MC-29 Integrated Disability Management

CAS Ratemaking Seminar

March 12, 1999

Michael C. DolanPricewaterhouseCoopers LLP

What Is the Product

• Combines Various Direct Coverages– Disability

• LTD• STD

– Workers Compensation– Healthcare– Other

• EAP

What Is the Product

• Implied Coverages– Absenteeism– Sick Leave– Disease Management

• Implied Costs– Productivity– Training– Substitution Costs

What Is the Product

• Other Items for Measurement– Morale

• Cuts Both Ways

– Retention– Implementation Costs

Total Cost

• Total Costs of Individual Programs

• Replace ET + BT by E`T + (1- k) x BT

– Include Insured and Self-Insured Programs– Adjust for Measured Impacts of Synergies

• Expenses• Benefits - Percentage and Reductions That

Apply

• Adjust for Required Investments

Cost Considerations

• Options– Add the Underlying Direct Costs

• Easiest• A First Approximation• Understates the Real Return• Ignores the Implied Savings

Cost Considerations

• Options (continued)– Add Underlying Costs + Adjust Expenses

• Identify the Expenses by Line• Eliminate the Duplication• Add Additional Expenses

– Add Underlying Costs + Adjust for Expense and Benefit Synergies

Expense Considerations

• Expense Synergies– Common Intake

• Healthcare & Workers Compensation• STD/LTD & Workers Compensation• STD & LTD• Healthcare and EAP

– Rational Database• Eliminate Multiple Sets• Better Analyses of Costs and Allocations• Available Staff

Expense Considerations

• Expense Synergies (continued)– Inter-Cover Administrative Expenses

• Initial Set Up• Historical Information• Coordinated Employee Relations

– Compliance Reporting• Carrier• Regulatory• ERISA Compliance

Expense Synergies

Synergy

• Common Intake

• Database

• Admin Cost

• Compliance

Proxy

• Count/Process

• Report Count, Transaction

• Counts/Process

• Complaints, Costs

Benefits Synergies

STD LTD

Medical WC Med WC Indem

COST PRODUCTIVITY

Synergies

• STD-LTD– Adjustments to Sum of Costs– Expense

• Set Up Cost• Prioritization

– Benefits• Early Case Management - Duration• Liability Acceptance

Synergies

• STD-LTD Measurements– Equivalent to Early Intervention for WC– Leverage Early Case Management– Draw from WC Experience

Synergies

• Medical-LTD– Adjustments to Combined Cost– Expense Savings

• LTD Case Management Relies on Medical Treatment

• Not Known Until After Treatment

– Benefits• Medical Treatment Can Be Aimed at RTW• Durations Managed as in WC

Synergies

• Measurements– Durations by Disability as in WC– Studies on Impact of Medical on Indemnity

Synergies

• WC - LTD– Adjustments to Combined Cost– Expense

• Some

– Benefits• RTW for WC Applied to LTD

– Setting Expectations for Employer/Employee

Synergies

• Measurements– RTW Studies for WC– Early Intervention Studies for WC– Impact of Light Duty Return

• May Need to Adjust LTD Contracts

– Apply Adjustments to Termination Curves

Synergies

• Others– Medical on WC Medical to Eliminate

Duplication– Impact on EAP Through Analysis– Utilization Tracking and Analysis

Other Returns

• More Benefits– Duration Reductions Translate into

Productivity Savings• Determine Cost/Day from Temporary Hiring

• Estimate the Reduction Cost/Day on Production

• New Hire Training Costs/Day to Ramp Up

– Turnover Reduction Costs• Exit Interviews - Benefits Programs/Flexibility Cited

• New Hire Costs/Day to Ramp Up

Other Returns

• Don’t Forget Other Costs– LTD Case Management - New Environment

• Aggressive RTW and Light Duty• Managing to WC Implied Duration• Leveraging Medical

– WC/LTD/Medical Case Management Integration

– Systems Design and Tracking Costs– Short- and Long-Term Costs