1 Casualty Actuarial Society Disability Management Strategies: Lessons Learned from Workers Compensation and Managed Health Care Jeffery P. Jordt, J.D., L.L.M Risk & Capital Management Seminar July 8-9, 2002

2 Agenda I.Exploring Disability Management - Why? II.Historical Perspective -Workers Compensation -Health Care -Group Disability III.Application of Lessons Learned to Integrated Disability Management IV.How to Implement a Successful Integrated Disability Management Program

3 Disability Management Definition: The prevention of disability, the minimization of its impact on and cost to employers and employees, and the encouragement of rehabilitation and return to work for employees with disabilities.

4 Incidence of Disability  During the course of your career, you are 3 1/2 times more likely to be injured and need disability income benefits than die and need life insurance (Source: Public Opinion Strategies)  Risk of long-term disability vs. risk of death Ô Age times more likely Ô Age times more likely Ô Age times more likely (Source: Field Guide 1998)

5 Incidence of Disability Probability of Disability* Occurring Prior to Age 65 *Disability defined as long term (at least 90 days). (Source: Field Guide 1998)

6 Employee Financial Consequences  Most people have savings to cover less than six months of expenses. One’s savings could be depleted before Social Security Disability income begins to pay (Source: Business Almanac)  48% of all home foreclosures are the result of disability, while only 3% of all foreclosures result from death (Source: Housing and Home Finance Agency of the U. S. Government)

7 Employer Financial Consequences Source: Watson Wyatt, 1999/2000 Percentage of Payroll

8 Employer Financial Consequences Source: Watson Wyatt, 1999/2000 Percentage of Payroll

9 A Historical Perspective  Workers Compensation  Health Care  Group Disability Insurance

10 Workers Compensation  Industrial Revolution and social policy  Employers’ Liability Statutes  Workers compensation statutes

11 Workers Compensation  Provide lost wages and medical care  Work related injuries and illnesses  Negligence and fault are not at issue  Employees surrender the right to sue employer  Cost passed on to the consumer

12 Health Care  Ancient Chinese  Early twentieth century  Managed care

13 Group Disability Insurance  Presumptive Disability Plans  Key Executive Plans  All Employee Plans  Short Term Disability: Removes an employee from the workforce for six months or less.  Long Term Disability: Removes an employee from the workforce for at least six months, until recovery, normal retirement age or death.

14 Long Term Disability External Factors  Moral hazard  Subjective diagnoses  Shift in employment paradigm

15 Long Term Disability External Factors  Moral Hazard - When the insured has a compensable disability and chooses not to work and receive a disability benefit.

16 Long Term Disability *1987 to (Source: Peter A. Carroll, Implementing an Effective Disability Management Strategy, Compensation & Benefit Management Autumn 1995)

17 Long Term Disability External Factors  Shift in Employment Paradigm  Lack of job security Reduction in force Downsizing Rightsizing Outsourcing  Lack of career path

18 Integrated Disability Management Most Promising Models Include:  Disability prevention strategies  Single point of entry into the program  Aggressive case management  Early intervention  Return to work strategies

19 Integrated Disability Management Model Disability Prevention Strategies  Seek to eliminate causes of illness and injury by correcting potential hazards.  Preventative Medicine - public health promotion  Traditional Medicine - treatment and cure

20 Integrated Disability Management Model Single Point of Entry  Employee advocate  Triage cases  Arrange for appropriate services  Contact coordinator  “Being there”

21 Integrated Disability Management Model Aggressive Case Management  Interface with disabled employee, attending physician, supervisor and insurer  Treatment protocols  Duration guidelines

22 Integrated Disability Management Model Early Intervention  Proactive strategy  Prevents a short term illness or injury from becoming a long term one  Facilitated by aggressive case management

23 Integrated Disability Management Model Early Intervention, Cont.  Targeted Diagnoses  Lower Back Pain  Chronic Fatigue Syndrome  Psychiatric or Psychological Disorders  Early Pregnancy Claims  Blindness or Near Blindness  Progressive Conditions  Head Injuries  Spinal Cord Injuries  Partial Paralysis  Strokes

24 Integrated Disability Management Model Return to Work Strategy  Employer must adopt and maintain a formal policy for alternative work opportunities  Light duty assignments  Work site modifications  Phased in progression to full-time, full duty assignments

25 Integrated Disability Management Model Return to Work Strategy, Cont.  Coordinated by case manager in conjunction with  Employee  Attending Physician  Supervisor  Creates sense of affinity  Promotes feeling of security

26 Integrated Disability Management Model Return to Work Strategy, Cont.  Critical success factors  Alignment of organizational goals  Integrated case management team

27 Integrated Disability Management Overcoming Barriers to Implementation  Organizational Culture  Aligned objectives  Caring attitude  Social policy  Administration  Integrated systems  Linked database  Low-tech solutions

28 Integrated Disability Management “How To”  Engage senior management support  Identify the business issues driving the need for change  Establish and articulate a mission and vision  Identify affected plans and organizational turf

29 Integrated Disability Management “How To” Cont.  Establish benchmarks  Draft concise request for proposal  Partner with selected vendor(s)  Communicate changes: up, down and across

30 Top Ten Tips for Reducing Disability Costs 1. Review and modify the disability management program regularly. This is not a one-time activity. 2. Include specific disability cost management goals in each managers’ job description and performance evaluation. 3. Align disability management strategies with organizational strategies 4. Establish an attractive program. 5. Remember: early disability detection provides more cost savings opportunities.

31 Top Ten Tips for Reducing Disability Costs 6. Coordinate all disability programs. 7. Make information accessible for tracking disability costs. 8. Target specific problems for the best disability management programs. 9. Develop benchmarks to measure disability management programs for cost savings. 10. Know the costs that need reducing.

32 Integrated Disability Management Questions?