New Workforce Survey Reveals Expense Control Is Most Critical Business Challenge Facing...

Business Editors & Health/Medical Writers

EMERYVILLE, Calif.--(BW HealthWire)--Aug. 20, 2001

Expense control, specifically in the form of rising healthcare, disability and labor costs, was revealed to be the most critical business issue impacting employers over the next 2-3

Other issues of concern to employers include recruitment and retention, streamlining of business processes, technology implementation, employee development and enhancement of productivity.

The survey of more than 1,500 public agencies and private employers was sponsored by THAP! (Total Health Advocacy Partners), The California Public Employees' Retirement Systems (CalPERS) and Andersen. The results provide insights into the key causes of rising expenses, and clues to the techniques currently being used or considered to deal with the rising costs.

Heading up the list of critical expense issues was concern over rising health costs. The overwhelming majority (96 percent) of public agencies and private employers (90 percent) surveyed reported that their general health costs have risen significantly in the past year. In addition, 74 percent of the public agencies and 53 percent of private employers blamed skyrocketing group health premiums for increases in labor costs.

"This survey reinforces our belief that the magnitude of rising healthcare costs and the value of proactively managing employee health and productivity has moved to a higher level of concern and priority," said Phillip Polakoff, M.D., president and chief executive officer of THAP!, a company that provides health management solutions to help employers rein in rising costs. "Employers aren't sure what direction to take. In fact, fewer than half of public agency employers surveyed have formulated impactful plans to tackle rising healthcare costs. Without some type of cost-management strategy, the convergence of rising operational costs with reduced employee productivity will squeeze already tight margins and could force employers to reduce benefits."

According to the new survey, the renegotiation of health plan or provider contracts was the most often used strategy for reducing healthcare costs among those who had addressed cost management. However, the most effective strategy, according to the study, has been the implementation of defined contribution plans, which provide employees a defined amount of dollars to cover health insurance premiums, while allowing employees to choose from a wider range of plan options. Additional strategies rated as having medium to high cost control impact for 50 percent or more of the respondents who had tried them include: employee cost sharing, return-to-work programs, integrated disability management, carve-out programs, disease management and reduction of coverage.

Decreasing employee productivity, the other factor squeezing margins, was also a focus of the survey. Almost two-thirds of public sector survey participants reported that the top three causes of absenteeism were employee: 1) personal responsibilities, 2) health problems and 3) inappropriate use of personal leave. Private sector respondents agreed, but not to the same extent as the public sector. One third of respondents said employee personal and family health concerns were the top work/life issues impacting employee productivity while on the job. Of those survey respondents who had tried to control absenteeism, 92 percent of private and 77 percent of public employers said they have used ergonomic and safety programs to deal with employee absenteeism. In both cases, employers rated this type of program less effective than flexible work and telecommuting programs.

"Clearly, employers need to consider new methodologies to help contain costs and increase productivity, including more sophisticated data tracking and analysis systems," added Polakoff.

Key Findings From the Survey

-- The most critical business issues facing employers: 70 percent of public
employers and 56 percent of private employers surveyed cited expense control as
the key issue, followed by recruitment and retention (58 percent and 68 percent
respectively), disability and rising health costs (65 percent and 37 percent
respectively), labor costs (57 percent and 35 percent respectively), employee
development (44 percent and 48 percent respectively), enhancing productivity
(35 percent and 47 percent respectively), streamlining of business processes
(28 percent and 58 percent respectively), and technology implementation (8
percent and 40 percent respectively).

-- Of the costs that have increased most significantly over the past year, 96
percent of public and 90 percent of private employer respondents cited general
health costs, followed by turnover costs (37 percent and 63 percent
respectively), occupational injury costs (47 percent and 35 percent
respectively), work/life absence costs (31 percent and 35 percent
respectively), and presenteeism costs (19 percent and 28 percent respectively).


-- Fewer than half of public agency respondents had actively addressed rising
health costs. Of those who had, 41 percent renegotiated health plan contracts,
31 percent developed more aggressive return to work programs, 28 percent
implemented defined contribution health plans, 28 percent instituted greater
employee cost sharing, 23 percent integrated a disability management plan, 23
percent reduced health coverage, 19 percent instituted more carve-out programs,
and 14 percent implemented disease management programs.

-- Underscoring the impact of work/life issues on productivity and absenteeism,
58 percent of public agencies agreed that employee personal responsibilities
were equal to employee health problems as the top cause of absenteeism, while
56 percent said employee attitude was also a key contributor. Among private
employers, 48 percent said employee health problems were the top cause of
absenteeism, while 40 percent blamed employee attitude and 38 percent blamed
employee personal responsibilities. Other top reasons included dependent health
problems, dependent personal responsibilities and longer work hours.

-- Turnover is an increasingly critical issue, with one-third of employers
surveyed citing non-competitive compensation, impaired career path and strained
relationship with supervisor as the three most significant causes of turnover.
These were followed by inadequate mentoring, lack of work/life balance,
emotional stress, and company culture, values and vision not shared.

THAP! is a developer and provider of innovative employee health, wellness, recovery and management tools for large employers. THAP! manages employees' health both on and off the job and provides a whole-person, single point of health management to employees and their dependents that improves care and controls costs. THAP!'s total health solutions have been shown in some cases to reduce the duration of medical impairment; lower time off up to 2.4 days per year per employee; and decrease workers' compensation. Consequently, THAP! products have helped organizations enhance their opportunities to negotiate reduced health, disability and workers' compensation premiums. For information about the survey or THAP!, visit www.thap.net.

CalPERS is the nation's largest public pension fund with assets totaling approximately $151 billion. CalPERS provides retirement and health benefits to 1.2 million state and local public employees and their families. For more information about CalPERS, visit www.calpers.ca.gov.

Andersen is a global leader in professional services. It provides integrated solutions that draw on diverse and deep competencies in consulting, assurance, tax, corporate finance, and in some countries, legal services. Andersen employs 85,000 people in 84 countries. For more information, visit www.andersen.com.