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MANAGING ALL DISABILITY COSTS

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Increased productivity, decreased disability costs and streamlined claims administration are some of the advantages employers can gain from integrated benefits programs.

Integrated or coordinated benefits programs can range from coordination of short- and long-term disability benefits to complete integration of workers compensation, non-occupational disability benefits and group health benefits. Complete integration, however, is the least-common approach.

Integrated benefits programs are increasing dramatically, said Veronica Hellwig, a senior consultant in the Wellesley Hills, Mass., office of Watson Wyatt Worldwide.

Dwight E. Davis, president and chief executive officer of Wausau Insurance Cos. in Wausau, Wis., said he thinks integrated benefits have arrived and are here to stay. "We don't think it's a passing fad at all."

"There's a tremendous explosion in the marketplace" of coordinated benefits programs, said William Molmen, general counsel for the Integrated Benefits Institute Inc. IBI is a non-profit research and educational organization in San Francisco comprised of employers, insurers and brokers, consultants and health care providers. And this is "just the very beginning. We're on the ground floor of something that's going to be growing."

Insurers, third-party administrators, disability management companies, consultants and even brokers are now offering integrated benefits services, Mr. Molmen noted.

As of January, IBI had information on 46 programs or products that integrated at least two of the major benefit areas, Mr. Molmen said. He said more offerings are in the marketplace now.

Completely integrated programs that combine group health with workers compensation and other benefits-sometimes called 24-hour coverage-are the least common approach because of the administrative difficulty of coordinating numerous managed care options with other benefits.

"The health care delivery component, fully integrated, is enough to give you a migraine," Ms. Hellwig quipped. Also, the typical management structure within companies is one of the biggest obstacles to integrating workers compensation and disability benefits, experts agreed.

While workers compensation usually is handled within the risk management department, disability benefits usually are handled in the benefits or human resources department.

Integrating benefits "requires that the risk folks at the employer and the human resources folks are doing this program together," Ms. Hellwig noted. "There may be this feeling of territoriality" that must be overcome. "That sometimes is the biggest hurdle of all."

Integrating group health with occupational and non-occupational disability benefits is "not impossible, just highly complicated," said Gregory VanDam, director of product integration for Liberty Mutual Group in Boston.

"Medical coverage is best purchased at the local level," he explained. And, at this point there is "no single health maintenance organization that has depth and breadth across the county" to be a local provider in each area where a company has employees.

"We believe that the medical portion will be the last to be integrated, if it does" become integrated at all, said Anthony J. Galioto, president of AIG Claim Services Inc., a subsidiary of American International Group Inc. in New York.

The larger the employer, the more complicated true 24-hour coverage is, experts agreed.

Portland, Maine-based UNUM Corp. has been marketing a pilot project for the past two years aimed at employers in California or Arkansas with 1,000 or fewer employees that integrates workers compensation, disability and group health benefits. The San Diego-based project, SinglePoint, is a joint venture with Zenith National Insurance Co., according to Beth Goodrich, a director in UNUM's integrated disability management division.

SinglePoint offers one toll-free telephone claims reporting line for all types of claims, one benefits process for the employer, one customer service telephone number and one bill for the employer, Ms. Goodrich pointed out.

SinglePoint contracts with health care providers to be partners in the program.

A few employers have signed up for SinglePoint, but their participation is too new to discuss, Ms. Goodrich said.

Integrated benefits programs that do not include group health are significantly easier to tackle and quite advantageous, sources said.

Many insurers have been offering the simplest approach-coordinating short- and long-term disability-for several years.

"Everybody seems to be heading in that direction," said Gerard Paolino, vp of benefit sales for Liberty Mutual.

A principal advantage of this kind of program is that long-term disability cases are managed earlier than they otherwise might be if they are not referred to the long-term disability insurer until after the short-term disability periods expire.

The key to making short- and long-term disability integration work is "absolutely early reporting of the claim, facilitated by an 800 number," Mr. Paolino said. "There are some links between early intervention, early reporting and the shorter duration of claims."

Coordinating all time-off benefits-short- and long-term disability and workers compensation-is an increasingly popular approach.

The objective is to reduce the time employees are out of work, regardless of the cause, thereby increasing productivity and decreasing salary-continuation costs.

While employers were trying to sort out how to save money by coordinating workers compensation and group health care coverage, they ignored disability management, said Elizabeth Lindner, executive vp at Kemper Insurance Cos. in Long Grove, Ill. "We kind of ignored the low-hanging fruit here.

"Many, many companies do not have centralized management of" short- and long-term disability, Ms. Lindner continued. "Companies have no concept of the amount of money they're spending on lost time." These costs include salary continuation for the injured employee and overtime and temporary personnel to fill in for the absent worker.

