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© Copyright 1998 Maclean Hunter Publishing Ltd. The following article first appeared in the October
1998 edition of BENEFITS CANADA magazine.
The Bottom Line on Disability
This decade has seen disability management become no more than a soft science, but only with hard
data can an organization hope to control absenteeism
By Laura Mensch and David Willows
The 1990s have seen a wave of conferences and articles extolling the virtues of disability management,
making the terms early intervention, modified work and seamless disability firmly entrenched in our
disability benefits lexicon. So as the decade draws to a close, it seems appropriate to determine whether
all the consulting hours and disability management initiatives launched by employers and insurers have
actually worked. Are organizations seeing fewer workers' compensation, short-term disability (STD) or
long-term disability (LTD) claims? And when claims do occur, has their duration shortened? Are the human
and financial costs of disability plans shrinking?
The problem is, these questions can't be easily answered. Simply put, disability management has been a
"soft science," with few organizations developing the tools to measure the outcomes of a disability
initiative or the appropriate benchmarks to establish target goals for improvement. But issues surrounding
absenteeism and disability costs rarely disappear without active intervention. Only when organizations can
measure the incidence, duration and costs of absences can they develop smarter, better strategies that can
reduce absenteeism.
Over the past decade, a number of trends have adversely affected disability plans, which has led to
dramatic cost increases and many organizations struggling with the question of how to effectively manage
absenteeism.
Years ago, sick leave, workers' compensation, and STD and LTD programs were used primarily by an
organization's older employees. For example, LTD was claimed most often after catastrophic illnesses, such
as heart attacks and cancer--the kinds of illnesses that generally affect people later in life. Today,
however, it's more common to see LTD programs filled by employees as young as those in their 20s. And this
time around, the illnesses aren't physical but psychological in nature, such as depression.
Clearly, the critical difference between the old and new eras is that we are in the age of self-reported
disabilities, with the emergence of such ailments like fibromyalgia. And since there are few objective
tests that can diagnose many of these diseases, deciding whether they meet the contractual terms of a
disability plan becomes not only difficult but controversial.
As well, issues related to family, working conditions and work performance are intermingling with claims of
illness. That makes it increasingly difficult to determine when an absence from work is due to medical
reasons and raises concerns about whether the standard medical claim form is the appropriate tool to gather
information. For example, while an employee is diagnosed with depression by a family physician, a conflict
with a co-worker could be the real reason behind the absence. So, even if there are real symptoms, recovery
and return to work will likely be delayed until the workplace issue is addressed.
Why are so many non-medical issues contributing to absence? It may be that the seemingly endless trend of
downsizing and re-engineering by organizations in the 1990s is taking its toll on the psyches of those in
the workforce. Often, as a result of such initiatives, employees are faced with rapidly changing work
environments and greater demands on productivity. Yet any psychologist will tell you that few of us adapt
well to continuous change.
And when absences do occur, a delayed recovery from an illness tends to be psychosocial rather than
medical. That is, as an employee's absence continues, prolonged absence may have more to do with anxiety
about the perception of co-workers when he returns and about coping with changes that have occurred in the
workplace since the absence began, rather than purely medical reasons.
WHY THE NUMBERS MATTER
In the early to mid-90s, many employers and insurers responded to the soaring rise in absenteeism and
disability claims with fuzzy, sometimes panicked responses--get-tough attendance policies, tougher (but
often short-sighted) adjudication of claims, a huge increase in the provision of vocational rehabilitation
resources to disabled claimants and the introduction of wellness programs.
With respect to vocational rehabilitation and wellness, they were feel-good responses that few questioned.
Too often, however, they were expensive, unfocused, not part of any cohesive or structured employee
healthcare strategy, and had little effect on bottom-line results. Cost-benefit analyses--a vital step in
most aspects of an organization's business planning--were extremely rare in the disability management
world.
True, many organizations embraced the call to develop early-intervention programs monitoring treatment and
co-ordination of return-to-work programs within days or weeks of the onset of illness or injury. As well,
they introduced transitional work programs that modified work tasks and hours to facilitate an early return
to work, and even hired staff devoted to nothing but managing absenteeism. But failing to develop systems
to track absenteeism, they had little hope of managing and improving it.
