This article first appeared in the January/February 2013 issues of Building Profits, the official magazine of the Construction Financial Management Association.
Establishing a Wellness Culture to Manage Workers’ Compensation Medical Costs
by Michael Mitchell, CPA, CPCU, Vice Chairman, Kimberly E. Sharkey, CPCU, AIC, Vice President
Everyone is talking about healthcare costs (for good reason), and construction financial managers should be no exception. In fact, with healthcare costs continuing to rise more quickly than inflation, there’s been a marked impact on workers’ compensation costs. It once was the case that 60 percent of a workers’ compensation claim was tied to lost wages and 40 percent was tied to medical expenses. Then in 2008, medical costs outweighed indemnity costs for the first time in the history of workers’ compensation. Today, approximately 60 percent of a claim accounts for medical expenses, thanks to steadily increasing healthcare costs.
Further exacerbating the dichotomy between lost wages and medical expenses in a workers’ compensation claim are the diseases plaguing the workforce. According to the Centers for Disease Control and Prevention, more than one-third of U.S. adults (35.7%) are obese1 and medical costs for people who are obese are $1,429 higher than those of normal weight.2 In addition, obesity-related conditions like coronary heart disease afflict about 9.4 percent of all white men, 7.8 percent of black men and 5.3 percent of Mexican American men.3 What’s most concerning is that approximately 40 percent of adults are living with hypertension and other heart disease risk factors but don’t know it.4
The diseases afflicting your firm’s employees have a negative impact that reaches far beyond your group medical costs; your employees’ health plays a significant role in helping to control medical costs in workers’ compensation claims. Generally, it would be up to the employee to prove that a heart attack while on the job was related to or caused – at least in part – by the work at hand. However, in the construction industry, precipitating work factors like physical exertion often aggravate preexisting conditions such as heart disease. While preexisting conditions would generally not be compensable, they would also not necessarily be a bar to compensability. If it can be shown that the work aggravated a preexisting condition, compensability may be granted.
Establishing a safety culture has long-been the construction industry’s unified response to reducing workers’ compensation claims. And while that is still a key component of accident and injury prevention, the need to develop a culture of wellness has also become essential to better managing workers’ compensation insurance costs. As medical costs continue to rise and the country’s state of health declines, CFMs must take control. This includes helping employees commit to a life of improved wellness – a strategy that will benefit both your group medical and workers’ compensation costs. The strategy to integrate group medical, wellness and workers’ compensation is on the horizon, and CFMs must understand how a holistic approach can benefit employees and the bottom line.
New Era, New Challenge
As a result of increasing healthcare costs, new workers’ compensation challenges have arisen for the construction industry. In order to reduce workers’ compensation costs, CFMs historically adhere to a three-pronged approach: 1.) hire talented, safety-minded employees; 2.) work safer; and 3.) manage the claims process well. But in a new era where medical costs comprise 60 percent of every claim, “managing the claims process well,” means new challenges. In order to most effectively manage the claims process, CFMs must now empower and motivate employees to know the unknown. Identifying preexisting health conditions and then motivating employees to manage those conditions is a new challenge for CFMs to overcome. The risk of not identifying preexisting conditions is far too great; it has become a “slippery floor” and it will impact both workers’ compensation and group medical if it goes unaddressed.
New Strategy, New Culture
These new challenges demand a new strategy – one of integration. A holistic strategy that integrates group medical, wellness and workers’ compensation is still novel, but the time is now to adopt this strategy – it will establish a culture of wellness and benefit your employees’ health and productivity as well as your workers’ compensation and group medical costs. Here’s how in seven steps:
Step 1: Know the Unknown
Mix obesity, high blood pressure, high cholesterol and high blood sugar and you’ve got the perfect storm for heart attack and diabetes. Known as metabolic syndrome, this term refers to a group of risk factors linked to obesity – risk factors that increase one’s chance of having heart disease and other problems like diabetes and stroke. The American Heart Association’s 2004 update to the U.S. National Cholesterol Education Program Adult Treatment Panel III (2001) defines Metabolic Syndrome as having at least three of the following5:
- Elevated waist circumference:
- Men — greater than 40 inches
- Women — greater than 35 inches
- Elevated triglycerides: Equal to or greater than 150 mg/dL
- Reduced HDL (good) cholesterol:
- Men — Less than 40 mg/dL
- Women — Less than 50 mg/dL
- Elevated blood pressure: Equal to or greater than 130/85 mm Hg or use of medication for hypertension
- Elevated fasting glucose: Equal to or greater than 100 mg/dL or use of medication for hyperglycemia
The American Heart Association (AHA) suggests that more than 47 million Americans have metabolic syndrome and has estimated that metabolic syndrome soon will become the primary risk factor for cardiovascular disease, ahead of cigarette smoking.6 Metabolic syndrome prevalence increases with age6, and that is troublesome for a number of reasons: 1.) as your employees become more experienced and take on leadership roles, they would tend to have more of these risk factors; 2.) employees with the syndrome are more likely to miss work; and 3.) these employees cost your medical plan more for a variety of reasons.
