Producer Connection

Fall 2010

How A Disability Carrier Can Help You With Health Care Reform

by Carol Harnett, Chair, Health and Performance Innovation Institute

The changes associated with health care reform began to take effect this month, but the major impact won’t hit until 2014. Consultants can take advantage of this interval by positioning themselves as the experts who can coordinate benefit packages and guide employers through the maze.

"There really is precious little to do immediately, but producers are caught in a maelstrom of information requests so that benefit managers can portray knowledge," says Skip Simonds, the western region absence and disability practice leader for Towers Watson."

Rob Queen, managing consultant and human capital practice leader for Willis in Orange County, California agrees. "Health care reform is the 800 pound gorilla in the room, but employers shouldn’t be so distracted that they lose focus on their overall strategic benefits plan."

Most experts believe health care reform is here to stay despite lawsuits by 21 states regarding the Patient Protection and Affordable Care Act’s constitutionality. According to a July 27th article in The New York Times, these same states, however, are still complying with the act’s requirements while waiting for their lawsuits to be resolved by the courts.¹

Jack Bastable, national practice leader for employee health and productivity at CBIZ Benefits & Insurance Services, Inc., believes "employers need to zero in on the act’s impact on employee performance and productivity. Reform is focusing on prevention and incenting employees based on outcomes," Bastable says. "That’s a good thing."

"All national account size customers want to get to health and productivity management…but a concise definition of H&P is missing," according to Simonds. "Right now, H equals medical and disease management and P equals disability management and absenteeism."

"Employers have relied on the H part of H&P to get to P," Simonds continues. "By 2014, H is going to have a much smaller footprint on the P side of the equation."

So, if getting employers to keep their eyes on their overall strategic benefits plans is important, how can a disability carrier help producers shift focus back to the big picture?

“It is very important for disability carriers to make information readily available to producers," Queen advises. “We need to paint a much broader picture of human capital risks than we did in the 90’s. Information from medical claims is important, but we also need to loop in disability and workers’ compensation claims, presenteeism and all causes of absenteeism."

Simonds is of the same mind. “Many organizations don’t review disability costs, drivers and trends even annually. They’re missing significant cost savings opportunities in multiple areas."

“Disability carriers have to step up and monitor what’s going on. They need to explain plan performance by looking for developing trends on a six to 12 month rolling calendar basis and develop two to three cogent options for how to address what they see along with any pricing impacts," Simonds believes.

Beyond information sharing and trend analyses, what else can a disability carrier do to help producers and employers with health care reform?

Bastable places a great deal of his focus on prevention programs. He believes producers need to leverage Section 2705 of the act and help employers design incentives, which allow all employees, including employees with disabilities and employees who are out of work on short- and long-term disability claims, to participate in health improvement and health maintenance programs.

“Disability carriers can help employees who go out of work identify accommodations that will allow them to continue to receive incentives for prevention program participation," says Bastable.

Disability carriers can also assist with an as-yet unexplored area for prevention program incentives. Once an employee is receiving disability benefits, the claim examiner or case manager can encourage the employee to begin participation in their employer’s prevention programs. “If the prevention program is set up correctly, there is no reason why a disability claimant couldn’t begin to receive incentives, even if they are out of work," Bastable responded.

Are there other ways disability carriers can help producers engage employers in the P side of the H&P equation? Simonds has a list of what employers “should consider doing before it’s too late," including:

• Convert traditional vacation and sick programs to paid time off programs
• Outsource family medical leave administration
• Reduce 100 percent replacement of income to no more than six to eight weeks with something less than 75 percent thereafter
• Change the definition and elimination period for disability in the life insurance waiver of premium to match long-term disability

Disability carriers can play a role in many of these strategies by assisting with the plan design changes and/or managing the outsourced absence tracking. Is there anything else producers should consider other than health care reform during the next several years?

“Do not lose focus on disability plans and what they provide," Queen says. “Health insurance plans are not going to replace income. Disability insurance is a critical benefit to provide to employees for their overall financial security and that of their family. Most expenses don’t stop just because you are disabled."

While health care costs are the number one driver in discussions that revolve around boardrooms, Queen can’t emphasize enough that producers need to help employers with business plans for their overall benefits strategy, including retirement benefits and defined contribution plans.

“Most importantly, we can’t let health care reform allow us to minimize the impact of the economy on our clients," Queen underscores. “Most employers are trying to stay afloat and keep their workers employed."

Queen said recently a client was able to maintain their employee benefits program when the partners elected to receive no compensation for two months. “They wanted to take a long-term view and keep the employees happy so when the economy improved, they would stay with them."

1 Kevin Sack, “Texas Battles Health Law Even as It Follows It," The New York Times, July 27, 2010

Carol Harnett is a highly respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett.