STD Plan Design Impacts on Health Plan Cost Trends
By Justin Schaneman
VP Data Analytics
By Nicholas Rohrbacker
Director, Integrated Analytics
For many companies, benefit trends are viewed in isolation. Medical spend is commonly viewed with pharmacy expenditures over the same time periods, but other benefits such as short-term disability (STD), long-term disability (LTD), and workers’ compensation (WC) are rarely presented in conjunction with health plan metrics. This detachment of information means that the health plan leaders in these companies are lacking what could be a key indicator of their future spend.
In reality it is highly logical that these benefits, in particular STD, impact the health plan costs for any company. After all, to be eligible for STD an employee will need to show evidence of a qualifying medical event or condition. Whatever event drives the need for an STD claim will also require medical and pharmacy care, and in many cases, the reason for the claim is severe enough to warrant higher-cost interventions.
With this link in mind, it is not surprising that in a recent analysis of multiple companies in the HCMS Group’s Research Reference Database we found that employees out on a non-maternity STD claim accounted for 30-40% of the company’s annual total health plan spending. These employees also had per person health plan costs that were 10 times higher than employees without an STD claim. Combining these findings with the well-known relationships between levels of wage replacement and prevalence and length of STD claims provides a strong link between health plan trends and STD plan designs. STD plan design can drive higher medical spending; when STD benefits are more generous or less generous than an optimal range, medical spending is higher.
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