1 Healthcare: Linking Return to Work with Healthcare Outcomes to Lower Costs Barton Margoshes, MD Chief Medical Officer CIGNA Group Insurance

2 Primary Challenges Facing Employers Today ● Rising medical and disability costs ● Workforce demographics ● Productivity pressure

3 Rising Medical Costs ● Factors fueling rising costs include:  Rapidly rising hospital unit costs  Inefficient and ineffective care delivery  Prescription drug cost increases  Increasing consumer demand  Aging population Health care as a % of GDPEmployee contributions Source: John Hopkins Bloomberg School of Public Health

4 Aging Workforce ● In 2010, 51% of labor force will be over 40  US Census Bureau ● In 2003, Americans aged 55 and older made up approximately 12% of the workforce - the highest percentage ever recorded  Bureau of Labor Statistics ● Aging labor force is expected to cause 37% increase in incidence of disability  JHA Factbook 2001

5 Source: Department of Labor Individuals Receiving LTD Increased 62% from

6 Chronic Conditions ● The five illnesses where costs increased the most were heart disease, asthma, mental disorders, cancer and hypertension  Health Affairs 8/04 ● “The highest rate of increase in medical and disability claims costs is among 30 to 39 year olds, and both are due to obesity.”  Helen Darling, president of the National Group on Health, a Washington, D.C. consortium of 208 large employers

7 The Aging Workforce & Lifestyle Health Risks Correlate with Short Term Disability ● Risk factors studied:  Age  High blood pressure  High cholesterol  Diabetes  Family history of heart disease  Obesity  Tobacco use  Lack of exercise Source: Wayne Burton, M.D., IHPM North American Summit Meeting 2000

8 Mental Health Costs ● Mental stress/depression claims are the fastest growing type of disability claim  Mercer/Marsh 2003 Time Off and Absence Survey ● Depressed workers lose about 5.6 hours of productive time on the job each week, compared with an average of 1.5 hours for non-depressed workers  June 2003 issue, Journal of the American Medical Association ● 40% of disabilities have a behavioral component  Managed Behavioral Health News 1998

9 Employer Costs of Lost (% of Payroll) DirectIndirectTotal AON4-6%8-12%12-18% Towers Perrin8-12%4-6%12-18% Watson Wyatt6.1%2-4x direct costs12-30% Mercer4.4%.5-4x direct costs 7-22% The Impact of Lost Productivity ● Average $6,000 Per Employee Per Year ● Averages 15% Of Payroll Direct Premium Costs – Only 1-2% of payroll

10 Impact of Disease on Presenteeism ● Percent of patients with allergies meeting performance standard Source: Burton et al, JOEM 2001 vol. 43 (1) l Studies have shown similar effect of disease on presenteeism for depression, osteoarthritis, migraine, diabetes, reflux disease.

11 Total Cost How We Used to Weigh STD and Medical Costs Old Paradigm

12 Total Cost Weighing the Total Cost New Paradigm

13 Integrated Health & Productivity Management Model ● Holistic approach to optimize a company’s human capital – investment in an employer’s people ● Addresses presenteeism, lost time, and employee health to lower costs and increase productivity ● Health related systems involved include :  Healthcare  Incidental absence & FMLA  Short and long term disability  Behavioral health  Pharmacy  Wellness and disease management  Workers’ compensation

14 Health & Productivity Management ● Non Health Related Systems involved include:  Corporate Culture  Policies and Procedures  Benefit plan designs  Alignment of incentives  Training and human resources  Employee communication  Data Integration

15 CIGNA’s Disability & Healthcare Connect ● A comprehensive and integrated approach for controlling quality and cost outcomes of a disability event ● Key components include:  Proactive pre-disability outreach  Coordinated disability and medical case management  Referral to disease management services  EAP assessment and referral ● Common philosophy, linked processes and technology

16 Key Study Findings ● Short term disability (STD) durations and return to work percentages are consistently better for claimants having both CIGNA Disability and CIGNA HealthCare ● 20% of employees were responsible for 91% of employee medical costs ● Employees on short term disability represented only 5% of employees, but were responsible for 35% of employee medical costs ● Behavioral health conditions associated with a medically related disability result in poorer outcomes (durations 28% longer; incidence rate 7% greater)

17 Key Study Findings (continued) ● Most of the top cost drivers are the same for both disability and medical ● Disability claimants with chronic conditions experience longer durations whether or not the disability was primarily due to the chronic condition ● Employees engaged in WellAware’s (disease management) Cardiovascular Disease and Low Back Pain programs experience shorter disability durations & lower incidence of short term disability

18 12% Shorter STD Durations 6% Higher Return to Work Rates 0% 5% 10% 15% 20% Solutions that Address Both Medical and Disability Cost Drivers Have a Greater Impact Proven Results Claimants with both a CIGNA STD and a CIGNA HealthCare claim have:

19 Average Medical & Disability Costs for Employees

20 Disease Management Reduces Both Medical and Disability Costs Condition Admission Rate Reduction Medical Cost Savings Disability Incidence Rate Reduction Disability Duration Reduction Cardiac4.0%13.0%3.0%7.7% Low Back2.2%12.0%1.0%18.0% Disease Management

21 Keep the Healthy Healthy and Improve the Health Status of the High Utilizers Average Medical & Disability Costs for Employees

22 Summary ● Healthcare and disability costs will continue to escalate due to demographic trends ● Aging, chronic diseases, and mental health are inter-related and will have an adverse effect on employers profitability and competitive advantage ● Employers need to consider the total cost of care (healthcare + disability + lost productivity) ● Investing in an employer’s human capital through wellness, disease management, quality healthcare, and integrated disability makes business sense