Casualty Actuarial Society
Disability Management
Strategies:
Lessons Learned from Workers Compensation
and Managed Health Care
Jeffery P. Jordt, J.D., L.L.M.
2002 Risk & Capital Management Seminar
July 8-9, 2002
1
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
2
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.
3
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

Age 30
4.1 times more likely

Age 40
2.9 times more likely

Age 50
2.2 times more likely
(Source: Field Guide 1998)
4
Incidence of Disability
Probability of Disability* Occurring Prior to Age 65
Age
To Any
One Person
One Person
Out of
Any Two Persons
30
.467
.716
40
.430
.675
50
.360
.590
*Disability defined as long term (at least 90 days).
(Source: Field Guide 1998)
5
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)
6
Employer Financial Consequences
Average Direct Costs of Disability
Workers' Compensation
Sick Pay
STD
LTD
Total
2.5%
1.7%
1.5%
0.06%
6.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Percentage of Payroll
Source: Watson Wyatt, Staying@Work 1999/2000
7
Employer Financial Consequences
Average Indirect Costs of Disability
Overtime Costs
3.1%
Replacement Employees
3.8%
Workstattion/Job
Accomodation
Total
1.0%
7.9%
0.0%
1.5%
3.0%
4.5%
6.0%
7.5%
9.0%
Percentage of Payroll
Source: Watson Wyatt, Staying@Work 1999/2000
8
A Historical Perspective
 Workers Compensation
 Health Care
 Group Disability Insurance
9
Workers Compensation
 Industrial Revolution and social policy
 Employers’ Liability Statutes
 Workers compensation statutes
10
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
11
Health Care
 Ancient Chinese
 Early twentieth century
 Managed care
12
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.
13
Long Term Disability
External Factors
 Moral
hazard
 Subjective
 Shift
diagnoses
in employment paradigm
14
Long Term Disability
External Factors
 Moral
Hazard - When the insured has a
compensable disability and chooses not to
work and receive a disability benefit.
15
Long Term Disability
Increase in Subjective Diagnoses*
273%
300
250
200
150
100
105%
28%
28%
Subs.
Abuse
Psych.
Disord.
50
0
Carpel
Tunnel
Synd.
Chronic
Fatigue
Synd.
*1987 to 1993.
(Source: Peter A. Carroll, Implementing an Effective Disability Management Strategy,
Compensation & Benefit Management Autumn 1995)
16
Long Term Disability
External Factors
 Shift
in Employment Paradigm
 Lack
of job security
• Reduction in force
• Downsizing
• Rightsizing
• Outsourcing
 Lack
of career path
17
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
18
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
19
Integrated Disability Management Model
Single Point of Entry
 Employee
 Triage
advocate
cases
 Arrange
for appropriate services
 Contact
coordinator
 “Being
there”
20
Integrated Disability Management Model
Aggressive Case Management
 Interface
with disabled employee,
attending physician, supervisor and insurer
 Treatment
 Duration
protocols
guidelines
21
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
22
Integrated Disability Management Model
Early Intervention, Cont.

Targeted Diagnoses

Lower Back Pain


Chronic Fatigue
Syndrome
Blindness or Near
Blindness

Psychiatric or
Psychological
Disorders
Progressive
Conditions

Head Injuries

Spinal Cord Injuries
Early Pregnancy
Claims

Partial Paralysis

Strokes


23
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
24
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
25
Integrated Disability Management Model
Return to Work Strategy, Cont.
 Critical
success factors
 Alignment
of organizational goals
 Integrated
case management team
26
Integrated Disability Management
Overcoming Barriers to Implementation


Organizational Culture

Aligned objectives

Caring attitude

Social policy
Administration

Integrated systems

Linked database

Low-tech solutions
27
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
28
Integrated Disability Management
“How To” Cont.
 Establish
 Draft
benchmarks
concise request for proposal
 Partner
with selected vendor(s)
 Communicate
changes: up, down and
across
29
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.
30
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.
31
Integrated Disability Management
Questions?
32