Healthcare Linking Return to Work with Healthcare Outcomes

Healthcare: Linking Return to Work with Healthcare Outcomes to Lower Costs Barton Margoshes, MD Chief Medical Officer CIGNA Group Insurance 1

Primary Challenges Facing Employers Today 2 ● Rising medical and disability costs ● Workforce demographics ● Productivity pressure

Rising Medical Costs ● Factors fueling rising costs include: � Rapidly rising hospital unit costs � Inefficient and ineffective care delivery � Prescription drug cost increases � Increasing consumer demand � Aging population Health care as a % of GDP 3 Employee contributions Source: John Hopkins Bloomberg School of Public Health

Aging Workforce ● In 2010, 51% of labor force will be over 40 � US ● Census Bureau In 2003, Americans aged 55 and older made up approximately 12% of the workforce - the highest percentage ever recorded � Bureau ● Aging labor force is expected to cause 37% increase in incidence of disability � JHA 4 of Labor Statistics Factbook 2001

Individuals Receiving LTD Increased 62% from 1992 -2002 Source: Department of Labor 5

Chronic Conditions ● The five illnesses where costs increased the most were heart disease, asthma, mental disorders, cancer and hypertension � Health ● Affairs 8/04 “The highest rate of increase in medical and disability claims costs is among 30 to 39 year olds, and both are due to obesity. ” � Helen Darling, president of the National Group on Health, a Washington, D. C. consortium of 208 large employers 6

The Aging Workforce & Lifestyle Health Risks Correlate with Short Term Disability ● Risk factors studied: � Age � High blood pressure � High cholesterol � Diabetes � Family history of � Obesity � Tobacco use � Lack of exercise heart disease Source: Wayne Burton, M. D. , IHPM North American Summit Meeting 2000 7

Mental Health Costs ● Mental stress/depression claims are the fastest growing type of disability claim � Mercer/Marsh ● Depressed workers lose about 5. 6 hours of productive time on the job each week, compared with an average of 1. 5 hours for non-depressed workers � June ● 2003 issue, Journal of the American Medical Association 40% of disabilities have a behavioral component � Managed 8 2003 Time Off and Absence Survey Behavioral Health News 1998

The Impact of Lost Productivity ● Average $6, 000 Per Employee Per Year ● Averages 15% Of Payroll Employer Costs of Lost (% of Payroll) Direct Indirect Total AON 4 -6% 8 -12% 12 -18% Towers Perrin 8 -12% 4 -6% 12 -18% Watson Wyatt 6. 1% 2 -4 x direct costs 12 -30% Mercer 4. 4% . 5 -4 x direct costs 7 -22% Direct Premium Costs – Only 1 -2% of payroll 9

Impact of Disease on Presenteeism ● Percent of patients with allergies meeting performance standard Studies have shown similar effect of disease on presenteeism for depression, osteoarthritis, migraine, diabetes, reflux disease. Source: Burton et al, JOEM 2001 vol. 43 (1) l 10

Old Paradigm Total Cost How We Used to Weigh STD and Medical Costs 11

New Paradigm Total Cost Weighing the Total Cost 12

Integrated Health & Productivity Management Model ● Holistic approach to optimize a company’s human capital – investment in an employer’s people ● Addresses presenteeism, lost time, and employee health to lower costs and increase productivity ● Health related systems involved include: Healthcare � Incidental absence & FMLA � Short and long term disability � Behavioral health � 13 �Pharmacy �Wellness and disease management �Workers’ compensation

Health & Productivity Management ● 14 Non Health Related Systems involved include: � Corporate Culture � Policies and Procedures � Benefit plan designs � Alignment of incentives � Training and human resources � Employee communication � Data Integration

CIGNA’s Disability & Healthcare Connect ● A comprehensive and integrated approach for controlling quality and cost outcomes of a disability event ● Key components include: ● 15 � Proactive pre-disability outreach � Coordinated disability and medical case management � Referral to disease management services � EAP assessment and referral Common philosophy, linked processes and technology

Key Study Findings 16 ● Short term disability (STD) durations and return to work percentages are consistently better for claimants having both CIGNA Disability and CIGNA Health. Care ● 20% of employees were responsible for 91% of employee medical costs ● Employees on short term disability represented only 5% of employees, but were responsible for 35% of employee medical costs ● Behavioral health conditions associated with a medically related disability result in poorer outcomes (durations 28% longer; incidence rate 7% greater)

Key Study Findings (continued) 17 ● Most of the top cost drivers are the same for both disability and medical ● Disability claimants with chronic conditions experience longer durations whether or not the disability was primarily due to the chronic condition ● Employees engaged in Well. Aware’s (disease management) Cardiovascular Disease and Low Back Pain programs experience shorter disability durations & lower incidence of short term disability

Proven Results Solutions that Address Both Medical and Disability Cost Drivers Have a Greater Impact 20% Claimants with both a CIGNA STD and a CIGNA Health. Care claim have: 15% 10% 5% 0% 12% Shorter STD Durations 18 6% Higher Return to Work Rates

Average Medical & Disability Costs for Employees 19

Disease Management Reduces Both Medical and Disability Costs Admission Rate Reduction Medical Cost Savings Disability Incidence Rate Reduction Cardiac 4. 0% 13. 0% 7. 7% Low Back 2. 2% 12. 0% 18. 0% Condition 20 Disability Duration Reduction

Keep the Healthy and Improve the Health Status of the High Utilizers Average Medical & Disability Costs for Employees 21

Summary 22 ● Healthcare and disability costs will continue to escalate due to demographic trends ● Aging, chronic diseases, and mental health are inter-related and will have an adverse effect on employers profitability and competitive advantage ● Employers need to consider the total cost of care (healthcare + disability + lost productivity) ● Investing in an employer’s human capital through wellness, disease management, quality healthcare, and integrated disability makes business sense