5 ways wellness reduces costs – Part 3: workers’ comp costs

 

Friday, November 7th, 2014

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I am doing a five-part series on how to measure the impact of your wellness program on five key employer costs. I started with health plan costs, and last week covered sick leave costs. Today’s post is on measuring the impact of your wellness program on workers’ comp costs.

All employees are covered by some form of workers’ compensation. This state-specific, legally required coverage has been around for more than 100 years and protects all of us when we experience an illness or injury related to our work. It is “no-fault” in nature so that employees and employers don’t have to prove who was at fault in order to get medical expenses covered and a paycheck while away from work. Workers’ comp coverage is usually provided by state government through very large pools made up of many employers. Some types of businesses have very high costs associated with workers’ comp while others have minimal cos

Researchers at the Health Management Research Center at University of Michigan found that employees with lots of health risks use a great deal more workers’ compensation dollars than those with minimal health risks. One landmark study showed that high risk individuals with multiple health risks used almost 20-times the average amount of workers’ comp dollars per year than someone without those risk factors

Executives can be skeptical about the tie between workers’ comp and wellness, thinking that workers’ comp claims is basically what happened ‘that time Joe fell into the milling machine’. What most executives (and many wellness professionals!) don’t realize is that about 50% of workers’ comp claims are strains, sprains and back injuries. When your wellness program gets more employees exercising (and taking care of their back), they get injured less, and bounce back faster from injuries. This is just one intuitive story behind the empirical findings.

Generally, wellness programs that are effective in helping employees reduce their health risks will lower workers’ compensation costs. If your company pays into these state pools in a way that is influenced by your actual claims expense then there is measurable employer cost savings attributable to your wellness program.

In simple terms, and in the same way we did with sick leave, we need to compare the trends in per-employee workers’ compensation costs incurred by employees who participate in wellness programs to those of employees on the sidelines. We also want to look at the business-wide use of workers’ comp over time. By making these comparisons, we can infer the effect our wellness programs is having on workers’ compensation. Here again, gathering the data to make this comparison can be tricky depending on how your organization is handling workers’ compensation costs—a factor that is strongly related to how aggressive these costs are currently being managed.

If your organization is not doing much to manage or minimize these costs (and the illness and injuries that employees experience!) then there may be some real opportunity for savings. If your workers’ comp experience is already tightly controlled and managed then don’t expect a lot of savings associated with your wellness program.

Are you big enough?

You probably want to begin by determining if you have enough employees and enough time to conduct any kind of meaningful analysis. You probably need at least 500+ employees in each group (wellness participants and non-wellness participants) and a year of data to start with. That is necessary for you to derive a rough baseline regarding your workers’ comp experience.

You usually want to look at two issues. The first is the frequency of workers’ compensation (WC) claims. This is simply a count of the WC claims filed during a set period of time, such as a year. Typically this might be 2-8 claims filed per 100 FTE employees per year. I want to go back in time 2-5 years before introducing the wellness program and then plot these numbers out as a trend over the years. I also want to monitor in the coming years the rate of WC claims filed by the work force using these same frequency measures. Ideally I would like to see the frequency trend diminish over time as the wellness program helps employees be healthier (and perhaps more safety conscious!).

The second thing I want to do is examine the pattern of average cost of each closed claim (remove claims that may have additional costs). You can appreciate if I only experience 2 or 3 WC claims per year then the average cost of the claims is going to vary tremendously and I won’t be able to use the data to demonstrate the economic value of the wellness program. However, if I am big enough to have 20 -100 WC cases each year then I can get some meaningful data out of changes in the average case cost. If the data shows that the frequency of WC cases is down by 15% and the average case cost is down by 23% after the wellness program has been introduced and there was no change in our safety activities or WC management process then I would feel reasonably comfortable suggesting that the wellness program had produced some WC savings that should be included in the economic return analysis. I can monetize that return by multiplying the cases avoided times the reduced average case cost.

As with the sick leave costs example, if you can measure any other costs such as hiring a temporary worker to replace the injured employee then you have some additional economic savings to include if that is reduced as the wellness program is introduced.

This approach doesn’t necessarily address the pain, discomfort, disability, work and family disruption, quality of life effects of fewer injured or ill employees due to healthier lifestyles brought about by the wellness program, but you can certainly mention i

Remember: always make your methods for estimating savings transparent so that critics can follow your methodology. If they poke holes, they can always be asked “Well how would you suggest we do it?”

