Integrated Benefits/Absence Management Operational Risk Management and Measurement from the Buyer - PowerPoint PPT Presentation

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Integrated Benefits/Absence Management Operational Risk Management and Measurement from the Buyer

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Define and Measure the total cost of unplanned ... Use Multi-Variate Analysis ... Multi-Variate Analysis is the key. Can view this as a data mining exercise ... – PowerPoint PPT presentation

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Title: Integrated Benefits/Absence Management Operational Risk Management and Measurement from the Buyer


1
Integrated Benefits/Absence ManagementOperational
Risk Management and Measurement from the Buyers
Perspective
  • CAS/SOA Enterprise Risk Management Symposium
  • July 30, 2003
  • Washington, D.C
  • Claus S. Metzner, FSA, FCAS, MAAA, Aktuar-SAV
  • EPIC Actuaries, LLC

2
Risk Management/Measurement
  • Base Line
  • Define and Measure the total cost of unplanned
    absences Base Line
  • Direct benefit cost (retained by employer)
  • Cost of replacement workers/additional staff
  • Productivity cost
  • Insurance cost
  • Regulatory costs (OSHA)
  • Legal costs

3
Risk Management/Measurement
  • Develop the Risk Tolerance Function
  • What level of unplanned absence cost is
    acceptable
  • Function of revenue
  • Function of earnings
  • Function of capital
  • Function of payroll
  • If current cost is not within acceptable range,
    what improvement is necessary
  • Benchmarking is relevant

4
Risk Management/Measurement
  • Project Cost into the Future
  • Base Line no change in current practices
  • Alternatives change method of benefit delivery
    integrate various delivery systems
  • Develop appropriate metrics
  • What are the expectations for reductions in the
    frequency/severity of unplanned absences
  • What are the implications on productivity
  • What are the expected insurance cost savings
    relative to the base line

5
Risk Management/Measurement
  • ROI
  • Assess ROI on the basis of
  • Marginal Cost of implementing an Integrated
    Absence Management Program
  • Marginal Reduction of Direct and Indirect Costs
    of Unplanned Absences
  • Alternative Risk Financing Programs (captives,
    self insurance, higher Self Insured Retentions)
    may lead to additional cost saving

6
Risk Management/Measurement
  • Monitoring
  • Develop metrics to differentiate normal
    statistical fluctuation from real change
    relative to the baseline
  • Frequency may be a better measure than severity
  • Severity should be by type of absence

7
Role of Demographic Analysis
  • Previous discussion focused on a macro oriented
    review
  • Consider what do we know regarding employees
    to refine the analysis
  • Employers may not be collecting all the data or
    may not know, yet, how powerful their data base is

8
Role of Demographic Analysis
  • Comparisons/Benchmarking
  • With other companies
  • Over time within a company
  • Between locations/business units within a company
  • Comparisons shed light on potential competitive
    advantage from optimizing costs of absences

9
Role of Demographic Analysis
  • Sources of information
  • Insurance costs (may be retained by company)
  • Short term disability
  • Medical costs (including group health)
  • Long term disability
  • Workers Compensation
  • The above provide a framework

10
Role of Demographic Analysis
  • Need to normalize the data to a comparable
    distribution for each entity for which a
    benchmarking is undertaken
  • Age
  • Gender
  • Type of employment
  • Geographic cost differences
  • Etc.

11
Role of Demographic Analysis
  • Need to work from individual employee
    characteristics to a portfolio of employees
  • Obtain claim data per employee
  • Employment/payroll records
  • Medical claims
  • Wellness and disease management information
  • Workers compensation claims
  • Short term disability claims
  • Other unplanned absences
  • Maintain appropriate mechanisms to assure privacy
    is maintained

12
Role of Demographic Analysis
  • Obtain census data
  • Age
  • Sex
  • Marital status
  • Children in household
  • Location
  • Consider other data
  • Insurance credit score may be relevant

13
Role of Demographic Analysis
  • Use Multi-Variate Analysis
  • Develop a score for potential risk/risk profile
    (similar to Auto Liability)
  • Statistical relevancy is the key
  • Score measures relative frequency/severity
  • Focus on employees exhibiting high scores
  • Develop targeted absence management programs
  • Use the individual scores to develop a company
    wide average score for monitoring
  • Changes in score can be used to disaggregate
    changes in cost between changes in score
    (internal) versus changes in external costs

14
Summary
  • Integrated Benefits/Absence Management Is an
    Operational Risk Management Issue
  • Historical Silo view is not optimal for
    assessing overall costs/benefits
  • Can optimize the expenditure if we take an
    integrated view
  • ROI Analysis is needed
  • Framework as for other investment decisions
  • Detailed Demographic Analysis is Necessary to
    Obtain Relevant Insights
  • Multi-Variate Analysis is the key
  • Can view this as a data mining exercise
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