1. MC-29 Integrated Disability Management CAS Ratemaking Seminar March 12, 1999 Michael C. Dolan PricewaterhouseCoopers LLP

2. What Is the Product Combines Various Direct Coverages –Disability LTD STD –Workers Compensation –Healthcare –Other EAP

3. What Is the Product Implied Coverages –Absenteeism –Sick Leave –Disease Management Implied Costs –Productivity –Training –Substitution Costs

4. What Is the Product Other Items for Measurement –Morale Cuts Both Ways –Retention –Implementation Costs

5. Total Cost Total Costs of Individual Programs Replace E T + B T by E` T + (1- k) x B T –Include Insured and Self-Insured Programs –Adjust for Measured Impacts of Synergies Expenses Benefits - Percentage and Reductions That Apply Adjust for Required Investments

6. Cost Considerations Options –Add the Underlying Direct Costs Easiest A First Approximation Understates the Real Return Ignores the Implied Savings

7. Cost Considerations Options (continued) –Add Underlying Costs + Adjust Expenses Identify the Expenses by Line Eliminate the Duplication Add Additional Expenses –Add Underlying Costs + Adjust for Expense and Benefit Synergies

8. Expense Considerations Expense Synergies –Common Intake Healthcare & Workers Compensation STD/LTD & Workers Compensation STD & LTD Healthcare and EAP –Rational Database Eliminate Multiple Sets Better Analyses of Costs and Allocations Available Staff

9. Expense Considerations Expense Synergies (continued) –Inter-Cover Administrative Expenses Initial Set Up Historical Information Coordinated Employee Relations –Compliance Reporting Carrier Regulatory ERISA Compliance

10. Expense Synergies Synergy Common Intake Database Admin Cost Compliance Proxy Count/Process Report Count, Transaction Counts/Process Complaints, Costs

11. Benefits Synergies STD LTD MedicalWC Med WC Indem COST PRODUCTIVITY

12. Synergies STD-LTD –Adjustments to Sum of Costs –Expense Set Up Cost Prioritization –Benefits Early Case Management - Duration Liability Acceptance

13. Synergies STD-LTD Measurements –Equivalent to Early Intervention for WC –Leverage Early Case Management –Draw from WC Experience

14. Synergies Medical-LTD –Adjustments to Combined Cost –Expense Savings LTD Case Management Relies on Medical Treatment Not Known Until After Treatment –Benefits Medical Treatment Can Be Aimed at RTW Durations Managed as in WC

15. Synergies Measurements –Durations by Disability as in WC –Studies on Impact of Medical on Indemnity

16. Synergies WC - LTD –Adjustments to Combined Cost –Expense Some –Benefits RTW for WC Applied to LTD –Setting Expectations for Employer/Employee

17. Synergies Measurements –RTW Studies for WC –Early Intervention Studies for WC –Impact of Light Duty Return May Need to Adjust LTD Contracts –Apply Adjustments to Termination Curves

18. Synergies Others –Medical on WC Medical to Eliminate Duplication –Impact on EAP Through Analysis –Utilization Tracking and Analysis

19. Other Returns More Benefits –Duration Reductions Translate into Productivity Savings Determine Cost/Day from Temporary Hiring Estimate the Reduction Cost/Day on Production New Hire Training Costs/Day to Ramp Up –Turnover Reduction Costs Exit Interviews - Benefits Programs/Flexibility Cited New Hire Costs/Day to Ramp Up

20. Other Returns Don’t Forget Other Costs –LTD Case Management - New Environment Aggressive RTW and Light Duty Managing to WC Implied Duration Leveraging Medical –WC/LTD/Medical Case Management Integration –Systems Design and Tracking Costs –Short- and Long-Term Costs