Why you should integrate risk management and workplace wellness

Amy Richter,

Risk management and human resources are traditionally two different job functions, and the people in these areas have rarely crossed paths — but that is changing.

Why are these people starting to work together more frequently?

Employee wellness has become a major factor in risk management because it’s an enormous gamble for employers to have unhealthy employees. Poor employee health negatively affects employee productivity, health insurance costs, and workers’ compensation expenses. A good wellness program can reduce risk in all of these areas, and that has caught the attention of the finance and accounting people who focus on managing risk.

Beyond exercise and nutrition

Human resources professionals have been handling wellness programs for a long time, as the original purpose was to boost employee morale and loyalty. It then became clear that an effective wellness program also helped reduce health insurance costs, and return on investment (ROI) started appearing frequently in wellness discussions.

The programs started to move far beyond exercising and healthy eating. Many employers began offering health risk assessments to employees and targeting their specific health problems. Preventing heart disease in just one employee, for example, could save an organization tens of thousands of dollars — in addition to creating goodwill, improving morale, and boosting loyalty.

When it became obvious that wellness programs could have an impact on workers’ compensation costs, we began to see different departments start to look outside their silos and create integrated strategies.

Impact of health conditions on workers’ compensation

Claims adjusters will tell you that poor health conditions such as obesity inherently slow the normal progression of a workers’ compensation claim. A Duke University Medical Center analysis found that obese workers:

  • Filed twice the number of workers’ compensation claims
  • Had seven times higher medical costs from those claims
  • Lost 13 times more days of work from work injury or work illness than did non-obese workers 

A study by the National Council on Compensation Insurance (NCCI) found:

  • Workers’ compensation medical claims open for one year cost three times as much when the injured employee is obese.
  • Claims that are open for five years are five times more costly when involving an obese claimant.
  • Cost differential can be even greater for smaller claims.

Given the strong link between poor health and work comp costs, maintaining a healthy lifestyle should be a high priority for employers.

Impact of comorbidities

Comorbidity is the simultaneous presence of two chronic diseases or conditions, which often make it more difficult to recover from work injuries. These conditions include systemic problems caused by an unhealthy lifestyle, such as hypertension, obesity, and diabetes. Many studies show that claims with a comorbidity diagnosis incur significantly higher medical costs than comparable claims without comorbidity. A recent NCCI study also shows:

  • The share of workers’ compensation claims with a comorbidity diagnosis nearly tripled from 2000 to 2013.
  • Claims with a comorbidity diagnosis have about twice the medical costs of comparable claims.
  • Comorbidity diagnoses for hypertension are the most prevalent of those investigated.

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Impact of the Affordable Care Act (ACA)

Some of the most devastating workers’ compensation cases — in terms of cost impact from employers — involve workers who don’t have health insurance.

For example, the absence of insurance makes it difficult for an employee to afford prescriptions for chronic conditions. Therefore, these untreated medical conditions slow recovery from the work injury, which leads to higher workers’ compensation costs. Additionally, the cost of treating the underlying condition is often applied to the workers’ compensation in order to resolve the work injury and close the claim.

Under the ACA, individuals are required to have insurance, and a health insurance company can no longer refuse to insure someone with a pre-existing condition. When individuals have medical insurance and treatment for comorbidity diagnoses, recovery times are reduced, claims are closed sooner, and workers’ compensation costs are reduced.

Wellness and workers’ compensation — a clear connection

A study by U.S. Corporate Wellness says the “average results” of an employee wellness plan include a:

  • Drop in workers’ compensation and disability claims by as much as 30%
  • Decrease in short-term sick leave by as much as 32%
  • Savings of between $3 and $6 for every $1 invested 

There is little debate that unhealthy employees injured on the job can cause more expensive workers’ compensation claims. However, if employers have been somewhat reluctant to address this issue in the past, it is something they must consider moving forward.

Amy Richter is a senior wellness consultant at Associated Financial Group, LLC.

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