Understanding Integration: The Bottom Line

Integrated Programs Show Savings and a Variety of Results

Integrated benefits delivery promotes savings for employers: IBI’s Integration Case Studies note that minimizing unnecessary absence and disability presents the greatest opportunity for savings from improving absence and disability management by integrating benefits. For some case study participants, disability costs savings can amount to 40% to 50% (likely associated with unmanaged benefits programs that now are managed and integrated). Others are satisfied to hold the line against anticipated cost increases in one or more of their benefits programs.

Only two of the 11 case study participants sought savings as a specific integration goal because few could quantify current costs. How could they promise savings if they couldn’t measure how much their new programs saved them? Instead, they established measurable goals:

• employee satisfaction
• reduction in administrative expense.

Results vary

Employers we profiled often report savings in their own idiosyncratic metrics, preventing a simple apples-to-apples comparison among employers or an ability to calculate an "average" savings from a "typical" initiative.

Primarily manufacturing employers reported their most significant savings in lost-time days and disability cost, especially in WC:

• WC lost days decreased 97% and lost days per employee decreased 53% at Cable Systems;
• total disability costs shrank 48% in four years at Owens-Corning;
• WC cost reduced 43% in four years at Champion, with unfunded liabilities (incurred but not reported) dropping 58%;
• WC restricted duty days dropped more than 40% at Steelcase;
• total lost-time for all disability dropped 42% in the first two years of the program at Pitney Bowes.

Primarily white-collar employers reported significant savings in medical costs, although their disability savings were still higher:

• Pacific Bell’s two WC pilots reduced average medical cost by 21% and 22%, while cutting disability costs by 41% and 25%;
• Nationwide’s pilot reduced the number of overall paid disability days by 20.4%;
• San Bernardino didn’t attempt to identify medical savings, focusing on disability, which was reduced by 10%in non-occ and 33% in WC.

To give context to saving reports, we are adding case studies to a display that reports a broad range of results and helps put savings measures into context for profiled employers.

Some employers reported higher WC or STD costs in the first year or two of a program, which could be attributed to a number of causes:

• new insurance program with different definitions of a claim;
• improved reporting and tracking uncovered previously hidden claims or costs
• some claims may have been misfiled before the initiative. Correcting this problem creates the false impression that claims are going up in one program or the other, when in fact costs are shifting to their appropriate program.

Administrative costs vary substantially from one case study to another. SoCalGas achieved significant savings by bringing case management in-house, while Nationwide incurred significant new costs to develop information systems and expand case management functions dramatically.

Best practice survey savings are strong

Our Best Practices survey respondents report strong savings, although here too, results are in each employer’s idiosyncratic metrics.

Two respondents report direct benefits program savings of 30% and 40%. For example, one mid-sized electronics manufacturer with global operations reports a 40% reduction in STD and LTD costs and a 35% reduction in disability days from integrating its occupational and non-occupational health and disability programs.

Two employers reported reductions in disability costs, overall, amounting to savings of 2.5% and 3.35% of payroll. Although a small proportion of payroll, savings can amount to millions of dollars company wide:

• for workers’ compensation alone, annual savings of this magnitude amount to $67 per employee
• add STD and LTD and the savings range from $160 to $500 for respondents.
• add reports of group health savings and the savings per employee range from $1500 to $1700.

Reducing lost workdays an effective measure: For several respondents, savings accrued primarily through reductions in lost workdays in each program as they benefited from an integrated case management and return-to-work approach. Companies that measured savings this way report decreases in disability days ranging from one employer’s 10% to 12% decrease in lost days for all occupational and non-occupational injuries and illnesses to another’s 35% reduction in occupational and non-occupational lost days. One mid-sized regional services company that integrates its workers’ compensation and non-occupational disability programs reported a 25% reduction in total lost workdays in WC, STD, and LTD, and another company reported a 20% decrease in STD lost days.

Smaller employers also benefited. One small service industry employer with fewer than 1,000 employees reported a 75% year-to-year reduction in the number of workers’ compensation claims after integrating benefits.

Two caveats

Two final words about these savings reports. First, these are case-by-case examples and cannot be generalized to employers broadly. For example, employers with well-run, stand-alone benefits programs can expect smaller savings after integration than employers starting with unmanaged programs. Also, results vary by industry, the local economy, benefit design and other individual employer characteristics. IBI’s annual benchmarking study of absence, disability and health can help to reduce the uncertainty of comparison.

Second, employers appear to be doing little to measure the total costs of absence, instead focusing only on direct benefits costs and savings. IBI’s benchmarking programs and a recent case study demonstrate that indirect benefits costs of failing to control unnecessary absence and disability can be several times larger than the direct costs.