Check out our wellness economics series courses on measuring the impact of wellness on workers’ compensation to go deeper on this topic.

 

Reference: Chapmaninstitute.com

 

 

5 ways wellness reduces costs – Part 2: sick-leave costs

Monday, November 3rd, 2014

 

American workers are absent from work due to sickness an average of 8 days a year. Wellness programs have been documented to reduce that amount by 25% or an average of 2 days a year. That reduction in absenteeism represents economic return that is potentially attributable to your wellness program, but it takes some effort to capture the data needed to make that case.

In simple terms, we just need to compare the trends in per-employee sick leave use of employees who participate in wellness programs to the employees on the sidelines. By making this comparison, we can infer the effect our wellness programs have on sick days. Of course, gathering the data to make this comparison can be tricky depending on the structure of your sick leave benefits—a factor that drives what data your organization already collects.

 

‘Dedicated’ Sick Leave

Dedicated sick leave refers to arrangements where there is a formal policy about the number of sick leave days earned by each employee per year. It’s easier to get data on dedicated sick leave because employers have to keep track of it. Some employers provide 6, 8 or 10 days of dedicated sick leave per year. This makes it easy to get the data on sick leave for participants and non-participants in your program.

 

Combined Leave

Another common type of sick leave is called “combined” leave. If your organization uses “combined leave” (also called “Paid Time Off”), all the distinctions between types of leave including administrative, sick, vacation, jury duty, family emergency, etc. are eliminated and each employee gets a lump sum of annual leave. Sick leave is converted into annual leave and is expected to be taken with adequate advance notice. When employees are sick the leave is arranged usually within 24 or 48 hours of its use, giving us a proxy for the amount of sick leave used by the population. If you can get data on each employee’s unscheduled leave within a year, you can do the comparison between wellness program participants and non-participants and measure the reduction in sick leave.

 

Using an HRA to measure sick leave trends

In many organizations, there are holes in the data a wellness program manager can get their hands on to gauge their impact on sick leave. As a result many wellness program managers use a question in their annual HRA that asks about sick leave usage. A question like: ”How many days in the past 12 months were you absent from work due to a personal illness or health problem?” can be used to track sick leave over time. If you ask a question like this at the beginning of your program, the result can be used as a baseline, as it gathers information about the 12 months prior to the launch of the program.

If lots of people complete the HRA then it can become your baseline sick leave measure for the entire population. The same question can also be used as a reference point for the individual participant in your wellness program in what is called a “cohort” analysis. This is when you compare the participants’ own sick leave usage in year one of the program to their usage in year two, etc. (Also called “participant to participant” comparison). In both these methods you are expecting to find a reduction in sick leave usage as participation in the program increases.

 

Monetizing the benefits of reducing sick leave

Using one of these data collection approaches, you can compare the trends in sick leave use in populations who have participated in your wellness program to those who haven’t. Once you have the raw number of days of sick leave reduction attributed to your program, you have to come up with the right cost-basis to use for each day to translate days into dollars of savings.

In many cases, all you need to do is take the average salary costs and apply them to the number of days saved to quantify the benefit to the organization. You can assume that each lost day of employee work is worth at least as much money as the organization was willing to pay them for it!

There are two ways to calculate the wage/salary savings. The first uses an estimate of the average labor cost per day of work. To use this method you need: the total wage/salary cost for all employees for the year, the average number of Full Time Equivalents (FTEs) employed during the same year and the average number of work days expected to be worked per year. It is typical in this method to arrive at an average wage/salary amount of $400 to $1,200 per day per FTE. This number then gets multiplied by the number of sick leave days reduced by the wellness program to derive a total amount of economic return.

The second method for uses the actual labor cost per work day of the program participant. This method is similar to the average method, but uses the actual labor cost of each day of work of the specific program participants that have experienced lower sick leave usage. Of course, this requires that you identify the labor costs of the specific individuals who saw a reduction in their sick leave use.

However, this simple approach breaks down in situations where employees can simply use the days they aren’t sick to extend their planned vacations! This is a great benefit for the employees who are now healthier, but it doesn’t result in bottom-line savings to the employer who still has to pay for those days off…or does it? In organizations with combined leave arrangements, there is often the false assumption that wellness programs don’t drive economic returns from a reduction in sick leave. The reality is there are additional savings we can calculate—costs from unscheduled absences.

