I’ve just returned from the Society for Human Resource Management (SHRM) Annual Conference and Expo, where I heard — as I often do — attendees express concern for rising health care costs. Those costs — especially increasing costs related to employer-provided health insurance — are weighing on the minds of employers, HR managers, brokers and consultants like you.
While many of you likely know that medical care and pharmaceutical costs are a significant portion of overall costs, you may be surprised to find out that is not the entire picture. Those costs — personal health costs — make up only 30 percent of the overall total cost of poor employee health.
The remaining 70 percent can be attributed to health-related lost productivity. Simply put, health-related lost productivity is the decline in employee productivity due to employee absenteeism and presenteeism. Research indicates that on average, for every $1 employers spend on worker medical or pharmacy costs, they absorb at least $2.30 in health-related lost productivity costs.1
I believe employers, brokers and consultants need to consider the total cost of poor employee health, not just medical and pharmaceutical costs, to better understand health-related lost productivity and to identify and implement solutions. The idea behind health-related lost productivity is based on the “iceberg concept,” meaning the presenteeism and absenteeism costs are hidden below the surface, and most people just focus on the medical and pharmacy costs, which are the tip of the iceberg.
I shared this concept with those who visited The Standard’s booth at the SHRM conference, and it also is detailed further in the first of my five Productivity Insight white papers, “Health-Related Lost Productivity: Causes and Solutions.” These papers will examine the facets of health-related lost productivity in greater detail, but for starters, let me provide a brief overview of a couple of the factors that impact health-related lost productivity and associated costs.
Presenteeism is the productivity loss that occurs with employees at work with medical conditions, whether physical or mental. Presenteeism costs American businesses $150 billion in decreased productivity.2
Behavioral health conditions directly affect an employee’s productivity and are major causes of presenteeism. Depression is estimated to cost $83 billion annually in the United States, and in terms of presenteeism, the disorder is the highest-cost health condition nationwide.3
There is much more detail associated with these and other facets of health-related lost productivity. The future editions of Productivity Insights will provide much more depth, as well as solutions employers can implement to help increase productivity.
Overall, these insights will demonstrate how a disability carrier-based program that effectively manages absence and disability — such as the Workplace PossibilitiesSM progam — also can help improve employee health and productivity, ultimately reducing health-related lost productivity.
Now that you’re aware of the iceberg concept, do you think your company focuses on the cost drivers that are located beneath the surface of the water?
1Loeppke R, Taitel M, Haufle V, Parry T, Kessler RC, Jinnett K. Health and Productivity as a Business Strategy: A MultiEmployer Study. Occup Environ Med; 2009;51(4):411-428.
2Hemp P, Presenteeism: At Work — But Out of It. Harvard Business Review. October 2004. Available at: http://hbr.org/2004/10/presenteeism-at-work-but-out-of-it/ar/1. Accessed June 18, 2012.
3Greenberg PE, Kessler RC, Birnbaum HG, et al. The Economic Burden of Depression in the United States: How Did It Change Between 1990 and 2000? Clin Psychiatry. 2003;64(12):1465-1475.