Spring has been selected to help the Maryland Department of Labor (MDL) more effectively implement and administer the Family and Medical Leave Insurance (FAMLI) Program. Check out the press release here.

Captive International has released the winners for the 2022 US Awards. Spring is proud to announce that our company and our Managing Partner, Karin Landry were selected as winners for Best Feasibility Study Firm and Best Feasibility Study Individual (respectively). We were also highly commended for Best Actuarial Firm, Best Individual Feasibility Study (Prabal Lakhanpal) and Best Actuary (Peter Johnson).

Our Senior Vice President, Teri Weber published an article explaining how employers can better gauge the efficiency of their leave management programs and highlight areas for process improvement using the secret shopper model. Check out the full article published by the Disability Management Employer Coalition (DMEC) here.

The World Health Organization defines burnout as: a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed and recognizes three identifying characteristics of the phenomenon:

  1. Feelings of energy depletion or exhaustion
  2. Increased mental distance from one’s job, or feelings of negativism or cynicism related to one’s job
  3. Reduced professional efficacy

Burnout has gained its status as a bona fide buzzword for good reason. A recent survey by Indeed found that 52% of workers were feeling burned out, up 9% from pre-COVID times; while a 2021 American Psychological Association study showed that 3 out of 5 employees reported negative impacts of work-related stress, such as lack of interest, motivation, and energy. The impacts of burnout go beyond an unhappy workforce. In fact, employees struggling with burnout are:

All of these factors contribute to lost productivity, a drain on both financial and non-financial resources (e.g., other team members needing to take on more from a burned-out colleague, or resources spent on replacing employees that have resigned due to burnout), and overall a workplace environment that is far from ideal. Although every industry is struggling with burnout, healthcare and higher education are industries with unique challenges. Both require a higher onsite presence than other industries and have experienced a lot of change related to the pandemic.

At this point, you have likely heard the term burnout and understand its prevalence, but perhaps don’t have a clear path forward to prevent or mitigate the issue.

What to Do About Burnout

If you notice a team member seems less engaged or enthusiastic, tangibly overwhelmed, is declining in performance, or just less present – these are all flags for burnout. Often burnout can be nipped in the bud before getting to a more extreme state if you know the signs and have tactics in place toward resolution.  Often supervisors will notice these signs early in the process, which means training related to burnout and compassion are imperative.

From a quantitative perspective, we’ve seen organizations successfully respond to employee burnout by implementing or boosting the following:

On the more tangible side, wellness tools like Headspace, Calm, and Noisli have been developed to tackle stress, focus, and productivity. There is also a range of virtual counseling and mental health platforms available for employers to provide additional support to employees. At Spring Consulting Group, we have access to a platform called Spring Health, which offers counseling services, Employee Assistance Programs (EAPs) and more.

Burnout solutions must align with your organizational goals and demographics. I mentioned that industries like higher education and healthcare have different forces at play, which need to be accounted for in a burnout strategy. It can be a challenge to know where to begin but expanding on current offerings can be an easy first step as well as surveying employees to understand what services would be considered value-add to most participants. The key is to know burnout is negatively impacting your population and if unaddressed it will compound an already burdened attraction and retention strategy. The time is now to make it a priority and find solutions.

1https://thrivemyway.com/burnout-stats/
2https://www.gallup.com/workplace/237059/employee-burnout-part-main-causes.aspx

Executive Summary

Musculoskeletal (MSK) conditions are a driving force behind healthcare spending, representing an estimated 17% of all spending in the US healthcare market. In addition, MSK conditions are the leading contributor to disability worldwide.1 Some examples of MSK conditions include osteoarthritis, rheumatoid arthritis, osteoporosis, sarcopenia, back and neck pain, and fibromyalgia.2  MSK pain may be acute or chronic, localized or affecting the entire body.3 Additionally, conditions may or may not be related to work, creating an added layer of difficulty in understanding the condition and addressing individual patient needs.

Many models currently exist that attempt to control costs related to MSK conditions. While the vendors providing these programs are confident in their success, it can be difficult for employers to select a program that addresses the needs of all employees with relevant conditions. Therefore, a thorough and ongoing review of organizational health data is necessary. For example, what a hospital needs in an MSK program may vary greatly for an employer operating solely out of an office setting. When reviewing workers’ compensation claims, how many are MSK related? If there is a concern, employers may want to start by implementing ergonomic reviews where the employee works to ensure there is nothing at work that is negatively impacting the employee. Other attempts to address MSK costs focus on care and treatment after the injury or disorder exists such as overall wellness programs, one-on-one coaching, and digital physical therapy offered as an employee benefit.

