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Doing too little, too late is money wasted - part five of eight
Ian Sanne, Chris Barker and Alizanne Cheetham. Business Report. 02 June 2003. Republished courtesy of Independent Newspapers (Pty) Ltd.
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In part two of this series, we spoke about the economic viability of treating the workforce. International and local studies have shown that treating the workforce would save the company money. Simply put, antiretroviral treatment costs less than the absenteeism, loss of productivity and disability costs that are incurred as an employee becomes ill when treatment for HIV/AIDS is not available.
Firms suffer the greatest cost at the time of disability, when the employee is no longer able to work. Most employees are covered by disability policies, which require the employer to continue paying the salary of the disabled employee for an insurer-contracted "rehabilitation period", usually three to six months, during which time the firm is encouraged to relocate the disabled employee (find work he or she can still do - a highly ethical mechanism).
While someone who loses a hand can perhaps be transferred from typist to telephone operator, employees in the final stages of AIDS are unlikely to fare better in an alternative job. They need rest and access to medical care, and would benefit from being at home rather than decreasing their life span in a hostile working environment. The solution to removing this company cost lies in putting employees on disability when they run out of effective antiretroviral treatment options, and before they even start their cycle of demise resulting in additional productivity and absenteeism costs.
This is not as easy as it initially sounds. Disability insurers have measures for what qualifies as disability, and they usually include CD4 (measure of immune system constitution) levels and incidences of opportunistic infections - all measures that occur after the company has incurred productivity losses. We discussed in previous weeks how it is not financially viable to start treatment after the employee has started showing productivity losses. Some of this may sound ruthless but deeper insight shows otherwise and trade unions in particular have been in favour of curtailing the disability period. It is good for all parties.
We have already touched on the benefits to the employer. The firm avoids the productivity losses associated with the death of an employee from HIV/AIDS. The record of the treatment period by an outside service provider can suffice as evidence of the employer's commitment to rehabilitation, expediting the insurance claim process. The disability insurer also benefits. The insurer gains the present value benefit of delaying a payout by seven years, equivalent to a 40 percent decrease in the final payout, let alone the benefit of premiums paid during that period. Of course the insurer must be persuaded that the treatment intervention put in place will truly yield this seven-year extension.
Finally, the employee benefits. Being allowed to go home with a disability benefit is far more palatable than having to work in the final stage of one's life. Employees should not have to carry, as well as a physically crippling illness, the unimaginable emotional burden of worry about the family's future, as well as possibly problems of workplace hostility and ostracism towards a status that can no longer be disguised.
In fact, the manner in which firms currently keep employees working to the last day, in a vain attempt to maximise their earnings before death, beggars belief. Bear in mind that an employee sent home with a 75 percent disability package will earn that 75 percent for longer than the alternative 100 percent salary in a tough environment, will have the opportunity to spend time surrounded by family and friends (who may or may not be aware of the employee's HIV status), and will die in a loving environment. We have found that 99 percent of their audited HIV deaths studied were in-service deaths (deaths while employed, not necessarily at the workplace). This is clear evidence that we're not doing enough to help employees through these last days, and that disability insurers are not making it any easier.
So how does one secure these savings? The principles are easy, but it does require up-front design considerations, and most firms are missing the opportunity.
The first requirement is to negotiate this arrangement with the employees' representative body. When employees start treatment they need to be aware that eventually their treatment may fail, and to agree that this would be the appropriate time to leave the workplace, before they become truly ill. An expedited process reveals less of the employee's HIV status than the protracted disability claim process which is common today. Dealing with the insurer is more complex and this negotiation is better managed by an experienced broker. First, the insurer needs to believe that on average, the lives of HIV-positive employees will be extended through treatment by seven years. Second, the insurer must be steered towards a unilateral disability waiver for HIV/AIDS, across the workforce.
Many factors work against your first argument. Firms across South Africa are implementing bare-minimum programmes ("We'll pay for your treatment when you are truly ill") and, as we will see in a future article, these deliver neither life extensions nor savings to the employer, the disability insurer - nor, of course, the employee. It's not easy to persuade an insurer that a different programme will truly deliver life extension. The key is to use programme providers that have secured credibility, and brokerage firms that have managed this negotiation in the past. Of course, selecting a disability insurer who understands the underlying economics is equally beneficial, but it is important not to fall into the trap of allowing the insurer to manage the programme.
The second argument is a little more insidious, and may not be won in the first round. It's easy for an insurer to say that for every employee who successfully undergoes treatment and achieves a life extension, the disability waiting period will be waived. But for the plan to work, failed cases must be treated in the same way. The employer must point out that the seven years is an average, and that some employees (notably those who are identified as HIV-positive late) may die within a year of commencing treatment. The survival time of employees depends on a range of factors, and the insurer should accredit the HIV/AIDS management programme and allow waivers across the entire employee base, provided the programme maintains minimum standards. To repeat a very important point: the insurer needs to be convinced of the medical credibility of the management programme because the benefits to the insurer are based on the successful extension of employees' lives. A substandard HIV/AIDS management scheme will not keep employees well and will not produce savings for the insurer.
Minimal HIV/AIDS interventions are money thrown away. Employers should either do this properly, or prepare to account to their shareholders down the line. |
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