Workforce HealthWorkforce Health-- From Cost to Value ---- From Cost to Value --

Thomas Parry, Ph.D.President

Integrated Benefits Institute

Michigan Purchasers Health Alliance

September, 2006

Today’s Discussion

• What’s the issue?

• Does senior management get it?

• What are the real costs of health?

• Emerging ER strategies to manage health and productivity

What’s the What’s the RealReal Issue? Issue?

ThisThis??

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Calendar Year

Bill

ions

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

GD

P S

hare

NHE GDP Share

National Healthcare Expenditures

Source: CMS, Office of the Actuary, National Health Statistics Group.

Actual

Projected

Plan Design

Healthcare Costs

Then, The Solution

Or ThisOr This??

Leveraging Human Capital

0

1

2

3

4

5

6

7

8

9

10

A B C D E F G H I J

HC

L R

atio

Company

Demonstrating Healthcare Value

Health Status

Business Impacts

Black Box

About IBI• National, non-profit

• 400+ corporate sponsors

• Programs

– Research

– Health & productivity measurement

– Benchmarking

– Education

Can Senior Management Can Senior Management be Change Agents?be Change Agents?

IBI’s CFO Research

Linking Health, Productivity & the Bottom Line

Moderate link32%

Weak link7%

Strong link61%

The Impact of Ill-Health

0%

25%

50%

75%

100%

Highermedical

Job focus Absence Bottomline

Otherbenefits

costs

Largerworkforce

Agree Strongly agree

96%90% 86% 84%

71%

47%

How Much Absence?

16%

48%

24%

8%

1%

4%

0% 10% 20% 30% 40% 50% 60%

DK

> 15%

10 to 15%

5 to 10%

2 to 5%

< 2%

Rat

e

How Much Presenteeism?

7%

4%

9%

22%

35%

23%

0% 10% 20% 30% 40%

DK

> 15%

10 to 15%

5 to 10%

2 to 5%

< 2%

Rat

e

Lost Worktime Criticality

32%

17%

51%

0%

10%

20%

30%

40%

50%

60%

Actual > Critical Actual = Critical Actual < Critical

CFO’s Role in Benefit Decisions

71%

51%47%

18%

0%

20%

40%

60%

80%

Analyticalsupport

Benefitsofferings

Integral teammember

Primary leaderof strategy

Measuring the Impact

• Absence– Overtime pay

– Lost revenue

– Temporary help

– Quality lapses

– Wage replacement

• Presenteeism– Overtime pay

– Temporary help

– Quality lapses

– Lost revenue

– Additional staff

Are CFOs Being Informed?

• Absence– 44% never get reports on occurrence

– 72% never get reports on financial impact

• Presenteeism– 83% never get reports on occurrence

– 84% never get reports on financial impact

Healthcare Management Objectives for Next Two Years

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

Controlcosts

ManageHC costs

Improvehealth

Shift costs QuantifyHC impact

Improvebenefits

Expandbenefits

Rati

ng

Quantifying Health-Related Lost Productivity

29%

22%19%

13%16%

0%

5%

10%

15%

20%

25%

30%

Opportunitycost

Time lost fromwork

Staffing cost Wagereplacement

cost

All othermeasures

Translating to the Business79%

51%45%

13%

0%

20%

40%

60%

80%

100%

% of humancapital cost

Total health-related costs

% of revenue Share priceimpact

How CFOs Would Use Productivity Information

75% 75% 73% 70%65%

0%

20%

40%

60%

80%

Consideragainst health

plan costs

ReduceAbsence

Manage allhealth costs

Examinebusiness

impact ofhealth plans

Reducepresenteeism

Then, the SolutionHealth Status

Absence Presenteeism

Healthcare Costs

Lost Productivity

Business Impacts

The Real Costs of Health

Perceived Costs/Program

$0

$1,000

$2,000

$3,000

$4,000

Ave. Cost

/FTE

EE GH WC STD LTD Incid.Absn.

FMLA

2002 Benefit Data

$3,090

$172

$762

$6

* Mid-point of lost productivity estimate used

$435 $387

What is the real cost of people being away from work?

The Opportunity Cost of Absence

Responding to Work Absence

Employer Strategy

Lost Revenue

Staffing Costs

Do Nothing XTemp Help/ Overtime X XAdditional Staff X

The Range of Lost Productivity Costs

$2,929

$19,433

$0

$5,000

$10,000

$15,000

$20,000

Avera

ge/FTE

Excess Staffing Lost RevenuePotential

2002 Benefit Data

Full Costs/Program

$0

$1,000

$2,000

$3,000

$4,000

Ave. Cost

/FTE

EE GH WC STD LTD Incid.Absn.

FMLA

Payments Lost productivity

2002 Benefit Data

$3,090

$675

$1,890

$178

$2,621

$418

Top 15 Health Conditions

11%

12%

12%

14%

14%

15%

17%

17%

21%

24%

27%

28%

29%

31%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Bronchitis

Urinary

Headache

Irritable bowel

Hypertension

Anxiety

GERD

Back/neck

Arthritis

High cholesterol

Obesity

Depression

Allergy

Fatigue

Sleep disorder

% w/ condition in workforce

Top 15 Causes of Lost Work Time

0

50

100

150

200

250

300

350

400

450

500L

ost w

orkd

ays/

100

FTE

s

Absence Presenteeism

How are Employers How are Employers Responding?Responding?

Employers Abandoning Silos

0%

20%

40%

60%

80%

Siloed Programs Linked Programs

Both integrated &coordinated programs

Coordinated programsonly

Integrated programs only

Siloed programs21%

44%

17%

18%

IBI 2004 Employer Survey

3%

6%

6%

7%

7%

19%

26%

29%

0% 15% 30%

Other

Change insurers/providers

Absorb cost increases

Change health plan type

Improve medical-care delivery

Promote workforce health

Shift costs to EEs

More EE healthcare responsibility

“Most Important” Strategies Today

IBI 2004 Employer Survey

Be Careful of This

17%

31%35%

21%

31%

40%

26%

42%48%

0%

10%

20%

30%

40%

50%

% d

elay

ing

heal

thca

re d

ue to

co

st

Total With healthproblems

<$50K annualincome

Comprehensive HDHP CDHP

Managing the Economic Burden of Ill Health

2%

61%

23%15%

0%

25%

50%

75%

Minimize MedicalCosts Year-to-Year

Manage WorkforceHealth

Manage in Concertwith Absence,Disability andProductivity

Other

IBI 2004 Employer Survey

5%

6%

18%

24%

47%

5%

8%

19%

36%

32%

0% 20% 40% 60% 80% 100%

Absorb costs

Limit coverage

Cost shift to EEs

Manage diseaseas continuum

Incent EE health

Best ApproachSecond Best

Approaches to Offering Health Benefits Longer Term

IBI 2004 Employer Survey

The Health-Related Data Solution

49%

37%

14%

0%

20%

40%

60%

Group health data only Link GH data to absence,disability and productivity

Integrated health,absence/disability,

productivity/financialoutcomes

IBI 2004 Employer Survey

For More InformationFor More Information

www.ibiweb.orgtparry@ibiweb.org