09/14/2010
September 14, 2010 Denver, Colorado – OCI, a Data Integration and Software Services provider, conducted a study on disability plan design changes that a large firm was considering in order to reduce claims and save money. Although the employer had intimate knowledge of its employees and benefit plans, OCI’s study found that the true cost drivers were not those that the employer suspected. Determining the actual cost drivers identified a 40% reduction in claims, resulting in $32 million in savings.
The study included disability claims from the previous four years and focused on two primary areas the employer was considering changing - claim duration limits and new employee waiting periods.
OCI first evaluated the claim duration limits on frequent injury types that tend to be affected by employee behavior. Although the employer assumed its greatest savings could be found by focusing on mental health claims, which accounted for around 13% of claims, OCI found that 29% of the employer’s claims were actually musculoskeletal long-term disability (LTD) claims. Additionally, since musculoskeletal claims have a large employee behavior component, they tend to be affected by plan design changes. Studying this group and other LTD claims, OCI found that establishing a two-year duration limit would save the employer $32 million.
OCI then looked at the waiting periods for new employees to determine the savings potential of establishing either a 90- or 180-day waiting period. The study found that over a four-year period, a 90-day waiting period would prevent enough disability claims to save $2.2 million, and that a 180-day waiting period would save $5.3 million.
“These results clearly show that not all plan designs are created equal,” said Archie Anderson, President of OCI. “The most critical piece of this study for employers to take note of is that without the ability to analyze their data, truly understand their cost drivers, and model the impact of proposed changes, it can be difficult to implement the correct changes to impact savings and their bottom line.”
Thanks to OCI’s analysis, the employer was able to clearly determine which changes would result in the most cost savings.