Unscheduled leave is a nuisance to managers particularly in manufacturing, school and retail settings. It may lead to line delays, service level reduction and the use of lower-skilled substitute labor. If it is possible to estimate the economic value of the elimination of an “unscheduled leave” event then that value can be used to monetize the reduction in sick leave absenteeism. This can be achieved by estimating the average labor cost per work day and then taking a fraction of that cost, for example 10%, 25%,or 33% of that cost. The unscheduled leave event may lead to bringing in a substitute teacher for a school district, hiring a temporary for a call center, reducing a manufacturing goal or losing a fraction of sales for a retail outlet. Just make sure you make the assumptions explicit so everyone knows how you are coming up with your numbers.

Remember: always make your methods for estimating savings transparent so if critics have concerns they can be challenged to come up with a better approach.

Check out our wellness economics series course on measuring the impact of wellness on sick leave absenteeism to go deeper on this topic.

 

Reference: Chapmaninstitute.com

 

 

5 ways wellness reduces costs – Part 1: health plan costs

Friday, October 24th, 2011

 

Last week’s post made the case for broadening the economic argument for your wellness program. As I noted before, the five economic factors that respond to wellness programming are health plan cost, sick leave absenteeism cost, workers’ compensation costs, disability management costs and presenteeism costs. I will take the next five posts to dig into each of these areas to give you a path to fleshing out the economic case for wellness.

 

Measuring wellness’ effect on health plan costs

 

Now let’s dig into health plan cost savings. The average U.S. employee costs their employer about $12,000 per year in health plan cost—lots of room for meaningful savings! There are many ways to do this analysis, but the one I advocate for most organizations is a basic claims analysis.

In simple terms, this kind of analysis just compares people who participated in wellness programming to people who didn’t. By comparing how fast health plan costs are growing in one group with growth rates in the other group, we can infer that any difference between the two is attributable to participation in wellness programs.

To do this analysis, you need:

• At least a 1,000 lives to make sure your population is “actuarially credible” or large enough to reach statistical confidence.
• Claims data so you can look at the yearly cost experience of both program participants and non-participants over time.
• Analytic resources to compute the average claims cost per employee per year–a consistent measure of health plan use for both participants and non-participants.
• Outlier removal so that extremely large claims don’t mess up the analysis unfairly.
• Consistency in the health plan design and claims payment process, so the data is comparable.
• Consistency part two–Use of consistent time periods and definitions (So that your analysis is valid and defensible.)

The major challenge for wellness program managers is usually getting access to health plan claims data in order to sift the data to isolate how much each group’s average claims costs were in each year. You also have to be careful about any significant change in the cohort groups from year to year (participants and non-participants), such as big changes or shifts in age, gender distribution or geographic pricing patterns often caused by people dropping out of your sample cohort groups mid-year.

When computing the economic return from health plan claims cost effects I usually recommend that you determine the growth rate of per employee health plan costs from year to year for non-participants and participants and then compare the non-participants’ growth rate to participants’ growth rate. This gives you a low cost yet valid way of identifying the savings associated with your wellness program. The non-participant’s growth rate functions as a kind of ‘control’ group to compare with the same metric for your participant group. Any difference can be reasonably explained by your intentional programs whose very purpose is to shift the very behaviors that would cause individuals to consume less health care.

If you don’t have access to health plan claims data you can use changes in the prevalence of specific health risks in the participant population over time to estimate the economic return from your wellness program. For example, if 100 individuals completing an HRA last year indicate that they are smokers and then this year only 50 of that same group indicate they are still smoking, 50 individuals have stopped smoking presumably due to the effects of the wellness program. If we then take those 50 people that stopped smoking and multiply them by the average annual excess cost associated with smokers (depends on the study you look at, but it’s roughly $1,500 per year) then the economic return associated with the reduction in smokers from the effects of the wellness program amounts to (50 x $1,500 = $75,000) $75,000.

These two methods for determining the economic return of your wellness program are covered in-depth in the WellCert Wellness Certification Program. Measuring the impact is great, but future posts will cover how to maximize the employee health plan cost savings from your wellness program actually drives!

Next week we will dig into how to measure sick leave absenteeism savings.

 

Reference: Chapmaninstitute.com

 

Three engagement mistakes you're probably making

Employee engagement programs really can be a "silver bullet" for struggling organisations, but many employers continue to use engagement surveys that ask the wrong questions, effectively robbing themselves of valuable insight, an expert says.