To manage a disability plan effectively, organizations must have the following data, at a minimum:
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the incidence of absence;
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the type of absence (such as sick leave, workers' compensation, STD and LTD);
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the average duration of absence;
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the dollar costs of absence; and
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the reason for absence when available.
If a company initiates a disability management program and suggests that cost savings could occur without
having performed a review of such data, those cost savings projections are, at best, a projection of an
estimate based on nothing more than a guess. In the end, without objective data, an organization does not
have even a clear starting point to address absenteeism issues.
And even though most organizations track absenteeism in some way--someone in the organization can usually
trace how many days an employee has been absent--often that information lies only with a supervisor,
scheduling associate or human resources benefits administrator. That means the data isn't readily available
to provide a bigger picture on patterns, trends and the associated costs of absenteeism.
To have a true understanding of an organization's performance in disability management, it's also important
to benchmark this performance against other companies by comparing absence and disability claims data. Some
organizations may find that, proportionally, they do not have high sick-leave usage or cost. Often,
however, such an exercise will still reveal unacceptable costs.
STAYING ON TRACK
It is only when the numbers have been thrashed over and a clearer understanding of the origins and
frequency of absence has been captured that an organization can evaluate its disability management program.
To that end, more and more organizations have begun to develop formal disability services agreements with
their disability management providers (group insurers, disability management and/or vocational
rehabilitation firms). These agreements aim to:
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Improve provider/client communication by developing a system where vital information can be exchanged
by telephone, correspondence or at regularly scheduled case management meetings;
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Increase the emphasis on early and timeline-driven rehabilitation and return-to-work plans to ensure
that an absence is addressed early in the process and managed in a logical, timely fashion; and
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Provide on-going reporting of disability plan results so that the performance of the disability
management program can be measured.
To get away from the "soft science" of disability management, agreements should be in writing to ensure
that these activities occur.
Once a statistical review and benchmarking exercise have been completed, it's also common for an
organization to have the management of its STD claims outsourced. If the data show a rise in
psychologically based disability claims and an obvious intermingling of medical and non-medical issues,
what may be needed is an expert third party to adjudicate and case-manage such complex and potentially
contentious absences.
REALISTIC GOALS
Finally, when a program has been developed or revamped, it's important to set performance goals. This is a
critical step in maintaining the momentum captured during the program's design. Simply putting the program
in place and assuming that it will work well is unrealistic. The program must be constantly revisited and
revised as circumstances inside the organization change, such as opening new offices, and factors outside
it, like a reduction in provincial healthcare coverage.
Without appropriate data gathering, benchmarking and analysis, an organization may set arbitrary targets
for the reduction of disabilities and related costs--some organizations with no access to other data may
set goals that will move their results from "horrible and embarrassing" to merely "unacceptable and
discouraging.'' That is not to say that unacceptable and discouraging is not a quantum leap for some, but
it may not be an appropriate end result for a disability management program.
It must be recognized, however, that change cannot and should not happen overnight. Organizations may find
that their unique business considerations can result in a higher incidence and duration of absenteeism than
the shop across the street. If an organization has an employee population with an average age of, say, 50,
recent Statistics Canada data suggest it can expect to see a higher rate of absenteeism than a company with
a younger employee group (see "The hard facts," page 61). Moreover, older employees are more likely to
contract more serious physical disabilities such as heart disorders and cancer, which lead to longer
disability claim duration.
In short, goals must be reasonable and attainable or faith in the program may be needlessly jeopardized.
At this point, it wouldn't be surprising if you concluded that absenteeism is a complicated issue.
Individuals who manage absenteeism in the workplace don't require combined degrees in social work, medicine
and law, but the complexity of the issue does require an organization to first accurately track employee
absence and understand the reasons behind it before it implements strategies to manage absenteeism.
Laura Mensch and David Willows are disability management consultants with KPMG Actuarial, Benefits and
Compensation Inc.'s practice in Toronto.
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The HARD FACTS
The following data from Statistics Canada gives a good snapshot of absenteeism in 1997:
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Employees with flexible schedules miss seven days per year compared with 10.25 for employees with
"rigid" schedules.
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Employees aged 15 to 24 average under five days of absence while employees aged 55 to 64 average nearly
11 days of absence.
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Industry sectors with the highest absenteeism are public administration, transportation and
communication.
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