To protect your company’s talent and reduce your insurance costs, embrace the mantra, “knowledge is power.” The biggest challenge in treating these risk factors is the “unknown.” Many people do not know they’re at risk because there may not be overt symptoms when cholesterol and blood sugar are too high, but together those risks can progress to a severe chronic condition that will significantly impact one’s ability to work. You see, metabolic risk factors are a predictor in that if an individual has three risk factors, they are four times more likely to develop diabetes or heart disease6. For this reason, it is essential to arm your workforce with the knowledge of their blood pressure, cholesterol and triglyceride levels as well as their body mass index.
Step 2: Adopt Population Health Management
You may be thinking, “I have a disease management (DM) program, why do I need to offer anything else?” Traditional DM programs scan claims data and identify at-risk members through high-cost or prevalent claims drivers, and unfortunately this approach may be of little use in identifying the aforementioned metabolic risk factors because most people have not yet received care or submitted a claim. Enhancing a disease management program by deploying a formal wellness strategy to routinely include a health risk assessment and biometric screening will ultimately help your firm move toward a more effective population health management program – a program targeted to a defined population that uses a variety of individual, organizational and societal interventions to improve health outcomes.
Offering employees a biometric screening paired with a health risk assessment gives employees highly valuable data that will identify metabolic risk factors for diabetes and heart disease. Furthermore, if the employer has chosen to incentivize employees as part of its wellness engagement strategy, then completing the screening may also result in a lower employee healthcare contribution. Because of privacy mandates on medical information, the powerhouse of health data that is obtained through biometric screenings is not released to the employer, only the employee. However, employers can require that employees return signed documentation from their doctor that confirms the tests were administered and that a course of treatment has been prescribed. By doing so, employers can address at-risk employees before they become high-cost to the plan and the bottom line.
Step 3: Understand Motivation Mechanics
Even if you follow Steps 1 and 2 and your construction firm has committed to employee wellness, you still must motivate employees to commit to it on their own. A true culture of wellness is like a safety culture – it’s only successful when both management and employees are committed.
It’s evident that healthy employees are more engaged, productive, less likely to be absent from work and have a lower risk of on-site injuries, but how to motivate employees to manage their diseases and embrace a health-conscious lifestyle is less evident. But there are simple steps that employers can take to educate their employees and implement wellness programs that will apply to employees both on and off the job (plus the added benefit of boosting the impact of integrated group medical, wellness and workers’ compensation program).
To motivate employees to partake in the biometric screening, consider offering them a paid personal day to complete the testing and then consider incentivizing them to manage their condition by increasing the employer contribution to their health insurance.
Step 4: Get with the Group
In addition to individual biometric screenings, group programming can be effectively used to spark camaraderie among employees and encourage healthier habits.
An effective trend in physical conditioning programs is on-site stretch and flex prior to beginning work and at the end of the day. Soft tissue injury is a major loss area for every type of industry, particularly construction. In fact, according to the Bureau of Labor Statistics, sprains and strains, most often involving the back, account for 43 percent of injuries and illnesses resulting in absence from work. That is a significant percentage that CFMs can help avoid with proper physical conditioning programs.
