Not a Member? Get access to HR news and resources that you can trust.
Don't leave the task of calculating total cost of workforce to the finance department.
Is your employee handbook ready for the changing world of work? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
60+ new SHRM Seminar dates in 10 U.S. cities and virtually.
Expand your influence and learn how to become an effective leader -- Join us in Phoenix, AZ, October 2-4, 2017.
A 360-degree view of employee health and organizational wellness
Rising health care costs and a trend toward an aging workforce leave businesses looking for ways to keep medical and prescription drug costs from cutting into their profits.
The numbers are worrisome. Data from numerous health care plans confirm that workers follow the 80-20 rule: 20 percent of the population accounts for 80 percent of health costs, while the remaining 80 percent only contribute to 20 percent of total health costs. Individuals in the latter group fall under two categories: healthy or at-risk for an emerging disease or injury. In addition studies in the Journal of Occupational and Environmental Medicine and other publications indicate that:
• Almost half of today's workforce is at least 40 years old, and workers 55 years of age or older will increase 42 percent in six years, leading to higher risks of absence and medical costs.• Stress is the cause of 40 percent of job turnover.• Cost shifting for short-term savings has an adverse impact on morale.• Absentee rates are overall on the rise along with medical costs.
• Almost half of today's workforce is at least 40 years old, and workers 55 years of age or older will increase 42 percent in six years, leading to higher risks of absence and medical costs.
• Stress is the cause of 40 percent of job turnover.
• Cost shifting for short-term savings has an adverse impact on morale.
• Absentee rates are overall on the rise along with medical costs.
The only way to absorb the resulting cost increases is to tackle them proactively. Short-term solutions such as cost shifting and increased co-pays that promise quick fixes are attractive at the onset, but they aren’t designed to be sustainable within today’s workforce. A long-term approach, on the other hand, won’t just increase productivity and protect the talent behind the business; it will also reduce payouts to employee benefits in the long run, adding dollars back to the bottom line.
Recognizing the Symptoms—and Impact—of Poor Employee Health
The first step toward overall organizational wellness is to recognize that employee health extends far beyond the world of benefits; its financial impact is felt enterprisewide. Organizational contributions to health care, pharmacy, disability and workers’ compensation are obvious expenses, and are cause enough for worry on their own. The day-to-day, productivity-related financial impact of health-related concerns like absenteeism, presenteeism, employee disability and medical leave, however, may be more subtle but are ultimately just as damaging to an organization’s revenue. For example:
• Absenteeism. The medical expenses of an unhealthy employee are only part of the total costs associated with his or her health risk. Health risks correlate directly with lost days of work. Studies show that individuals with only one health risk factor cost employers a total of over six days of lost work per year. Those with three health risks cost employers more than nine days of lost work, and individuals with four or more health risks cost employers more than 12 days of lost work per year.
• Presenteeism.Although employees may be present at work, often they aren’t performing at their highest productivity level. Health issues that most commonly correlate with presenteeism include mental health, allergies, musculoskeletal problems, diabetes and respiratory issues. Aside from productivity loss, safety is a concern when employees aren’t fully alert and functional.
• Employee Disability.Employee disability claims have an overwhelming impact on employers’ health costs. According to research conducted by the Integrated Benefits Institute, just 10 percent of disability cases account for more than half of all medical expenses. Even a small reduction in the duration of a disability claim can lower medical costs dramatically.
• Family and Medical Leave Act.The total costs of FMLA are difficult to measure. According to a 2007 Society for Human Resource Management employer survey, 55 percent of employers experienced staffing and productivity problems with regards to work reallocation, with nine out of 10 employers assigning work temporarily to other employees; 73 percent of employers experienced challenges in tracking an employee’s intermittent leave usage; and 39 percent approved leaves they believe were not legitimate.
That’s why more organizations are turning to integrated health and productivity management (IHPM) programs. IHPM programs integrate employee wellness, medical plans and absence management with the organizations’ overall business strategies to not only reduce total health-related costs, but also to improve employee satisfaction and productivity.
By effectively integrating data and managing health risks, injury risks, chronic illness, disability and all absences in one integrated program, IHPM programs reduce the amount of overall costs paid out, and provide an impressive return on investment.
Roadmap to Wellness
Because the majority of an organization’s health costs come from a small portion of its employees, a strategy for long-term success lowering those costs should focus on prevention: fostering positive lifestyle changes among the workforce to reduce the most common sources of poor health. By maintaining as many employees in the spectrum of low health risk and guiding others to that level, cost reductions will occur and the overall quality of your employees’ health and well-being will increase.
The first step in moving toward IHPM is gaining a clear understanding of your workforce’s current state. Look within your organization to assess your plan designs and administrative processes relative to health plans and plan management, wellness programs, disease management, disability plans, workers’ compensation, federal and state family leaves, and all time-off programs, including paid time off (PTO) banks, sick leave, military leave and so on.
The initial step includes a workforce demographic analysis looking at age bands, length of service and years remaining until retirement. Additional data analysis includes:
• An assessment of medical and pharmacy claims.• Behavioral health data.• Workers’ compensation experience.• Health risk assessments.• Disability claims data.• Presenteeism experience.• Family leave information.• Paid and unpaid time off data.
Once this information is collected, begin to identify opportunities for improvements and potential solutions. The integration of data will ultimately provide valuable information about the organization’s overall productivity, including total lost workdays, the number of additional workers needed, its impact on net income and impact on earnings per share.
The organization’s size and culture will dictate whether to implement a comprehensive IHPM program or to opt for an incremental program that uses existing health and productivity initiatives that have the potential for integration.
Comprehensive programs require:
• Creation of an internal team.• Alignment of business strategy with integration.• Redesign of the benefits program, internal policies and procedures.• Management of integrated data.• Ongoing communication and measurement.
The development of an IHPM program identifies where costs are increasing above trends and assesses health and disability management initiatives, absence and time off, FMLA and employee assistance programs for integration potential.
Keys to IHPM
When engaging in an IHPM program, keep a few key items in mind
• Data from all components should play an important factor in program development.• An incentives strategy should be in place to drive cost-efficient decisions.• Management support for the IHPM initiative is crucial, and there should be a common goal among the stakeholders.• Return on investment and results reporting will impact the overall success of an IHPM program.• Monitoring and measurement of participation levels and outcomes, as well as ongoing communication, are critical.
Diagnosis: Long-Term Success
When implemented successfully, the results of a successful IHPM program are enterprisewide. The outcome can lead to a reduction in costs for health plans, sick leave absenteeism, workers’ compensation and disability management. Health risks decrease and productivity improves. Additionally, IHPM programs have been shown to increase organizational loyalty, retention and recruitment success and to reduce turnover.
IHPM is about changing the mindset of your organization, from simply managing disability to preventing disability and maintaining overall wellness among employees. It’s a long-term commitment with long-term benefits of controlling health costs before they arise.
Marie J. Killian is integrated health and productivity management (IHPM) leader at Trion, an employee benefits consulting firm. She focuses on health, absence, disability and organizational productivity strategies. A licensed attorney, she is a member of the Pennsylvania Bar Association.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies