More Employees Using Disability Programs To Protect Jobs

November 18, 2003 ( - Employees fearful of losing their jobs may be turning to disability programs as an employment safe haven.

Evidence of this practice can be found in an increase in the number of short-term disability (STD) and long-term disability (LTD) utilization over the past two years. Thirty-two percent of respondents to Mercer/Marsh Survey of Employers’ Time-off and Disability Programs reported an increase in STD claims over the past two years, similar to the 22% reporting higher instances of LTD claims. Only 8% of the 500 employers polled noted a decrease in disability instances.

Additionally, almost half of respondents (46%) said use of family medical leave has increased, while only 1% reported a decrease. When put together, STD is being utilized by 7.4% of participants in the employers’ plan; LTD has a 0.6% yearly utilization rate and family medical leave a 9.6%.

Further evidence to support the “safe haven” contention can be found in lower utilization of incidental absence or sick days over the past two years. Only 16% of the surveyed employers reported an increase in this time off and the average number of days taken per year – 4.5 for salaried employees and 5.2 for hourly – was also fairly stagnant during that time.

“There are undoubtedly many reasons for increases in disability claims, including an increase in stress and in health risk factors such as obesity,” says William Craig, a Marsh consultant and one of the study’s authors. “But one reason is also that some employees who feel vulnerable to job loss view disability benefits as a safe haven.”

Cost of Time Off

The costs of these programs were even more alarming. In 2002, the total cost of time-off and disability programs averaged 14.9% of payroll -higher than the 13.1% of payroll going to the employers’ health benefit programs. Of that, 4.4% of payroll was due to unscheduled absences, compared with 10.5% attributable to scheduled time-off benefits.

Musculoskeletal problems, stress/depression, cancer, and cardiovascular diseases are the types of conditions that most often result in disability costs for survey respondents. When asked which conditions were increasing in either frequency or cost, respondents were most likely to select stress/depression (63%). Mercer/Marsh attribute the growing impact of these conditions to

  • an aging workforce
  • a struggling economy
  • an increase in such risk factors as obesity
  • the continued erosion of marriage and community institutions for social support.

With the increase in these programs employers are turning their attention to the disability programs as a potential source of savings. Among the trends that have emerged over the past four years, is an integration of STD and LTD coverage with one third-party administrator or insurance carrier increasing to 51% of respondents from 39% in 2000. Further, 42% of the survey sample now uses a single centralized intake process for reporting occupational and nonoccupational claims, up from only 32% in 2001. Also up is the use of consistent occupational and nonoccupational return-to-work programs, utilized by 62% of companies in 2003, compared with only 32% in 2000.

Copies of the fourth annual Survey of Employers’ Time-Off and Disability Programs cost $250 and may be purchased at or by calling (212) 345 2451.