Results Lead to CIGNA’s Move to Drop Prices on Disability Benefits Purchased with Medical Coverage

March 15, 2004

CIGNA has released the findings of a new study that reportedly reveals an unmistakable trend: Integrating disability with health care programs has the potential to lower employers’ total benefits costs and help disabled employees get back to work sooner and stay at work.

As a result of the positive results found in the study, CIGNA is lowering its prices on disability benefits purchased with CIGNA medical coverage.

“We believe that over time, integrating disability and health care
programs may truly be the ‘giant leap forward’ all employers and their employees are seeking when it comes to total benefits cost control, productivity gains, and enhanced health and wellness,” said Jay Menario, senior vice president of marketing for CIGNA Group Insurance. “If we can assist employees with conditions most likely to cause repeat disability, like those with back problems or heart disease or diabetes, we can help employers and employees prevent lost time from work and manage overall benefits costs. The revelations in this study validate our intuition about the intimate
relationship between disability and health care costs.”

The study looked at a total of 60,000 short-term disability claims and compared the results of those insureds who were covered by CIGNA short-term disability (STD) and CIGNA medical care to those insureds who were covered by CIGNA STD and a different health care provider.

“The objective was to quantify the impact that having the same health care and short-term disability provider has on reducing overall costs and length of disability,” explained Jim Lyski, senior vice president and chief marketing officer for CIGNA HealthCare. “The results were clear that CIGNA’s integrated approach to disability and health care drove lower costs and shortened workplace absences. In the process, we gained deeper insights into the important role that return-to-work, chronic disease management, and depression may play in the overall cost and productivity equation.”

Five major findings emerged:

The duration of the short-term disability, as well as how quickly a
disabled individual returns to work, is better for those individuals with both disability and health care coverage through CIGNA. The study found that disability durations were 12 percent shorter (on average, a difference of seven days) and return-to-work rates were six percent higher for those individuals who had the advantage of CIGNA short-term disability and CIGNA HealthCare coverage, compared to those who did not have the CIGNA medical

“At a time when many employees live paycheck to paycheck,
returning people to work sooner helps protect their standard of living and their ability to take care of their needs and their families,” said Menario.

From the employer perspective, shorter durations and better return-to-work means, for an employer with 3,000 employees, between $100,000 and $200,000 in direct disability cost savings per year depending on the wage replacement of an employee’s average salary – and up to $500,000 in indirect costs. Indirect costs are estimated by some experts to be two to four times higher than direct costs and represent lost productivity and the cost of hiring and training temporary replacement workers.

A quarter – 26 percent – of “medical episodes*” leading to a disability stem from chronic health issues like heart disease, diabetes, and low back pain, yet these chronic health issues account for 56 percent of STD-related medical costs. This finding reportedly heralds a monumental opportunity to better control disability and medical outcomes through disease management. While chronic disease is likely to result in multiple occurrences of disability, it is highly predictable and manageable.

“For example, patients with severe diabetes need preventative care. If they don’t receive proper preventative care, they are more likely to suffer loss of a limb. This contributes to disability that could be avoided through programs that help patients better manage their diabetes,” explained Dr. Allen Schaffer, chief medical officer for CIGNA HealthCare.

Almost half – 45 percent – of the expense of treating depression and
other mental health conditions stems from individuals who suffer from other disabilities like low back pain or heart disease – not from individuals who seek treatment for the mental health condition itself. Employees may become disabled because of one illness, but during that time may experience depression or another mental health problem that further complicates the initial diagnosis.

With patients in disease management programs, for example,
depression is prevalent among seven percent with cardiac disease and diabetes, 11 percent with asthma, and 37 percent with low back pain, according to CIGNA Behavioral Health data.

“This means health and disability professionals must be prepared to take a more holistic view of an individual’s disability, recognize the likelihood of depression, disabling stress or another mental
health factor as a hurdle in overcoming disability, and understand when and how treatment is needed,” according to Dr. Barton Margoshes, chief medical officer, CIGNA Group Insurance.

Short-term disability claim-related medical costs – both direct and
indirect – often continue after return to work.

The study found that employees may continue with medical treatments such as examinations, additional tests, or physical therapy for up to 25 days after they return to work.

An employee back at work but still in need of limited medical treatment may have special needs. Managers reportedly need to keep in mind that employees may feel more fatigue than normal, and may require a more flexible schedule to juggle medical appointments. “Recognizing this will help set more realistic expectations for job performance for the employee as well as for colleagues who may need to assume additional responsibilities during this time,” explained Menario, “which, in turn, can contribute to a more successful return to work.”

The top drivers of short-term disability costs match the top drivers of
medical costs. The study identified the number one driver of disability and medical costs as musculoskeletal – representing 22 percent of claims for STD and 27 percent of the costs.

On the medical side, musculoskeletal represents 21 percent of the claims and 18 percent of the costs. The study also identified illness associated with digestive, respiratory, circulatory and
neoplasms (cancers) as among the top cost drivers for both disability and health care.

Additionally, on average, the medical payments related to the average short-term disability dwarf the cost of the STD benefit payments. The study found, on average, the total direct disability and medical cost of a short-term disability is $13,094.

Of this, $2,444 is associated with the STD benefits payments and $10,649 for the medical benefits. This reportedly suggests that short-term disabilities are emerging as the leading indicators of a company’s medical costs.

“When employers have a clear picture of those disabilities likely to drive up the costs of their medical benefits, they can create a
roadmap as to which prevention, early intervention and wellness programs they can put in place to improve results,” said Lyski.

Key lessons learned from this study
In the medical community, return-to-work is not traditionally thought of as a conventional “health outcome,” according to Dr. Margoshes. “Yet, returning disabled employees to work and keeping them at work may prove to be a cornerstone of controlling an employer’s direct and indirect costs from disability as well as enhancing the lives of employees nationwide.”

Additionally, there is an inherent disconnect between the medical and disability management systems, according to Dr. Schaffer. “Many doctors are not focused on return-to-work for their patients, just as many health care providers do not consider return-to-work as a major component of a treatment and recovery plan,” he said. “However, the entire health care and employee
benefits community needs to view the impact of disability differently as part of overall health care. This will result in promotion of prevention, wellness, lower medical costs and less time lost from work.”

What will CIGNA do differently as a result of the study?
While still evaluating the implications of the study, CIGNA will offer
discounts of three to seven percent on STD and LTD coverages sold in combination with CIGNA medical coverage.

“This is one way we can provide immediate cost relief to employers,” added Menario. “Lowering prices demonstrates our strong belief that linking disability and health care programs like disease management and Employee Assistance Programs give us, and our customers, a power tool for drilling down on overall costs, boosting productivity for employer and employee, and helping employees stay well and stay at work.”

For a summary report of the study’s findings, contact or .

* A medical episode is defined as a group of claims all related to one single medical event. For example, if someone breaks a leg, s/he may need X-rays, pain medication, and other procedures. All those medical claims would represent one medical episode related to the broken leg.

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