Speaking at a breakfast function in Sydney earlier this month, Right Management senior vice president of talent management, Scott Ahlstrand, said that whether a CEO is looking for more productivity or more profitability, greater customer satisfaction or a safer work place, increasing engagement will help.

Many organisations, however, find their engagement programs produce encouraging results in wave one or two of their strategy, but then plateau, he says.

He says there are a number of common mistakes to avoid, including three associated with a traditional survey approach.

Do the Right Thing

When life hands you a difficult choice, try this time-tested process for discovering your dharma—the right action for this situation.

Personal Dharma

One June morning in 2003, I took my seat on an airplane next to a man with a chiseled face and beautifully pressed clothes. As we talked, he told me about a dilemma he faced: People in the Democratic Party wanted him to run for president and he wasn't sure it was the right thing to do. He had already had a military career and felt that he was done with being a commander. He liked private life. Still, some part of him felt that, given the way things were going in the country, maybe it was his duty to try to lead. The problem, he told me, is that when you put yourself into the political arena, your opponents will do whatever they can to try to destroy you. He wasn't sure he wanted to subject himself to such intense personal attacks.

When the flight was over and he gave me his card, I discovered that I'd been sitting next to General Wesley Clark. I was struck by how much his life-path crisis mirrored the one immortalized in the Bhagavad Gita, when Arjuna is faced with having to fight his own kinsmen in a world war. It was in response to a dilemma much like Clark's that Lord Krishna gave Arjuna a teaching that has literally rung down through the centuries: "Better your own dharma—your personal duty—even if unsuccessful, than the dharma of another done perfectly."

Three ways yoga can improve your career

We've all heard about the benefits of yoga for reducing stress, but can it directly benefit your career?

The founder and principal teacher of Adore Yoga, Nikola Ellis, says yoga has the potential to improve your confidence and performance in the workplace – and not just because it makes you feel less stressed.

Traditional yoga and yoga therapy uses different practices to address psychological issues, as well as the physiological, changing the way our bodies move and how we perform in a high-pressure work environment.

Be more powerful

According to Ellis, what you do with your body can influence your mindset and this directly affects your behaviour and outcomes in the workplace.

"For women, the benefits of performing strong, powerful poses has been amply demonstrated by Harvard psychologist Amy Cuddy, who noticed that the reticent body language of female MBA students corresponded to their lower levels of engagement in the 'hands on' components of the program, when compared to their male counterparts," Ellis explains.

"She ran a study that showed that 'power positions', similar to yoga's Warrior poses, can change our brain chemistry and behaviour in a way that creates stronger engagement, confidence and performance."

This, says Ellis, is what yoga has been doing for centuries. Working with students in private sessions up to groups of no larger than six, Ellis helps people prepare for a challenging day ahead or that important pitch or meeting by using physical poses and breathing practices that are designed to create stability, strength and power, allowing people to stand their ground in the office and keep their minds calm.

"This helps to steer them towards the outcomes they want, rather than being reactive to a pressured environment," she says.

"In yoga we move people's body in a way that changes how they feel and then that allows them to move forward with confidence."

Be better at decision-making

Yoga ensures that our decision-making is based in reality and helps us to be more mindful, according to Ellis.

"Our decisions are often informed by past experiences or projections that rely on a flawed understanding of the situation," she says. "Yoga teaches you to be mindful of every moment, taking your perceptions off 'auto-pilot' so that your decisions are based on a real-world understanding, rather than assumptions or reactive triggers."

Yoga teaches us to pay attention to how our thoughts are affecting our body and our breath. Ellis says it's through this process of continually watching ourselves and picking up on our own patterns of behaviour that yoga can teach us to become present and not to react to someone in a work environment by projecting past experiences into the future.

Become a better leader

The practice of yoga requires us to work on our 'edge', which Ellis describes as "the place where we fully challenge and extend ourselves, yet remain calm and comfortable".

Constantly working along this edge, says Ellis, yoga teaches us how to continually challenge ourselves while staying controlled.

"That is how we achieve and sustain peak performance. When we work with yoga, the idea is that it doesn't matter what poses you are doing, you take yourself to a point where it's challenging and sometimes to a place you didn't think you could go," she says.

"In a work environment we need decision-makers who are not afraid and who are able to challenge themselves in new ways and push themselves right up to that edge, but know when to pull themselves back before the challenge turns into unmitigated risk."

