Benefit integration boosts productivity and profits: by streamlining any combination of benefits such as health, disability, time-off, and workers' comp, unscheduled absences can be better managed. That saves time and money

Workforce, Dec, 2002 by Annmarie Geddes Lipold

To Libby Child, it just made sense. If her company, Steelcase Inc., could save money and help its employees on workers' compensation by bringing them back to work, then the same results would occur for employees on long-term and short-term disability. Even better, says Child, the integrated disability manager for the Michigan manufacturer of custom office furniture, the company's decision to change the way it administered benefits before the economy deteriorated has made a significant difference in raising productivity and controlling costs.

The Grand Rapids-based firm was enjoying the fruits of integrated benefits: higher productivity, improved morale, increased administrative efficiency, and fewer legal hassles. Then the economy faltered, and Steelcase laid off more than 1,000 employees. Its benefit-integration program--which combines long- and short-term disability, workers' compensation, medical case management, and Family and Medical Leave Act administration--helped keep the cost of layoffs in check. The program has enabled employees, laid off or not, to receive proper medical treatment and benefits for the appropriate amount of time, while ensuring that they do not simultaneously dip into different benefit streams. As other employers watch medical and disability costs skyrocket, costs at Steelcase are increasing at a much slower pace, Child says.

So, what exactly is benefit integration? It coordinates any combination of benefits, including health, disability, time off, and workers' compensation, to meet human resources objectives, says George R. Faulkner, a principal with New York-based Mercer Human Resource Consulting. "All we are talking about is being smarter about how benefits are delivered," notes William P. Molmen, general counsel of the San Francisco-based Integrated Benefits Institute (IBI).

At Steelcase, it works like this: a disabled employee calls a toll-free phone number and, after following the prompts, connects with a representative who files the claim, collects necessary FMLA information, and directs the worker to a medical case manager if necessary. Employees at the $3.1 billion company get the same treatment regardless of whether the disability is work-related. Thanks to benefit integration, the combined cost of short-term disability, long-term disability, and workers' compensation has dropped 13 percent, from $1.63 per $100 of payroll in 1998 to $1.42 in 2001. Restricted workdays have plunged 73 percent, from 63,000 in 1992 to 16,943 in 2000. Lost-time days have declined 70 percent, from 4,313 in 1992 to 1,313 in 2000. And the number of litigated disability-related cases fell from 15 in 1996 to 6 in 2000.

Employee satisfaction also has improved under the integrated approach, Child says--from 1.2 on a 4.0 scale in 1997 to 3.5 in 2000, according to an in-house survey. "The employee satisfaction kept going up and up," she notes. Getting employees and managers to adapt to the new procedure was the biggest hurdle. It took six months to get them on board, despite a full-scale promotional campaign. "They weren't sure who to call, when to call, and how to file a form," she says.

But once that initial period had passed, managers and employees took to the convenience of calling just one number to report a lost-time injury or illness. Employees also appreciate the consistent return-to-work policy, whether they are on workers' compensation or short-term or long-term disability.

Comerica is another company that is reaping the rewards of benefit integration. The Detroit-based financial services provider saved millions of dollars in lost wages in its first five years of integrated benefits, also known as absence management, says David R. Groves, vice president of corporate health management.

The company, which has 308 branches and posted net income of $710 million in 2001, saw the cost of disability-related lost wages drop from $8.7 million in 1995 to $5.3 million in 2000--a decline of 39 percent. During the same period, average lost-time claims shrank 42 percent, from 52 to 30 days, and total disability days dropped 49 percent, from 65,000 per year to 33,000.

The savings can also be more immediate. Just 12 months after hiring a third-party administrator to manage and cover much of its integrated disability program, Owenshoro Mercy Health System, in Owensboro, Kentucky, was able to convert 3,096 lost-time days to restricted-duty days. This saved the organization $282,815, says Pam Cox, manager of human resources development.

Lured by such promising results, more and more employers are pursuing benefit integration, according to the 2001 Employers' Time-Off and Disability Programs survey, released in May by Mercer Human Resource Consulting and Marsh Inc.

Of the companies surveyed, half of those with 1,000 or more employees have already begun to integrate their short- and long-term disability plans with one carrier or administrator. This compares with 40 percent of same-size employers in the previous year Another 19 percent are planning or considering the approach.