Recession's Impact: STD Costs Declined While LTD Costs Surged

By Stephen Miller Jan 20, 2011

U.S. employers received an unexpected but welcome fallout from the 2008-09 recession—fewer short- and long-term disability claims and lower short-term disability costs per claim. Long-term disability costs, however, jumped 25 percent, according to a report by the National Business Group on Health, a nonprofit association of 300 large U.S. employers.

The Employer Measure of Productivity, Absence and Quality (EMPAQ) annual survey found that:

The incidence for short-term disability (STD) claims declined 17.3 percent—​from 8.1 claims per 100 covered employees in 2008 to 6.7 claims per 100 covered employees in 2009.

STD costs declined 15.9 percent—from $343 per employee in 2008 to $296 per employee in 2009.

Long-term disability (LTD) claims dropped 26 percent—from 4.6 claims per 1,000 employees in 2008 to 3.4 in 2009.

But LTD costs jumped by more than 25 percent—from $10,507 per claim in 2008 to $13,226 per claim in 2009.

The EMPAQ annual survey is based on responses from 648 large and mid-sized U.S. companies.

“When the recession began, many employers anticipated their STD claims would increase. When employees experience anxiety regarding impending workforce reductions, their subsequent behavior often causes employers to feel the impact in their benefit plans,” said Helen Darling, president and CEO of the National Business Group on Health. “However, this recession appears to have caused a somewhat opposite effect, with decreases in claims in 2009. The collapse of the housing market and the unemployment picture may have caused employees to delay taking time off from work, especially for elective medical procedures.”

The unemployment picture may have caused
employees to delay taking time off from work,
especially for elective medical procedures.

Other Absence Programs

Concerning other leave programs, survey respondents reported:

FMLA. A median annual incidence for Family and Medical Leave Act (FMLA) claims of 14.9 per 100 covered employees in 2009—up from 12.5 in 2008.

Workers' comp. The incidence of workers’ compensation claims was 2.6 per 100 employees in 2009—down from 3.7 in 2008.

The report noted that for a large employer, an increase in the number of FMLA claims from one year to the next can have a substantial impact on productivity and the bottom line, something particularly hard to absorb in a down economy.

“Even as the economy begins to improve, companies remain under growing pressure to constrain costs while at the same time increase the productivity of their workers,” said Darling. “We expect companies will be taking a hard look at all of their absence programs. Identifying areas where better tracking, management and reporting for these programs will be all that more critical.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Winter Wellness Woes: A Flurry of DisabilityClaims, SHRM Online Benefits Discipline, December 2009

Avoid Common Myths When Coordinating FMLA and STD Leave, SHRM Online Legal Issues, November 2009

Return-to-Work/Stay-at-Work Programs: Reduce Lost Time, Boost Productivity, SHRM Online Benefits Discipline, January 2009

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform Resource Page

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