Programs that coordinate occupational and non-occupational disability "clearly save employers a lot of money," Ms. Lindner said. The "most obvious and conspicuous result is they see a decrease in short-term disability costs." Decreases could run as high as 8% to 10% in salary-continuation costs, she estimated.

Integrated occupational and non-occupational disability programs generally use one of two approaches, according to Watson Wyatt's Ms. Hellwig.

Under a fully integrated program, cross-trained claims examiners handle all kinds of claims through one toll-free telephone line and use their knowledge and experience to handle both occupational and the non-occupational claims, she explained.

One significant advantage of this approach is that cross-trained claims examiners can tap the best protocols, which often were developed in workers comp programs, for non-occupational injuries, Ms. Hellwig said. "Intuitively, it makes sense."

Also, "workers compensation has gotten really good at connecting medical treatment with return-to-work," according to Liberty Mutual's Mr. VanDam. Integration allows insurers to "take the lessons learned from workers compensation and apply them to the non-occupational side."

Another integration approach uses one toll-free telephone intake line, but claims examiners parcel out claims to different vendors or departments depending on the type of claim, Ms. Hellwig said.

Both approaches should give employers a streamlined claims-handling process and consolidated reporting, Ms. Hellwig said.

Vendors are offering both of these approaches and others with their own particular twists.

For example, 12 employers are participating in a pilot project Kemper offers that integrates occupational and non-occupational claims administration.

Under the program, called HealthyReturn, a case manager is assigned to each claim. The case manager "acts as an employee advocate," Ms. Lindner said. The case manager confirms with the worker the diagnosis and treatment plan, which "makes a huge amount of difference in both the feeling of well-being and the actual recovery."

The case manager also ensures that the physician understands the worker's job, and together they work out a plan to help the employee return to work as soon as possible.

The Wausau program features a single claims reporting process handled by case managers who use a series of disability guidelines to assess and make recommendations on occupational and non-occupational claims. Nurses review all claims that present the potential for lost time, and specialized nurses working in Wausau's group health department consult on complicated cases, such as high-risk pregnancies and organ transplants, according to Dr. Jerry Osband, vp for medical affairs and managed care development.

The advantage of this approach is that "medical management can be moved to the forefront of what used to be a very claim-oriented process," Dr. Osband said.

Steelcase North America and the state of Indiana are two employers using Wausau's approach, but both programs are too new to have generated meaningful data.

Under Liberty Mutual's program, an injured worker calls a toll-free line to report either an occupational or non-occupational injury. Based on the type of claim, the case is referred to a claims administrator. More complicated claims are handled by both a claims administrator and a nurse. Each claim also has a case manager, who is the contact point for the worker and the employer.

National City Corp., a Cleveland-based financial services company with 21,000 employees, has been using Liberty Mutual's integrated workers compensation and disability management program since last September, said Penny McGinty, vp.

"It's been quite a fascinating project," Ms. McGinty commented. Before contracting with Liberty Mutual, National City self-insured short-term disability while insuring long-term disability with one insurer and workers compensation with another insurer, neither of which was Liberty Mutual.

Under Liberty Mutual's integration program, claims are reported to one source, and the management of a long-term disability claim begins much sooner than it did previously, Ms. McGinty said.

Although Ms. McGinty declined to give numbers, she said National City's savings on disability payments are "beyond what we had originally projected." The company has not quantified related medical spending yet, but additional savings related to those costs are expected.

Employers considering integrating occupational and non-occupational disability management would be well-served by determining what they now are spending in these areas so they have a basis for comparison, she advised. AIG Claim Services is taking a behavioral approach to integrated workers compensation and disability benefits management.

Mr. Galioto, AIGCS' president, explained that certain employees are likely to take more time off than others for occupational and non-occupational injuries. Data on how much time a worker has been absent from work-either due to vacation or lost-work time-and his or her claim history "give you a picture of the type of claim behavior that individual has had in the past which is predictive of" future behavior, he said.

"Employees with behavioral tendencies to miss time at work need to understand they are needed at work," Mr. Galioto continued.

To handle these situations, AIGCS recommends using a case manager early in the claims administration process and finding a health care provider that has been successful with the type of injury sustained.

A lot of communication among the employer, the case manager and the employee also is necessary, he added.

AIGCS is in the process of developing a data system that will capture all the information necessary to allow employers to use this behavioral approach, according to Mr. Galioto.

"An employer's attitude is really key," agreed Ellen Steel, assistant vp of disability benefits for Standard Insurance Co. Employers must be "committed to reducing lost time from any source."