occupational and Environmental Medicine.3rd edition. Philadelphia, PA. Lippincott, Williams and Wilkens; 2003: 40-152s Loeppke, R., et al., "Health and Productivity as a Business Strategy: A Multi-Employer Study", JOEM.2009; 51(4):411-428. 140-152

Annual Costs: Top 10 Health Conditions* September 21, 2018 Annual Costs: Top 10 Health Conditions* *Health and Productivity as a business strategy: A multiemployer study, Journal of Occupational and Environmental Medicine, Volume 51, No.4, April 2009 9/21/2018

Productivity Loss Through Absence/Disability September 21, 2018 Productivity Loss Through Absence/Disability 9/21/2018

The Direct Cost of Absence September 21, 2018 The Direct Cost of Absence 11.7% 12.4% 13.3% 13.2% 12.0% Source: Kronos/Mercer survey report on The Total Financial Impact of Employee Absences, 2010 9/21/2018

The Indirect Cost of Absence September 21, 2018 The Indirect Cost of Absence 17% 27% 25% 22% 24% Source: Kronos/Mercer survey report on The Total Financial Impact of Employee Absences, 2010 9/21/2018

The Total Cost of Absence September 21, 2018 The Total Cost of Absence 29% 39% 38% 35% 36% Source: Kronos/Mercer survey report on The Total Financial Impact of Employee Absences, 2010 9/21/2018

Higher Cost & Lower Productivity = Lost Profit September 21, 2018 Higher Cost & Lower Productivity = Lost Profit Regular production cost Value of goods produced Production cost 15% higher Production cost 44% higher Gross profit Jane at work $100 $200 50% Jane absent: Extended disability absence: This is where Workplace Possibilities has most effect 21% production loss 27% $158 $115 $144 9% Jane absent: Unplanned incidental absence 29% production loss 19% $142 $115 $144 -1.4% Kronos/Mercer Survey on The Total Financial Impact of Employee Absences, 2010

Productivity Loss Through Presenteeism September 21, 2018 Productivity Loss Through Presenteeism 9/21/2018

What is Presenteeism? Definition: Decreased on-the-job performance due to the presence of health problems Measures: The decrease in productivity for the much larger group of employees whose health problems have not necessarily led to absenteeism The decrease in productivity for the disabled group before and after the absence period* Research is less advanced than research on absenteeism & health management *Schultz, A. B., Edington, D. W., (2007) Presenteeism A Systematic Review, Journal of Occupational Rehabilitation, 17:547-579 9/21/2018

Big Picture Cost Estimates Costs American businesses $150 billion in decreased productivity* On the job losses from presenteeism are 60% of the total cost of worker illnesses** ……..exceeds what companies are spending on medical, disability, and absenteeism American businesses lose 1,228 days/100 full-time equivalents to presenteeism for employees with two to five chronic health conditions*** Survey of 29,000 workers: presenteeism accounted for 1.32 hours/week (66%) of lost time……absenteeism accounted for the rest**** *Zengerle, J. (2004, December 12) Presenteeism, The New York Times **(2004, April 20) Economists Coin New Word, ”Presenteeism” to Describe Worker Slowdowns That Account for Up to 60% of Employer Health Costs, Cornell University Press ***Parry, T. (2008, August), Diseases vs. Populations, The Impact of Chronic Conditions, IBI Research Insights ****Stewart, W.F.,et al, (2003), Lost productive work time costs from health conditions in the United States: Results from the American Productivity audit, Journal of Occupational and Environmental Medicine, 45, 1234-1246 9/21/2018

Cost of Presenteeism – Health Risks For employees with at least one health risk (high biometric, smoking and alcohol, emotional health): 0.73 to1.65 lost days/employee/year* For employees with two or more chronic conditions: 12 to 14 lost work days/employee/year** For employees with single condition clusters (socio-emotional, metabolic, arthritis, headache, digestive, heart, pulmonary, cancer): 0.6 to 9.6 lost days/employee/year, depending on cluster*** *Goetzel, R., et al, (2009) The Relationship Between Modifiable Health Risk Factors and Medical Expenditures, Absenteeism, Short Term Disability, and Presenteeism Among Employees at Novartis, Journal of Occupational and Environmental Medicine, p. 495 **Parry, T., (2008) Diseases vs. Population – The Impact of Chronic Conditions, IBI Research Insights ***2009, The Impact of Chronic Conditions and Co-Morbidity on Lost Work Time, IBI Quick Study 9/21/2018

The Cost of Presenteeism – Behavioral Health Conditions Socio-emotional (depression, anxiety, fatigue, sleeping problems, etc.): 9.6 lost days/employee/year* For employees with treated or untreated depression: 7.5 lost days/employee/year 63% of total lost productivity from depression is from presenteeism** For employees with mental illness: $247.11/employee/year*** *(2009) The Impact of Chronic Conditions and Co-Morbidity on Lost Work time, IBI Quick Study **Gifford, B., et al (2009), Full Costs of Depression in the Workforce, Research by the Integrated Benefits Institute (IBI), p.15 ***Goetzel, et al, (2006) Estimating Money at Risk, American College of Occupational and Environmental Medicine, Health and Productivity Tool Kit, p. 35 9/21/2018

What Can Brokers, Consultants and their Clients Do? September 21, 2018 What Can Brokers, Consultants and their Clients Do?

What Should Brokers & Consultants Do? September 21, 2018 What Should Brokers & Consultants Do? Advise your clients that focusing on only health care/pharmacy only addresses part of the problem. Help clients understand that merely obtaining disability policies, does not automatically solve workplace problems Advise your clients that issues of absence and presenteeism require a pro-active disability management provider Absence and presenteeism are best addressed through: RTW Stay at work Integration with health management programs

Partner with Carriers Who Offer: On-site assistance Education to employees on health to ensure proper diagnoses and treatment: Wellness programs Disease management Improved pharmacy programs: Decrease employee cost for drugs Research demonstrates significant improvements in productivity with appropriate drug treatments* Target both high risk and low-medium risk workers for health management programs Disability management programs that feature RTW, absence/disability prevention, integration with health management *Schultz, A. B., Eddington, D. W., (2007), Employee Health and Presenteeism; A Systematic Review, Journal of Occupational Rehabilitation, 17: 547-579 9/21/2018