Editor's note: Chris Mandel,senior vice president, strategic solutions with Sedgwick, andDavid Smith, divisional vice president of riskmanagement with Family Dollar.

Imagine having two claims adjusters handling every workers'compensation claim — one managing the medical component, the otherhandling the indemnity — sitting in different rooms and rarelydiscussing the claim.

Aside from being an extremely inefficient claims managementprocess, not only would the impact on the claim outcome from a costsavings perspective suffer, but the injured employee could beconfused, frustrated and ill-served.

In most companies today, health insurance, short-term disability(STD), long-term disability (LTD), and absence management are humanresources (HR) and employee benefits functions; theresponsibility for workers' compensation rests squarely on theshoulders of the risk management department. They're classic siloedfunctions, with minimal collaboration and sometimes even outrightanimus between the groups.

According to a recent Aon study, risk management departmentsonly partnered with the corporate benefits department 2% of thetime, and in those cases the emphasis was not on achieving a trulyaligned result focused on enterprise benefit, but on the insurancerenewal process relative to insured risk benefits (life,disability, accident, medical) and minimizing overlaps andleveraging premium efficiencies.

The main focus of many risk managers is on the corporate totalcost of risk (TCOR), which is generally driven by three keyexpenses: claims, premiums and administrative. Effective managementof TCOR is only achieved through a holistic approach, or byintegrating management of the key benefits of each, understandingtheir unique nature and how these components interrelate in orderto control TCOR expense. If insurance-related expense is your keyconcern, this is a good measure, yet it fails to capture the otherside of the coin. Importantly, the other side is often much moresignificant in magnitude.

Risk management programs are no longer simplya matter of risk transfer, i.e. purchasing insurance to cover andpay losses. Effective risk management requires an integrated andcollaborative approach, combining the skills of claims management,risk analytics and loss avoidance expertise to optimize thespectrum of activity from preventative through claimclosure. Insurance coverage or risk transfer to insurersserves as the safety net subject to large retentions ordeductibles, which ideally represent our appetite for risktaking.

On the benefits and health insurance side, the managementprocess is heavily weighted to transference of risk throughinsurance, with staff dedicated to customer service and benefitsenrollment, while devoting limited resources to strategic healthclaims management and wellness. Often these strategies do notaccount for the potential synergies that exist within riskmanagement functions and the typically separate strategies theypursue.

Historically, the integration of healthcare and workers'compensation management has focused mostly on the concept ofintegrated disability management (IDM). The fact that IDM hasachieved only limited traction in practice in many places may restin its approach, which typically focuses on the coordination ofabsence management first and medical management second – theproverbial cart before the horse. This juxtaposition of prioritiesreveals the resulting opportunity.

State-of-the-art workers' compensation claims management hasproven that aggressive and strategic medical management reducesdisability durations and drives more cost-effective resolution.Strategic oversight of these processes by risk management has aproven track record of success that can be leveraged for evengreater impacts if extended to the non-occupational healthcare sideof the organization.

Alignment, if not integration, of the workers' compensation riskmanagement strategies with the HR-controlled healthcare managementstrategies may provide more effective and efficient delivery of allprograms within an organization that affect employee health andproductivity.

Corporate risk management and health benefits managementhistorically have remained independent and isolated organizationalbusiness practices. Program integration provides opportunities foremployers to deliver efficient, effective occupational andnon-occupational health and wellness programs no matter the sourceof the problem. If our collective interests as functional leadersinclude the maximum health, welfare and productivity of the entireworkforce, then it seems logical that leaders of these two keyfunctions should build their collaborative relationship towardcommon enterprise-wide goals like these.

Goals of an integrated program approach

So what are the priorities that these respective leaders can aimat together for the good of the whole? Well, here are a few toconsider:

• Delivery of high quality medical and disability services to allemployees who experience occupational and non-occupational injuriesand medical conditions, whether physical or mental.
• Delivery of a collaborative, proactive strategy, drivingefficient resolution of physical and mental conditions; providingcentralized care management for all affected employees whileproviding a beneficial return on investment (ROI) to theenterprise.
• Driving a culture of health, wellness and safety across theenterprise through a collaborative services approach, combined withcentralized loss/cause analytics.

With leaders focused on common goals, it is much more likelythat these goals can be achieved and the related benefitsdelivered.

Timing is everything

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

Interestingly, the ACA has emerged just as the U.S. continuesits recovery from a crippling recession, where organizations andindividuals must do more with less. As a result, the pressure forproductivity and improved work process efficiencies continues.Simultaneously, the American consumer is now forced to become moreknowledgeable about the healthcare system and its choices, and moresensitive to how lifestyle and behaviors impact personal wellness.This places additional demands on the effective delivery ofhealthcare. In response, new healthcare providers, options,products and services are under development, while the consumer canbe expected to become less tolerant of system inefficiencies andpoor, less informed support. All the while, additional complexitiesare introduced under the ACA, such as the mental healthcarerequirement, which opens entirely new opportunities and challengesfor an area previously underserved.

All of these factors require organizations to rethink thetraditional delivery of health and wellness in the workplace, andmust now include a progressive 24/7 total care approach, whichsubtly, if not directly, infer an opportunity to provide solutionsto infirmity, regardless of the cause, in more effectiveways. All stakeholders are being affected and therefore allstakeholders should consider how alignment and collaboration can beleveraged.

Getting there is more than half the fun

Significant challenges to this “services approach” remain. Theyinclude territorial disputes, understanding the differences andsimilarities 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 eachand frankly, the answer is a function of each organization, and thestrengths and weaknesses of these respective functions. An in-depthanalysis of the various functions, results, strategic goals,services, cost management tools, expertise and talents should becompleted to evaluate the current and potential ROI.

Questions must be identified and answered relative to HIPAAimplications, alternative medical management tools (e.g. providers,facilities, pharmacy, ancillary medical services) as well asemerging options (medical tourism, cyber alternatives, etc.), theimpact on Medicare set-asides and alternative healthcare financing(e.g. captives, both pure and group). Setting timelines with goalsand objectives for a new, integrated process must be supported byrobust measurements on actionable reports shared regularly with keypartners and decision makers.

Integrating workers' compensation and healthcare through thecollaboration of risk management and HR functions is challenging,but doable. Its success or failure fundamentally rests with theleaders of these functions. The potential benefits are importantenough that they can't be subordinated to the status quo. Ifpursued successfully, you should expect a healthier, more satisfiedand increasingly productive workforce that can navigate more easilythe myriad of hurdles presented by injuries and illnesses that canhave a negative impact if not addressed in the most efficient andeffective ways possible.

DavidSmith

David Smith is divisional vice president of risk managementwith Family Dollar.

Chris Mandel

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