According to a recent Aon study, risk management departments only partnered with the corporate benefits department 2% of the time, and in those cases the emphasis was not on achieving a truly aligned result focused on enterprise benefit, but on the insurance renewal process relative to insured risk benefits (life, disability, accident, medical) and minimizing overlaps and leveraging premium efficiencies.

The main focus of many risk managers is on the corporate total cost of risk (TCOR), which is generally driven by three key expenses: claims, premiums and administrative. Effective management of TCOR is only achieved through a holistic approach, or by integrating management of the key benefits of each, understanding their unique nature and how these components interrelate in order to control TCOR expense. If insurance-related expense is your key concern, this is a good measure, yet it fails to capture the other side of the coin. Importantly, the other side is often much more significant in magnitude.

Risk management programs are no longer simply a matter of risk transfer, i.e. purchasing insurance to cover and pay losses. Effective risk management requires an integrated and collaborative approach, combining the skills of claims management, risk analytics and loss avoidance expertise to optimize the spectrum of activity from preventative through claim closure. Insurance coverage or risk transfer to insurers serves as the safety net subject to large retentions or deductibles, which ideally represent our appetite for risk taking.

On the benefits and health insurance side, the management process is heavily weighted to transference of risk through insurance, with staff dedicated to customer service and benefits enrollment, while devoting limited resources to strategic health claims management and wellness. Often these strategies do not account for the potential synergies that exist within risk management functions and the typically separate strategies they pursue.

Historically, the integration of healthcare and workers' compensation management has focused mostly on the concept of integrated disability management (IDM). The fact that IDM has achieved only limited traction in practice in many places may rest in its approach, which typically focuses on the coordination of absence management first and medical management second – the proverbial cart before the horse. This juxtaposition of priorities reveals the resulting opportunity.

State-of-the-art workers' compensation claims management has proven that aggressive and strategic medical management reduces disability durations and drives more cost-effective resolution. Strategic oversight of these processes by risk management has a proven track record of success that can be leveraged for even greater impacts if extended to the non-occupational healthcare side of the organization.

Alignment, if not integration, of the workers' compensation risk management strategies with the HR-controlled healthcare management strategies may provide more effective and efficient delivery of all programs within an organization that affect employee health and productivity.

Corporate risk management and health benefits management historically have remained independent and isolated organizational business practices. Program integration provides opportunities for employers to deliver efficient, effective occupational and non-occupational health and wellness programs no matter the source of the problem. If our collective interests as functional leaders include the maximum health, welfare and productivity of the entire workforce, then it seems logical that leaders of these two key functions should build their collaborative relationship toward common enterprise-wide goals like these.

Goals of an integrated program approach

So what are the priorities that these respective leaders can aim at together for the good of the whole? Well, here are a few to consider:

• Delivery of high quality medical and disability services to all employees who experience occupational and non-occupational injuries and medical conditions, whether physical or mental.
• Delivery of a collaborative, proactive strategy, driving efficient resolution of physical and mental conditions; providing centralized care management for all affected employees while providing a beneficial return on investment (ROI) to the enterprise.
• Driving a culture of health, wellness and safety across the enterprise through a collaborative services approach, combined with centralized loss/cause analytics.

With leaders focused on common goals, it is much more likely that these goals can be achieved and the related benefits delivered.

Timing is everything

With the implementation of the Affordable Care Act (ACA) enacted in 2010, all companies and individuals are required to carry health insurance. The first mandatory open enrollment under the ACA took place from Oct. 1, 2013 through March 31, 2014. The debate, controversy and analysis accompanying this new law created unprecedented awareness of health insurance and wellness, and the debate continues as to the “right” approach for healthcare access, financing and delivery.

Interestingly, the ACA has emerged just as the U.S. continues its recovery from a crippling recession, where organizations and individuals must do more with less. As a result, the pressure for productivity and improved work process efficiencies continues. Simultaneously, the American consumer is now forced to become more knowledgeable about the healthcare system and its choices, and more sensitive to how lifestyle and behaviors impact personal wellness. This places additional demands on the effective delivery of healthcare. In response, new healthcare providers, options, products and services are under development, while the consumer can be expected to become less tolerant of system inefficiencies and poor, less informed support. All the while, additional complexities are introduced under the ACA, such as the mental healthcare requirement, which opens entirely new opportunities and challenges for an area previously underserved.

All of these factors require organizations to rethink the traditional delivery of health and wellness in the workplace, and must now include a progressive 24/7 total care approach, which subtly, if not directly, infer an opportunity to provide solutions to infirmity, regardless of the cause, in more effective ways. All stakeholders are being affected and therefore all stakeholders should consider how alignment and collaboration can be leveraged.

Getting there is more than half the fun

Significant challenges to this “services approach” remain. They include territorial disputes, understanding the differences and similarities between healthcare, STD, LTD, workers' compensation, HIPAA restrictions and fear of job loss, among others. For example, the corporate reporting structure must be examined for ownership; should it be finance, legal, or HR? There are arguments for each and frankly, the answer is a function of each organization, and the strengths and weaknesses of these respective functions. An in-depth analysis of the various functions, results, strategic goals, services, cost management tools, expertise and talents should be completed to evaluate the current and potential ROI.

Questions must be identified and answered relative to HIPAA implications, alternative medical management tools (e.g. providers, facilities, pharmacy, ancillary medical services) as well as emerging options (medical tourism, cyber alternatives, etc.), the impact on Medicare set-asides and alternative healthcare financing (e.g. captives, both pure and group). Setting timelines with goals and objectives for a new, integrated process must be supported by robust measurements on actionable reports shared regularly with key partners and decision makers.

Integrating workers' compensation and healthcare through the collaboration of risk management and HR functions is challenging, but doable. Its success or failure fundamentally rests with the leaders of these functions. The potential benefits are important enough that they can't be subordinated to the status quo. If pursued successfully, you should expect a healthier, more satisfied and increasingly productive workforce that can navigate more easily the myriad of hurdles presented by injuries and illnesses that can have a negative impact if not addressed in the most efficient and effective ways possible.

David Smith

David Smith is divisional vice president of risk management with Family Dollar.

Chris Mandel

Chris Mandel is senior vice president, strategic solutions with Sedgwick.