Educate employees about the value of disability insurance

Thirty percent of employees between the ages of 35 and 65 will become disabled for at least 90 days at least once during their working years. That costs organizations dearly in lost productivity; places a strain on the healthy work force to produce more to make up for the absence of the disabled employee; and decreases the morale of the healthy work force.

It also means you can count on a steady stream of short-term disability (STD) insurance claims. Do you know how much those claims cost your organization? Almost half of employers do not.

The reason. Most organizations treat disability as a payroll practice, making it difficult to determine costs. Yet those costs could be as high as 15 percent of your organization’s payroll, estimates the International Society of Certified Employee Benefits Specialists (ISCEBS). And the Social Security Administration predicts a 37 percent increase in disability insurance claims as the work force ages.

In a new report on disability insurance, ISCEBS calls salary continuation and STD “the black hole of employee benefit plans in terms of quantifying cost and controlling utilization.”

The hurdles. Union contracts, employees’ views that the benefit is low-value and lack of management buy-in all contribute to a perception that disability insurance isn’t particularly valuable.

Your employees are just as likely as you to be in the dark about their STD benefits. Two separate surveys by Guardian Life Insurance and the National Association of Insurance Commissioners reveal that employees do not believe they will become disabled and do not know how much coverage they currently have.

Education, communication, savings

Knowing how much your organization pays for STD benefits and educating your employees about their value could help you push for changes that would prepare your organization and staff for inevitable disabilities.

Some strategies include:

1. Switch to a noncontributory disability benefit. Organizations that require employee contributions find that employees don’t enroll.
2. Benchmark your plan against others in the industry to learn whether your benefit is more generous than it needs to be or doesn’t cover enough.
3. Communicate your disability plan’s details to employees via a benefits newsletter, e-mail and your intranet.
   Tip: Don’t just post the summary plan description. Explain how employees qualify for benefits; what is expected of them while on leave; and how much money they’ll get if they become disabled.
4. Survey employees to learn whether disability insurance is a valuable benefit. Nationally, employers rank it as the fifth most important benefit (see box below), an indication that you might need to change your own perception of its value.

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Short-term disability costs

Percent of payroll                                 Percent of employers

spent on STD benefits                        who pay that amount

  0 to 5%                                                           53%

  6 to 10%                                                           6%

11 to 15%                                                           2%

Don’t know                                                       41%

Source: International Society of Certified Employee Benefits Specialists (ISCEBS)

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