Step 5: Start at Time of Hire
Managing the claims process actually begins before an employee is even hired. CFMs committed to establishing a wellness culture and reducing workers’ compensation claims should follow the following process:
- Resumé/applicant screening
- Thorough interviews
- Background checks
- Effective drug and alcohol testing done post-offer
- Conditional Offer of Employment: Employment is conditioned upon the candidate being physically able to perform substantially all of the essential job duties of the position
- Post-offer pre-employment exam: Allows medical professionals to screen a hire before they start the job and verify that they are able to perform the physical demands of the job
Step 6: Take Control
Creating a panel of experts is one way for CFMs to take greater control over a claim once it has occurred. Establishing a well-screened panel composed of medical professionals committed to preventing fraud and abuse will effectively demonstrate to employees that you have their best interest in getting healthy again. But there are also ways to take control before a claim occurs.
Step 7: Consider Consumer-Driven Healthcare
We have become a culture that largely reacts to health problems rather than proactively managing our health and risks through understanding the fundamental principles of healthy living. In an effort to improve your employees’ state of health and increase awareness about maintaining a healthy lifestyle, you may want to consider implementing a strategic consumer-driven healthcare (CDHC) plan that includes a healthcare savings account (HSA) or a health reimbursement arrangement (HRA). According to The Graham Company’s employee benefits division, either option may allow you and your employees to realize premium dollar savings, but most importantly, these plans will engage employees in their healthcare decisions, which ultimately will drive down healthcare costs.
HSA: Employee Is in Total Control
A healthcare savings account (HSA) is designed to help your employees save for medical expenses on a tax-free basis and is completely owned by the employee, although the most successful programs are funded by both the employee and the employer. Since these plans have a higher deductible than most co-pay plans, there is usually a significant premium savings. The concept is to place the premium savings in the tax-deductible HSA account and use these dollars to pay for smaller expenses while maintaining the insurance plan for major expenses.7
HRA: Employer Owns, but Assumes Less Risk
A healthcare reimbursement arrangement (HRA) is different than an HSA, as the employer is the owner of the account and only funds the HRA when eligible claims are incurred. The more successful HRA plans are designed to allow a portion of the unspent accounts to roll over from year to year as an incentive to the employee to use the HRA wisely. If funds are exhausted, the employee is responsible for satisfying the remaining deductible before the plan begins to pay. If the employee changes jobs, the money stays with the employer.7
Conclusion: Influence the Outcome
The new mantra for CFMs looking to better manage workers’ compensation and group medical insurance costs should be: Mind the slippery floor you’ve overlooked – your employees’ health. Gone are the days of attacking workers’ compensation costs exclusively through safety and accident prevention measures – it’s time to establish a culture of wellness and safety. The two are entwined and demand your attention today. Integrating group medical, wellness and workers’ compensation through a holistic approach is the future for CFMs. Integration in this manner will provide CFMs with the assurance that only comes with the ability to influence and manage the outcome.
1. Ogden; Carroll; Kit; Flegal
Prevalence of obesity in the United States, 2009–2010. NCHS data brief, no 82.
Hyattsville, MD: National Center for Health Statistics. 2012.
2. Eric A. Finkelstein; Justin G. Trogdon; Joel W. Cohen; William Dietz
Annual Medical Spending Attributable To Obesity: Payer-And Service-Specific Estimates
Health Affairs, 28, no.5 (2009):w822-w831
3. Centers for Disease Control and Prevention. A Closer Look at African American Men and High Blood Pressure Control: A Review of Psychosocial Factors and Systems-Level Interventions. Atlanta: U.S. Department of Health and Human Services, 2010.
4. Marian Sandmaier. National Institutes of Health, National Heart, Lung, and Blood Institute, NIH Publication No. 06-5269. U.S. Department of Health and Human Services, December 2005
5. Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (May 2001). “Executive Summary of the Third Report of the National Cholesterol Education Program (NCEP) Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (Adult Treatment Panel III)”. JAMA: the Journal of the American Medical Association 285 (19): 2486–97.
6. The American Heart Association (AHA) and National Heart Lung and Blood Institute (NHLBI) via Johns Hopkins Medicine Library: http://bit.ly/UPl2Mk
7. The Graham Advisor newsletter, Volume 1, Issue III, page 2. Fall 2009, written by The Graham Company