Healthcare Costs Underestimated: Study

March 9, 2001 ( - Employers may be underestimating the total costs of employee health conditions by as much as 80%, according to a new study.

The study, released by the Integrated Benefits Institute (IBI), found that the costs of medical treatment made up less than 20% of the $1.24 billion in health-associated costs during the 30-month study period.  Lost productivity alone accounted for nearly $1 billion.

Cost differences among health plans are driven more by short-term disability wage replacement than by medical care payments.

Cost Components

Nine medical conditions account for three-fourths of all medical and disability costs, with musculoskeletal, cardiovascular and mental health combined accounting for nearly half.

Employees out on short-term disability represent only 11% of cases but account for more than half (53%) of total group health and short-term disability costs.

The research also noted that:

Total medical and disability costs differ significantly by health plan for the same medical condition, with employees covered by fee-for-service experiencing higher total medical/disability costs and longer disability durations than those treated by preferred provider network.  Total costs for:

  • mental health conditions averaged 22% higher
  • back and spine conditions were 18% higher, on average

IBI, in partnership with members CORE, INC. and The MEDSTAT Group, analyzed more than 300,000 group health and 32,000 related short-term disability episodes for a large Midwest manufacturer with 72,000 employees.