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Consensus growing among employers that better employee health equals better business


United States
New York, 24 October 2007

 

Like ethics and diversity – mission statement concepts that have been elevated in recent years from “nice to have” to “must have” – workforce health is being recognized by a growing number of employers as having a measurable impact on business performance. In a new survey of more than 600 for-profit and nonprofit US employers released today by Mercer’s health and benefits business and insurance broker Marsh, nearly two-fifths (39 percent) of respondents “strongly agreed” that improving employee health is a core business value, and another 41 percent “agreed.”

 

“It comes down to maintaining productivity as well as managing health care cost,” said Sue Willette, head of Mercer’s health and productivity management group. “It’s clear that if your employees are not at work – or are at work but not 100% healthy – productivity suffers.”

 

The Mercer/Marsh survey found that for a sizable minority of employers, absences are up. Nearly one-fourth of the employers surveyed (23 percent) said that the incidence of short-term disability (STD) claims rose between 2005 and 2006, and 15 percent saw an increase in the average length of the disability period. Just 11 percent of employers reported a decrease in STD incidence. For most others (66 percent), absence rates stayed about the same, despite efforts to manage them more effectively.

 

Conditions cited most frequently by respondents as being in the top three in terms of cost are cancer and cardiovascular disease (both cited by 54 percent of employers), other musculoskeletal conditions (53 percent) and low back pain (42 percent). A few specific conditions appear to be driving increases in utilization of disability benefits. Of eight common disabling conditions, survey respondents reported seeing more and/or more costly claims for cancer (47 percent) and stress/depression (44 percent), other musculoskeletal (39%), cardiovascular (38%) and low back pain (28%).

 

According to Ms. Willette, substantial financial opportunities can be gained through a healthier workforce. Health benefit cost is equivalent to about 16 percent of payroll, while the cost of absence programs – incidental absence, STD, long-term disability (LTD) and workers’ compensation – together equals 4 percent of payroll. On top of these direct costs are the hidden cost of absence – the cost of replacement labor and loss of productivity, estimated to equal about 3 percent of annual payroll. In some industries, the impact of absences on productivity can be much greater. In the health care industry, for example, workflow problems caused by absent or underperforming staff can lead to issues with quality of care and greater liability exposure.

 

“Altogether, employers are looking at cost of nearly a quarter of payroll for health and absence programs and health-related productivity losses. These costs are related, but until recently employers have managed them separately,” said Ms. Willette.

 

Addressing absence with health management tools
Most large employers are committed to health management as a way to address spiraling health benefit costs. The Mercer/Marsh survey explored the extent to which employers are finding ways to integrate health management into their absence programs. About one-fifth of respondents (17 percent) have integrated their health care and disability programs.

 

Among employers with 10,000 or more employees, who tend to set rather than follow benefit management trends, 6 percent require employees on STD to participate in any relevant disease or health modification programs they offer, and another 4 percent offer an incentive to do so. An additional 14 percent of these employers are planning to implement one of these approaches within the next year; 41 percent are considering it.

 

“Employees on short-term disability are typically generating big health care claims, so these are the people you most want to utilize your health and disease management programs,” said Ms. Willette.


With the increase in absences related to stress, depression and other behavioral health disorders, employers have also found it useful to better integrate the Employee Assistance Program (EAP) with their disability and health management programs. Employees on STD are often at risk for stress or depression: 49 percent of respondents now routinely refer employees with an occupational or nonoccupational medical disability to the EAP, and 44 percent routinely refer employees on leave under the federal Family & Medical Leave Act to the EAP.

 

Integrating occupation and nonoccupational programs can also strengthen an employer’s overall health management program by cross-applying evidence-based strategies for controlling costs. For example, many employers (79 percent) with formal return-to-work program for workers' compensation also use it to cover their nonoccupational STD and LTD programs.

 

While the concept of integrating health, health management and absence programs is still the province of larger, more proactive employers, this may be changing. When asked about the primary objectives of their health management programs, nearly all respondents cite controlling health care costs. But more than half (54 percent) also say that improving overall employee productivity is an objective. To reach that objective, employers are finding that they need to bring absence into the equation.

 

About the survey
The Mercer/Marsh Survey on Health, Productivity and Absence Management Programs 2007 was conducted earlier this year by Mercer and Marsh, both operating units of Marsh & McLennan Companies (MMC), a global professional services firm. The 611 survey respondents range in size from those with 100 employees to those with more than 10,000 employees. The average number of employees covered per respondent is 9,694; overall, nearly 6 million employees are represented.

 

About Mercer
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 17,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.

 

About Marsh
Marsh, the world's leading insurance broker and risk advisor, has 26,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with more than 54,000 employees and approximately $11 billion of annual revenues. MMC also is the parent company of Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. MMC’s stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC’s Web site is www.mmc.com. Marsh’s Web site is www.marsh.com.