What is the impact on healthcare spend?

– Musculoskeletal (MSK) conditions are the top cost driver of healthcare spending, followed by heart disease, cancer, and diabetes.
– The average health cost per member with MSK condition increased by 40% between 2010 and 2019.
– COVID-19 aggravated this trend as more workers shifted to remote work; 70% of employees with MSK conditions experienced new or increased pain.4
-The Department of Labor’s Bureau of Labor Statistics estimates that about 30% of workers’ compensation injuries fall under MSD.5

As costs have increased, traditional approaches to treating MSK conditions have not shown a corresponding improvement in patient outcomes. This may include surgery, advanced imaging, injections, and pain management.6  It may be time to consider alternative treatment options to appropriately address these rising costs and employee pain levels.

What alternative models exist?

As employers, employees and providers begin to understand that traditional treatment options may not be the best approach for specific cases, alternative approaches have grown in popularity. Workers’ compensation claimants receiving opioids dropped from 55% to 24% between 2012 and 2018, while there was a 131% increase in the use of massage to address chronic pain, a 26% increase in the use of orthotics, and a 15% increase in the use of physical therapy, according to the National Council on Compensation Insurance (NCCI).7

Employers who have identified a significant impact of MSK conditions on their claim costs should seek programs that can be added to their benefit offering. There is a large market for these alternative treatment options, some components of which are listed below:

Specialty MSK vendors track data that implies overall success including a 50% to 70% reduction in pain, 40% to 75% reduction in anxiety and depression, increased adherence and participation in programs, surgery avoidance, and return on investment for employers.

What should I do as an employer interested in an MSK program?

Employers must begin by understanding the cost associated with musculoskeletal conditions within their population, as well as the range of conditions employees may be experiencing. If costs (medical and pharmacy) are significant or increasing, employers should consider alternative programs that would benefit employees and the plan. Identifying a pattern may demonstrate the need for a specific approach like preventive programs or ergonomic assessments.

From there, market research will be necessary to understand pricing and select a vendor with the best program for your population. Spring’s consultants are here to help with market research, claims and data analysis, and/or a Request for Proposal (RFP) process so that you find a solution that best meets your organizational needs.

1https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes,  https://www.who.int/news-room/fact-sheets/detail/musculoskeletal-conditions
2https://www.who.int/news-room/fact-sheets/detail/musculoskeletal-conditions
3https://my.clevelandclinic.org/health/diseases/14526-musculoskeletal-pain
4https://healthactioncouncil.org/getmedia/a738c3c5-7c23-4739-bb8d-069dd5f7406b/Hinge-Health-State-of-MSK-Report-2021.pdf
5https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes
6State of MSK Report 2021, Hinge Health
7https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes

Coming out of our COVID haze, it can be difficult to remember a time when employers could be truly strategic and proactive without priorities evaporating due to lockdowns, staffing shortages, travel bans or taking a U-turn due to pressures in other areas of the business. The time is now to pivot back to your strategic plans related to employee benefits. We recommend the road to an optimal benefits program be lined with solutions to specific pain points and cultural considerations at your organization. However, I advise at least considering the following within your strategic roadmap to see if they are a fit and can close gaps within your current program. 

1) Employee Surveys

Priorities within your workforce have likely changed considerably in the past two to three years.  If you haven’t asked employees about their priorities related to employee benefits, it is time!  Some of your more traditional benefits or office-affiliated perks that may have been linked to attraction and retention in the past are no longer a value add to employees.  It is not enough to talk about perks and flexibility; needs must be better understood to ensure you are providing something that actually attracts and retains talent, instead of the

2) Lifestyle Accounts

Financial accounts within employee benefits are not new (e.g., a Flexible Spending Account), but recently employers have started using these account-based perks in different ways to fill a gap that exists in their offering while providing ultimate flexibility.  These accounts are taxable but can be used within the parameters set by the employer.  Organizations may use them to support just about anything, but common categories today include:

– Medical procedures that may not be covered within the medical plan (i.e., infertility services, elective procedures, etc.)
– Travel expenses for medical services
– Family-focused benefits (i.e., doula, etc.)
– Legacy wellness support (i.e., fitness equipment, fitness classes)

The beauty of these services is that they can be selected based on employee needs as well as organizational culture and budget.

