MC-29 Integrated Disability Management

1. MC-29 Integrated Disability Management CAS Ratemaking Seminar March 12, 1999 Michael C. Dolan PricewaterhouseCoopers LLP

2. What Is the Product • Combines Various Direct Coverages • Disability • LTD • STD • Workers Compensation • Healthcare • Other • EAP

3. What Is the Product • Implied Coverages • Absenteeism • Sick Leave • Disease Management • Implied Costs • Productivity • Training • Substitution Costs

4. What Is the Product • Other Items for Measurement • Morale • Cuts Both Ways • Retention • Implementation Costs

5. Total Cost • Total Costs of Individual Programs • Replace ET + BT by E`T + (1- k) x BT • Include Insured and Self-Insured Programs • Adjust for Measured Impacts of Synergies • Expenses • Benefits - Percentage and Reductions That Apply • Adjust for Required Investments

6. Cost Considerations • Options • Add the Underlying Direct Costs • Easiest • A First Approximation • Understates the Real Return • Ignores the Implied Savings

7. Cost Considerations • Options (continued) • Add Underlying Costs + Adjust Expenses • Identify the Expenses by Line • Eliminate the Duplication • Add Additional Expenses • Add Underlying Costs + Adjust for Expense and Benefit Synergies

8. Expense Considerations • Expense Synergies • Common Intake • Healthcare & Workers Compensation • STD/LTD & Workers Compensation • STD & LTD • Healthcare and EAP • Rational Database • Eliminate Multiple Sets • Better Analyses of Costs and Allocations • Available Staff

9. Expense Considerations • Expense Synergies (continued) • Inter-Cover Administrative Expenses • Initial Set Up • Historical Information • Coordinated Employee Relations • Compliance Reporting • Carrier • Regulatory • ERISA Compliance

10. Synergy Common Intake Database Admin Cost Compliance Proxy Count/Process Report Count, Transaction Counts/Process Complaints, Costs Expense Synergies

11. Benefits Synergies STD LTD Medical WC Med WC Indem COST PRODUCTIVITY

12. Synergies • STD-LTD • Adjustments to Sum of Costs • Expense • Set Up Cost • Prioritization • Benefits • Early Case Management - Duration • Liability Acceptance

13. Synergies • STD-LTD Measurements • Equivalent to Early Intervention for WC • Leverage Early Case Management • Draw from WC Experience

14. Synergies • Medical-LTD • Adjustments to Combined Cost • Expense Savings • LTD Case Management Relies on Medical Treatment • Not Known Until After Treatment • Benefits • Medical Treatment Can Be Aimed at RTW • Durations Managed as in WC

15. Synergies • Measurements • Durations by Disability as in WC • Studies on Impact of Medical on Indemnity

16. Synergies • WC - LTD • Adjustments to Combined Cost • Expense • Some • Benefits • RTW for WC Applied to LTD • Setting Expectations for Employer/Employee

17. Synergies • Measurements • RTW Studies for WC • Early Intervention Studies for WC • Impact of Light Duty Return • May Need to Adjust LTD Contracts • Apply Adjustments to Termination Curves

18. Synergies • Others • Medical on WC Medical to Eliminate Duplication • Impact on EAP Through Analysis • Utilization Tracking and Analysis

19. Other Returns • More Benefits • Duration Reductions Translate into Productivity Savings • Determine Cost/Day from Temporary Hiring • Estimate the Reduction Cost/Day on Production • New Hire Training Costs/Day to Ramp Up • Turnover Reduction Costs • Exit Interviews - Benefits Programs/Flexibility Cited • New Hire Costs/Day to Ramp Up

20. Other Returns • Don’t Forget Other Costs • LTD Case Management - New Environment • Aggressive RTW and Light Duty • Managing to WC Implied Duration • Leveraging Medical • WC/LTD/Medical Case Management Integration • Systems Design and Tracking Costs • Short- and Long-Term Costs