A recent survey by Brookfield-based International Society of Certified Employee Benefit Specialists (ISCEBS) shows that 41 percent of employers don’t know how much they spend on short-term employee disability benefits. About 150 employers responded to the survey.
Not knowing the amount they’re spending on short-term disability coverage likely means many employers are spending too much, said Leanne Fosbre, manager of group insurance administration for Wyeth, a producer of pharmaceuticals and other health-related products based in Madison, N.J. Fosbre is also a fellow in the ISCEBS.
“If employers are not monitoring it, chances are that they’re spending too much,” Fosbre said. “If you don’t have a program in place to identify disability and manage it, then money is being spent unnecessarily.”
Two-thirds of respondents said they had not made any changes to their short-term disability coverage in the last five years. Employers may want to make changes to their plans to encourage employees to return to work faster, Fosbre said.
“Salary continuation plans that replace 100 percent of an employee’s pre-disability income encourage absenteeism and diminish the employee’s incentive to return to work,” she said.
For example, Fosbre said Wyeth recently changed its short-term disability policy from up to 26 weeks of coverage at 100 percent of salary to eight weeks of 100 percent salary and nine to 26 weeks at 50 percent salary. She said employers may want to adopt a similar model when thinking about plan changes.
“You want to change it so (the plan) encourages them to return to work,” she said. “It’s insurance to protect against a catastrophic wound, but not at the same level of income as when you’re working.”
The ISCEBS survey shows that 53 percent of the respondents who know the amount they pay for short-term disability coverage say they’re spending less than five percent of payroll on short-term disability benefits.
Only 14 percent of the responding companies said they ask employees to contribute to their short-term disability plans. Those companies also indicate requiring employee contributions are a detriment to enrollment.
The survey also says most employers take a low-key approach to talking with employees about short-term disability. Most employers use summary plan descriptions, generally handed to new employees, to provide information about the company’s short term disability benefits.
Talking with employees about short term disability plans is important because 30 percent of employees ages 35 to 65 will be disabled for at least 90 days at least once during their working lives, Fosbre wrote in her summary to the survey. She also states that the Social Security Administration is planning for a 37 percent increase in the cost of short term disability insurance due to the country’s aging workforce.
“The time for reevaluating disability benefits has arrived,” Fosbre wrote. “Employers need to strike a fine balance between providing disability benefits without encouraging malingering. A healthy productive workforce positively impacts bottom-line profitability.”
The ISCEBS is not planning a future survey to gauge changes in short-term disability coverage, Fosbre said. Instead, she’s putting together a list of recommendations for employers to consider while making changes to their short-term disability coverage.
“The article serves as a ‘discovery’ mechanism to get the plan design and administration folks aligned before rolling out a newly designed short-term disability program,” she said.
The new article will be published in May through the ISCEBS’ Web site. www.iscebs.org.