Yoga teaches self-discipline and self-control which are key to good leadership.

"A leader is like a parent," says Ellis. "You cannot have low self-awareness to inspire confidence, trust and inspiration and that's exactly what yoga teaches."

Ref: By Briana Everett / Jun 18, 2013 9:21AM / Print / (2)

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Why Core Matters - Power Source

Surely there are no more-evocative words in the practice of yoga than these two: core strength. They point you to the vital force that holds you steady in your asana, keeps you upright in your standing poses, lends vitality in backbends, and enables you to maintain balance. Without a strong physical center, every pose you do is in danger of falling apart from the inside out. Core strength is what lets you keep it together.

However, that's only half the story. "Core strength" also refers to the spiritual, ethical, and emotional essence of who you truly are. In the same way that your physical muscles hold you upright during practice, so, too, does this more subtle essence support your life. This kind of core strength gives you the power you need to act on what is in line with your innermost values—it can put you in touch with your dharma, the very purpose of your life. The whole point of practicing yoga is to become aware of what and where that core is and to be able to act from that center of your being. When you begin to engage the core with a multidimensional understanding, you'll find that you can strengthen your back, abs, and thighs, and also your highest Self (yes, with a capital S). It takes effort and awareness, but yoga practice provides the opportunity to evolve. The core is where we start.

Basic feedback skills make performance management "light and easy"

Managers need the skills to have casual conversations - as opposed to confrontations - about minor performance and behaviour problems, says leadership consultant Steve Fearns.

Too often, what should be a simple conversation between a manager and an employee blows up into a confrontation because "we go in with all guns blazing", he told HR Daily.

The right type of conversation, however, ensures employees are aware of what the issue is, and allows them to take responsibility for addressing it. It is much more effective than a confrontation and direction about what is the right thing to do, he says.

Fearns, who outlines processes for providing feedback, counselling and discipline in an HRD Plus Gold webcast, says leaders should be managing performance on a daily basis, and considering - as they would with any other resource - how their team members are performing, and what they can do to increase or maintain that performance. 

Who Qualifies to be Your Corporate Wellness Champion?

There is a significant misconception in many organizations who aim to birth an employee wellness strategy. This misconception revolves around the question of who qualifies to be the Wellness Champion for the organization. The prevailing opinion will often be that the only people worthy of leading the wellness strategies are either nutritionists, dieticians, nurses or fitness gurus. While having an understanding of nutrition and fitness certainly is helpful to whoever is leading the wellness program, it is not the primary qualification. I likened it to the latter section of a job description where the recruiter will list qualifications that are “a plus” but not necessary.

Effective Wellness Champions are first business oriented. They are equipped with a well-rounded set of business acumen skills. Holly Firestine, Manager for Wellness and Worklife at Children’s Healthcare of Atlanta, affirms this. She comments, “A business approach to wellness, where there is a true strategic approach to programming and measurement that aligns with corporate strategy, is critical to the success of anyone seeking to lead Wellness in the workplace.” She continues by adding, “The Wellness Leader must have the ability to sustain the culture through stakeholder engagement throughout all leadership and staff levels in order to establish credibility and authenticity with all employees.”

Wellness programs now a business imperative

Defining the return on investments in workplace wellness is one of the biggest challenges for employers with "the best intentions", but data is critical to continuing support for programs, says Aon Hewitt principal Danni Hocking.

"Gone are the days when workplace wellness programs were a nice thing to have," she has told a webcast for HRD Plus subscribers.

"It's now a business imperative. We have to be seen to invest in the health of our workforce."

One of the problems associated with garnering support for workplace wellness is the "siloed" approach most organisations take to people-risk management, and confusion over "who is responsible" for wellness, says Hocking, who leads Aon Hewitt's people risk solutions practice.

But the critical reasons for investing in health cross departmental boundaries:

• Compliance - the WHS Act, which applies in all jurisdictions except for WA and Victoria, "clearly defines that psychological risk must be mitigated, and a workplace should be providing a work environment free from risk", Hocking points out;

• Human resources - Research demonstrates that "fit and healthy workers are far more profitable than unhealthy ones. So for an HR director, having fit and healthy workers is paramount";

• Profit - "The CFO is driven by profit. He or she is certainly concerned with the impact that people risk is having on the business";

• Remuneration and benefits - Investing in wellness assists with attraction and an employer's value proposition, for example.