3) Absence Policies and Processes

Diversity, equity, and inclusion (DEI) are at the top of the list of internal initiatives, and goals are uniquely defined based on how much progress has already been made.  It goes without saying that DEI is critical to the success of all companies, but I think a key area of DEI that requires some additional attention is your corporate absence strategy.  Over the past few years, organizations have developed additional absence policies around COVID-19 and Monkey Pox, but there has also been a large push toward more family-focused leave of absences surrounding bereavement, parental leave, and the like.  It’s important that DEI initiatives within employee benefits focus not only on the services but also on the time off that may be required, and viewing this through the many lenses of your diverse workforce. 

4) Oncology Support

As benefits professionals, we have worked diligently to identify point solutions for high-cost and highly disruptive conditions.  While point solutions continue to be part of a strong strategy, most employers have or will see an increase in oncology prevalence and spend due, in part, to expensive treatments but primarily driven by disrupted or delayed care and screenings. 

Initial concerns with COVID-19 not only decreased primary care visits but snowballed, as providers later had limited appointments available due to overwhelming demand, which has translated into undiagnosed cancers.  Now as participants are getting back to their primary care physicians, many cancers have progressed further or upstaged, creating the need for more intense and complex treatment. 

In addition to the direct cost of cancer care, employee productivity is significantly less after a cancer diagnosis, even if that diagnosis is within their extended family. 

Spring encourages employers to seek a proactive and holistic approach to oncology support, including some or all the following:

– Monitor screening engagement
– Encourage prevention including reminders and other communications; consider incentives
– Educate and support initial and ongoing care decisions
– Concierge support
– Clinical support

Of paramount importance is to educate and engage employees before a diagnosis, so they know where to go for initial support.  Those first few weeks after a diagnosis are critical to setting the stage for appropriate treatment and clinical review and/or second opinions.  There are some free and buy-up options in the market provided by top-tier cancer care providers/facilities.  Those have brand recognition and are designed to provide unbiased support but, in many cases, they also funnel patients to their service centers.  Another consideration available is point solutions that are agnostic to cancer care providers/facilities and provide concierge support but do have an add-on charge, typically as a per employee per month (PEPM) or per referral model.

5) Healthcare Disparities

One of the most complex items that should be on your roadmap is to examine what healthcare disparities exist in your population. For starters, ensure multilingual communications are available to close healthcare gaps for those with language barriers.  From there, it is important to begin to stratify your population – if your size warrants – and begin to examine if health outcomes are impacted by race, location, earnings, and/or other social determinants of health.  This strategic initiative must be performed in collaboration with your insurers and third-party administrators and will take dedicated time to set a methodology and refine your findings over time.  The key is to at least get started by looking at the data and talking about how you can improve your understanding of the current state to work toward better data in the future.

Setting the strategic plan for your employee benefit package should be customized to your organization’s priorities and complexities that are identified through claims experience and survey information.  Given each organization has its own culture, demographics, and business priorities, it is impossible to set a perfectly standard list of considerations when it comes to your employee benefit strategy. But as you drive toward the best vision for your company – off in the horizon – be sure to stop along the way to check out these five hotspots of benefits planning.

Spring frequently helps employers assess different solutions, plans, and programs and build them into their roadmap. One client, edHEALTH, is currently organizing three solution committees to refine areas of opportunity and prioritize solutions based on demand and change readiness. 

With healthcare costs skyrocketing and employee needs shifting, many employers are examining how they can save money while still providing strong benefits packages. Last week I spoke at the Vermont Captive Insurance Association (VCIA)’s 2022 Annual Conference on current medical stop-loss market trends and how captives can help cut costs. My fellow panelist, Tracy Hassett, President of edHEALTH, a collection of educational institutes and client of Spring’s spotlighted their captive which has seen significant savings.

Cost of Healthcare

Healthcare costs keep climbing for both employers and employees and our actuaries predict an increase in medical trends for 2022 between 4%-7%. Looking back further, within the past decade healthcare costs have risen roughly 80% for employees and 60% for employers while economic growth has been consistent at 2.5% annually. This increase in costs is coming from a range of factors including administrative expenses, prescription drug prices, increased utilization/deferred care, and risk-based capital of insurers.

