10 Tips for Disability Management Programs
Walker, Jasen M., Heile, Gordon, Heffner, Fred, Risk Management
Corporate risk managers can improve the casualty insurance experience of their organizations by coordinating existing corporate strategies to focus on comprehensive disability management. According to a study by UNUM and Thomas L. Jacobs & Associates from 1992, the average company spends 8 percent of payroll on disability costs. Companies can reduce these costs by inducing interaction and collaboration between human resources, health care benefits, employee assistance, safety and injury treatment activities.
Several factors have helped contribute to increases in workers' compensation claims. For example, a study conducted by the National Institute on Drug Abuse found that 30 percent of all workers' compensation claims are associated with workplace substance abuse. And according to a 1992 report by the U.S. General Accounting Office, the average workers' compensation claim costs $26,600. Considering these factors, the potential benefits of integrating employee assistance programs (EAPs) and injury management efforts become obvious.
There are ten indicators that signal the need for a comprehensive Disability Management Program (DMP). However, each company must develop specific recommendations for change in light of its unique workplace circumstances. Even though there are often operational differences between companies, most organizations are likely to benefit from DMP implementation.
There are more indicators of the need for DMPs than those listed below, but the following ten are the most important.
1) The lack of cost-effective service from the company's third party administrator (TPA). Most large corporations work with a TPA. However, most firms that purchase these services realize only after the fact that such services frequently fail to move a lost-time case toward closure effectively. More often than not, this situation occurs because of the way the services are priced and the fact that employers lack the knowledge necessary to monitor the cases. Competition among administrative services can lead TPAs to offer claims management at a fixed price per case. This results in reduced services on each case handled unless the employer reviews each case and insists on appropriate servicing.
In other words, a company purchasing TPA services will get what it pays for. One of the authors recalls distinctly being told that a group of claims adjusters assigned both contract cases (at a fixed price) and time-and-expense cases would handle only the time-and-expense cases on a weekly basis. Only when that work was done was the adjuster sufficiently free to service a flat-rate contract file.
Thus, large corporations hoping for service from a TPA on contract work probably will not get it without a concerted effort. There is no incentive for front-line adjusters to work a flat-rate file, particularly if they will be rewarded on time-and-expense billing only. A system of penalties and rewards to TPAs based on a review of randomly selected claims files to compare actual claims-handling action with mutually predetermined standards can serve to overcome this bias.
2) The corporation has a recent history of labor/management conflict. Unresolved labor/management strife may be the single most frequently cited cause of lost-time claims and elevated disability expenditures. When management cannot gain the cooperation of labor in the formation and enforcement of safety programs, workers are more prone to accidents or injuries. When labor tends to perceive workers' compensation as an entitlement, disability is likely to become more costly to the organization. Conversely, if management has no regard for the safety of its work force or no desire to provide workers with return-to-work rehabilitation, the company is prone to being held hostage to spiraling disability claims and expenses.
3) The company's policies and/or procedures promote time off work. One Fortune 500 company has a workers' compensation policy that allows workers to remain on long-term disability until age 65. …