Can income protection insurance fund return to work?

income-protection-insurance

The Government is soon to launch a national Fit for Work service, including a tax exemption of up to £500 per employee to fund rehabilitation and return to work. Iain Laws asks if there is also a role for group income protection insurance (GIP) in preventing long-term absence?

The latest government-backed scheme is to pay £500 per member of staff to encourage an earlier return to work, via a new Fit for Work service. This service is intended to provide OH advice to employees, employers and GPs so that they can help individuals with a health condition. Scheduled to start in 2015, it will be supplied by Health Management Ltd in England and Wales, with a separate Fit for Work Scotland delivered by the Scottish Government, on behalf of the UK Government.

On the face of it, this seems like a good idea: any extra financial help to facilitate return to work must be a good thing. However, the details here remain woolly. Managing the assessment of all individuals after a time-specified absence on a national scale will need careful and detailed planning.

How could GIP help?

An initial area that needs clarification is whether the cost can be offset against existing, or new, private medical insurance schemes. Employers and the insurance industry will also need to know the extent of choice that the employer has on how this is spent.

This is a continuation of Welfare Reform recommendations and, as such, it increases the emphasis of responsibility on the employer, but in fact, they already have access to this kind of support via GIP policies, at a much lower cost.

As a type of insurance, income protection is often misunderstood by individuals and employers alike. With many commercial insurances, such as property or fleet, the number of claims will increase premiums, whereas GIP can be valuable in offsetting staff absence risks. Like most employer-funded insurances, the better the communication with the provider, the better the engagement. The reality is that it is in the interests of company-funded health and protection insurers to do what they can to facilitate health and wellbeing. Consequently, they all offer a raft of support at no extra charge to help keep staff at work.

Most GIP policies now automatically include full employee assistance programmes at no extra charge. It makes good sense for employers to make use of these services; they are run professionally, and confidentially, to further enhance support for employees and their families.

For all the additional benefits of GIP, the expense is not prohibitive. It can typically cost less than 1% of salary to introduce an element of cover for all staff, with this amount easily recovered from reduction in absence overall, when the policy is fully integrated within company absence management processes.

In the interests of managing all staff consistently, GIP is most beneficial when it is a company-wide offering. Some companies only offer it to a select number of staff, depending on seniority or length of service. However, the most effective absence management policies are those that apply to the whole company. Economies of scale also come into play here and it makes financial sense to offer this widely, and to proactively utilise it.

Other support is also available at no extra cost. For instance, OH providers will offer a number of guides on particular causes of absence, such as dealing with cancer in the workplace or correct posture for manual tasks. With musculoskeletal problems being one of the other main reasons for absence, prevention is the best place to start.

So, while the philosophy of extra funding to support return to work may be right, the detail needs to be fully thought through in order for it to work in practice on a national scale. There are many tools available to employers, which can be used to great practical effect.

What does this mean to employers?

With all the pressures of running a day-to-day business, particularly in the current economic climate, employers could be forgiven for missing the emphasis of Fit for Work, which arose from the Government’s response in 2012 to the independent review of sickness absence in 2011.

The starting premise, which seeks to tackle the spiralling cost of sickness absence to UK plcs, based on the underlying principle that work is good for you, is laudable. Unfortunately, this message is lost in the political arguments about state benefits, unemployment and the costs of long-term medical care.

In the meantime, employers of all sizes continue to be affected by absenteeism (and presenteeism) in the workplace, with many lacking the resources, time or knowledge to address it. Absence has a reported average cost of £680 per employee per annum, and this is just the quantifiable expense; if you add this to the immeasurable impact on morale and productivity to employees covering the work of long-term absentees, these costs are significantly higher.

Therefore, it makes complete sense to assess these absences early, in line with one of the key recommendations of the independent review of sickness absence in 2011. The plan is to encourage employers to arrange an independent medical assessment for all employees who have been absent for four weeks or more, with the aim of developing a return-to-work plan for each individual. It is a huge task to implement this on a national scale, and the funding required will be significant.

One other consideration to raise is that a number of employers struggle to manage the recording of absence consistently. Without a central reporting capability, absence tracking is difficult and unmanaged absence is more likely to become a long-term absence, meaning employers will struggle to implement the recommended four-week assessment.

A consistent approach is the best way to manage absence and employers should take note of the shift in emphasis here, where the onus will be on the employer to undertake assessments. And, with stricter government criteria meaning that fewer people qualify for state benefits, employees will be turning to their employer for support.

However, what does, or should, this support look like, and are employers already providing it? In principle, of course they should be, but the reality will be that they are hostage to day-to-day operational pressures where, all too easily, an absent employee can slip under the radar.

This is not intentional on the side of either party as, at this early stage, in the majority of incidences, neither have an expectation of the likely length of the absence. But, with no early intervention, all too quickly these can become long-term absences.

Role of the OH practitioner

For this reason alone, the proposed independent assessment would (or should) stop this trend, but how, in practice, will employers implement this? Current thinking would suggest that assessments will be delivered by OH practitioners.

At present, not all employers have access to OH, which raises the question of how the significantly increased volume of referrals will be delivered. But, more importantly for employers, how will they be funded, including the necessary follow-up on any recommendations? And will these general assessments fully consider the specific functional expectations of a particular role?

Outside of an established OH relationship, follow-up is unlikely, and even where this link is in place, initial assessments tend to be employee led. They would therefore be unlikely to challenge early return-to-work discussions in the way welfare reform change is expecting.

Income protection insurance: a genuine alternative?

This is where income protection offers more than insurance to employers, as a genuinely cost-effective alternative. Under income protection, the insurer can not only undertake the independent absence assessment at four weeks, but also extend this to proactive support for employer and employee, with a timely return to work.

Typically, this support would include access to early rehabilitation for common absence triggers, notably musculoskeletal and stress-related symptoms, where the latter would often be non-work-related.

These interventions can be standalone or in tandem with existing OH or other health provision. This offers clear benefits to both employees and employers, and the hidden value of the income protection insurance (where this support is integral) would not be lost on finance directors.

The value of income protection insurance for those unfortunate enough to be affected by serious long-term illness is clear but insurers should also embrace the opportunity to offer practical support for employers facing the new challenges of implementing Fit for Work nationally.

Employers should consider investment in income protection insurance for all employees, which would form an integral part, alongside Fit for Work considerations, of early absence management and intervention processes, with the majority of these costs absorbed by the insurer.

These immediate savings will create a return on investment, reduced absence durations, improved employee wellbeing and increased productivity.

About Iain Laws

Iain Laws is managing director, UK Healthcare, at Jelf Employee Benefits.
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