We are also seeing a transition in what employees want out of their benefits packages. Our working population is changing; boomers are retiring and transitioning from employer health insurance to Medicare. Millennials have different needs and are looking for straightforward and convenient benefits without high costs. These shifts in healthcare priorities along with high costs have slowly made self-insurance the norm, with a Spring survey reporting 64% of all employers are now self-insured.

When looking at the healthcare market the vast majority of pharmacy spending is through pharmacy benefit managers (PBMs). Employers estimate outpatient pharmacy to be about 18% of health spending, with an additional estimated 10% within medical claims. Also in 2020, overall drug spending rose by almost 5%, with utilization and new drugs driving most of this increase.

Self-Insurance

We are seeing a fundamental change in the healthcare market, and all parties within the healthcare continuum are being asked to handle risk and chase healthcare dollars. This has pushed many employers to move towards self-funding plans which allow for greater customization, more control over risk, and potential cost savings. Many of these self-insured programs are looking at putting medical stop-loss into a captive, with a Spring survey reporting that although less than 50% of self-insured programs have stop-loss coverage, 42% of those that do have it within a captive.

Within the COVID era we have also seen many changes in the industry and numerous employers are reevaluating their healthcare packages. There has been a giant spike in mental health and COVID-19 resources like telehealth, and a decline in elective surgery. These trends have left hospitals and providers with the short end of the stick, leaving self-insured employers and health plans as the parties saving the most in the insurance landscape.

Case in Point: edHEALTH

Tracy Hassett led the case study portion of the presentation, with edHEALTH being a prime example to of a captive successfully yielding savings in healthcare costs as well as flexibility of options. edHEALTH is a consortium of 25 higher education institutions who came together (originally as a group of six schools) to bend the trend in rising healthcare costs. Today, edHEALTH covers  almost 15,000 employees (~30,900 lives) and aim to better understand and control their healthcare costs and risk. Tracy explained edHEALTH’s captive structure and how the captive retained savings of $6.7M since inception through 2020, in addition to paying out $3.2M in dividends.

These universities all have similar risks when it comes to healthcare, so investing in a group captive was the ideal solution. Each member chooses their own level of risk and pays for their own claims (below the established self insured retention level [SIR]), but still has control of their program. Tracy continued to explain how prescription drug costs are one of their largest challenges when trying to save money in creating/reevaluating healthcare plans. However, with their captive in the past four years edHEALTH members have saved an estimated $50M on Rx costs.

All in all, I was honored to join in the thought-provoking discussions that took place at VCIA. Since medical stop-loss is one of the biggest areas of focus for our clients right now, it was a pertinent conversation and I was glad to have the opportunity to share my perspective, as well as the success of edHEALTH. Burlington remains as perfectly quaint as ever, and I look forward to next year’s event.

We are all feeling the impacts of inflation, and as the word “recession” continues to be a popular one among political, economic and social conversations, we thought we would sit down with our captive insurance experts (Karin Landry, Prabal Lakhanpal and Peter Johnson) to get their two cents on how a possible recession or economic downturn interplays with risk and financial management tactics, with a focus on captives. Here’s what they had to say.

1. What are some possible impacts of a recession on captive insurance companies?

Peter: Changes in risk profiles driven by economic changes (examples include commercial auto frequency moved down then up, cyber ransomware on the rise, healthcare workers’ compensation programs utilized, excess liability/umbrella rates increased substantially, etc.). This also impacted the commercial market and captives often stepped in to fill the gap.

Prabal: Changes in exposure units: a recession may lead to reduction in workforce and therefore a change in insurance spend. On the employee benefits side, during times of uncertainty we typically see an increase in disability claims as well as a spike in usage of health insurance. When taken together with the change in exposure units, benefits programs may see a reduction in performance.

Karin: A continued increase in captive interest. Clients are looking at different ways to save money during a recession. For those organizations that already have captives, risk managers will need to prove the value of the captive, as typically there are a lot of dollars funding reserves that management wants access to in order to improve cash flow during a period like a recession.

2. Are there steps captive owners can take to safeguard their captive against a recession? If so, at what point should they implement them?

Peter: We recommend having service provider and reinsurer relationships in place to be enable the ability to make quick changes and file a captive business plan change to adapt according to the market.

Prabal: For existing captives, we advise undertaking a captive optimization or “refeasibility study” every few years, and this will be especially important if we enter a recession. This process assesses captive performance against original goals, aims to realign the captive according to changes in corporate objectives or priorities, evaluates impacts from recent regulatory changes and/or market trends, considers additional lines, analyzes the domicile, and so forth. Captive optimization helps organizations understand the vulnerabilities of your captive and help you shore them up.

