Saving Health Costs Important to Business Values

October 24, 2007 ( - Some 39% of respondents in a new poll "strongly agreed" with the notion that improving employee health is a core business value while another 41% "agreed" with that suggestion.

A news release reported that the survey by Mercer and Marsh said “substantial” financial opportunities can be gained through a healthier workforce. The survey report pointed out that health benefit cost is about 16% of payroll while the cost of absence programs – incidental absence, STD, long-term disability (LTD) and workers’ compensation – together is 4% of payroll.

Employers also have to deal with the hidden costs of employee absence – replacement labor and loss of productivity – that is estimated at about 3% of annual payroll. In the health care industry workflow problems caused by absent or underperforming staff can lead to issues with quality of care and greater liability exposure.

“It comes down to maintaining productivity as well as managing health care cost,” said Sue Willette, head of Mercer’s health and productivity management group, in the announcement. “It’s clear that if your employees are not at work – or are at work but not 100% healthy – productivity suffers.”

The Mercer/Marsh survey found that absences are up for a sizable minority of employers. Nearly one-fourth of the employers (23%) said that the incidence of short-term disability (STD) claims rose between 2005 and 2006, and 15% saw an increase in the average length of the disability period. Just 11% of employers reported a decrease in STD issues. For most others (66%), absence rates stayed about the same, despite efforts to manage them more effectively.

The news release said medical conditions cited most frequently by respondents as being in the top three in terms of cost are cancer and cardiovascular disease (both at 54%), other musculoskeletal conditions (53%) and low back pain (42%). Of eight common disabling conditions, respondents reported seeing more and/or more costly claims for cancer (47%) and stress/depression (44%), other musculoskeletal (39%), cardiovascular (38%) and low back pain (28%).

The poll also found that 17% have integrated their health care and disability programs.

Among employers with 10,000 or more employees, 6% require employees on STD to participate in any relevant disease or health modification programs and another 4% offer an incentive to do so. An additional 14% of these employers are planning to implement one of these approaches within the next year; 41% are considering it.

The study found that employers have also found it useful to better integrate the Employee Assistance Program (EAP) with their disability and health management efforts. Employees on STD are often at risk for stress or depression: 49% of respondents now routinely refer employees with an occupational or nonoccupational medical disability to the EAP and 44% routinely refer employees on leave under the federal Family & Medical Leave Act to the EAP.

The 611 survey respondents range from those with 100 employees to those with more than 10,000 employees. The average number of employees covered per respondent is 9,694; overall, nearly 6 million employees are represented.