Further, have your actuaries undertake stress testing of the captive to ensure financial stability and consider getting rates as a captive, where appropriate. Then, implement a dividend return policy, which ensures that in the time of need, there is a clear outline of how the parent organization can access any surplus in the captive. Be careful here as you don’t want the parent entity drawing down the surplus so much that the captive loses financial strength.

Karin: Risk managers should determine whether or not their captives are optimally funded. They should calculate the value of the captive to the organization before it becomes a management issue. They should explore other lines of coverage to determine whether or not it will save money, improve investment income, and/or increase cash flow for the organization going forward.

3. How would a recession affect underwriting?

Prabal: Insurance companies have two main revenue streams: 1) underwriting income and 2) investment income. In a recession environment, investment income becomes less likely or harder to come by. Therefore, underwriters are laser-focused on ensuring underwriting income, resulting in tighter underwriting standards. For example:

Peter: Carriers often tighten underwriting standards and may refuse to underwrite certain risks and/or business types all together. We’ve seen this for certain casualty lines like cyber, GL, and excess liability. Carriers may also be forced to remove manual rate discounts and/or increase rates all together while narrowing coverage at the same time.  

Karin: Because underwriting practices may tighten, risk managers must understand their organization’s risks better than the marketplace.  You could find that your experience is better than the book of business at the carrier level. If this is the case, a captive may make sense.

4. What about reserving?

Peter: To the extent a carrier’s or a captive insurer’s reserves are in a strong position due to favorable experience, reserve releases can be expected and may offset some of the poor 2022 investment experience we’ve experienced. The opposite also holds for exposures with loss trend on the rise that are driving up overall loss costs.

Prabal: Actuarial stress testing of the captive also comes into play here to ensure stability and dividend return strategy so that there is a consistent approach.

Karin: For captives that book discounted reserves, changes in the discount rates will affect the level of reserves captives carry. For those lines of coverage that are sensitive to recessions like workers’ comp and disability, the impact of negative experience should be factored into the reserving process.

5. Could the economic environment cause changes in captive methodology or the lines placed within a captive?

Peter: We’ve seen captive owners become more interested in captive utilization particularly when they feel like carrier coverage and pricing is unjustified based on their own loss experience.

Prabal: Captive optimization helps with optimal capital utilization. In a recession where capital is scarce, companies benefit from being efficient with how they use it.  

6. What sort of pressures might captives face during a recession in terms of loan backs or dividends to the parents, or any impacts on capitalization?

Peter: We’ve certainly seen dividend policies put into place for certain clients that have been hit harder during the recession than others. Some have looked to access their captive capital that was built up to significant levels over the years.

Karin: As noted earlier, management may see the reserves of the captives as a pot of money to access; proving the value of the captive negates that issue.

7. The Great Recession around 2008 caused a stall in captive formations. Do we think that could happen again?

Peter: It seems fairly unlikely to have a similar scenario to 2008 since a portion of the collapse was driven by extremely poor mortgage underwriting standards in place. But anything is possible.

Prabal: Further, unlike in 2008, the commercial markets are still in a hard market cycle. This will likely be accentuated in a recession and therefore yield an increase in captive formations.

Karin: Because capital is scarce during a recession, this may spur the use of cell captive programs as opposed to pure captives to meet the needs that risk managers have to control costs and minimize price increases.

8. Anything else related to economic volatility that captive owners and risk managers should keep in mind?

Prabal: One thing would be the potential to free up captive capital by using loss portfolio transfers. The current interest rate environment is likely to create a preferential market for these opportunities.

Karin: Organizations’ hurdle rate might change as a result of the recession. This would necessitate looking at the opportunity costs associated with captives and their reserving process. Additionally, organizations should evaluate their insurance partners to make sure they are sound as they will be grappling with some of the same recession issues noted here. I wouldn’t be surprised if some of the insurers experienced difficulties and either left the marketplace, contracted and changed the coverage levels that they offer, and/or focused in on certain risks while excluding other risks from their policies in accordance with market shifts.

Our Chief P&C Actuary, Peter Johnson participated in a panel discussion at the Vermont Captive Insurance Association (VCIA) Annual Conference on hard-hitting solutions to hard market concerns. Check out this article in Captive International which summarizes key points of the discussion.