EMPLOYEE ASSISTANCE PROGRAMS
Serving employee needs and employers’ ROI
By Thomas A. McCoy, CLU
It’s no secret that the stresses of everyday life can have a detrimental effect on employee productivity. An employee assistance program (EAP) built into a benefits plan provides a means for an employee to obtain professional help in dealing with extraordinary stressors that impede his or her work performance.
Professional counseling through an EAP can be a potential lifeline for an employee who is undergoing problems affecting his or her work—whether from family strains, financial or legal issues, depression, substance abuse or work-life balance problems. Enlightened employers naturally want to be able to help employees through difficult times.
So, a business owner can receive a dividend in personal satisfaction that transcends the financial return from successful outcomes from EAP interventions. At the same time, establishment and promotion of an EAP is a business decision that deserves ROI analysis to determine whether or not it is a cost-effective way to help struggling employees.
With behavioral health issues on the rise, the financial stakes are high. Seth Moeller, president of KGA, a Massachusetts-based EAP services company, outlined the scope of the problems addressed by EAPs at a recent webinar sponsored by the New England Employee Benefits Council in partnership with the International Foundation of Employee Benefit Plans.
“The numbers that get reproduced consistently each year show that one in five working Americans have a mental health condition,” he said. “Of these, nearly 50% have a co-occurrence involving substance misuse. More than half of them (56%) receive no treatment, and almost all of them could benefit enormously from some sort of assistance.” Moeller added, “Nationally, short-term disability claims for mental health are increasing by 10% or more per year.”
Citing 2015 figures published in the Journal of Clinical Psychiatry, Moeller said the estimated cost to U.S. employers from depression alone was $210.5 billion per year—50% of which was the result of absenteeism, disability and presenteeism. In addition, in a three-month period those with depression experienced 70% higher medical costs.
“Under a typical employee assistance program,” Moeller explained, “coverage for counseling usually includes some number of face-to-face visits with a counselor, for example, five sessions, before the employee’s usage moves into their health insurance program benefit.” The employer’s costs may be based on a per-employee monthly or yearly fee or on a fee for service basis, Moeller said.
He also noted that family members of the employee typically are included in the coverage for EAP services. “About 8% to 10% of those utilizing an EAP are members of the employee’s household, but it varies widely by employer.
“Depending on the caliber of the EAP that an employer is partnered with, an EAP might cost somewhere between $1 and $3 per employee per month. These are relatively low investments. You spend more than this on coffee for employees.”
Moeller was joined at the webinar by Louis Servizio, executive director of Disease Management Strategy Group and the developer of Wellcast ROI™, which is used to calculate the return on investment for EAP services. Having hard numbers for ROI can be important to benefits managers, Servizio pointed out.
“Benefits managers and HR people intrinsically believe in employee assistance programs, but people who approve the budgets want to see return-on-investment figures. For example, they might want to compare the EAP’s ROI to the ROI for other healthcare programs such as those devoted to physical wellness,” Servizio said.
When calculating a return on investment for an EAP, Servizio first measures the levels of absenteeism and presenteeism by surveying employees who have utilized the EAP services. His firm asks these employees to quantify their time spent away from the office or distracted at their work by the problem for which they are seeking help. Employees are surveyed before they begin the EAP counseling and afterwards. Then dollar figures can be determined based on salary.
Return on investment results for EAP services can be reflected in an employer’s results more quickly than ROIs from other health-related programs, Servizio pointed out. “A wellness program that promotes exercise to control blood pressure or diabetes is likely to show progress gradually over time. Counseling sessions in an EAP may produce results that can be measured much sooner.”
The return on investment for an EAP can vary widely depending on the type of business being measured, Servizio and Moeller explained. Moeller provided an example comparing the EAP investment return of a hypothetical high-tech company with 500 employees with one for a healthcare company with 5,000 employees.
Using a 2% annual EAP utilization rate for employees of both firms, which he estimates to be the national average, he calculated an ROI of 282% for the 500-employee high-tech firm (a return of $3.82 for every dollar spent); for the 5,000-employee healthcare firm, he calculated an ROI of 54% ($1.54 for every dollar spent).
“Why are the ROI figures so much higher for a high-tech organization than for a healthcare organization such as a hospital? The average salary at the high-tech company is probably higher and the way their efficiency is measured is probably different,” said Moeller.
All EAPs are not created equal, of course. Moeller explained that at KGA their average annual utilization rate is 5.7% of employees, and their return on investment for their clients’ EAPs is 988% or $10.88 for every dollar spent on the EAP. Some of its clients have ROIs as high as 2,190%, a return of $22.90 for each dollar invested in their EAP.
His firm’s EAP clients with the highest returns, Moeller said, are those “where the capabilities of their employee assistance program are being integrated into their wellness program and promoted across the organization. Their managers are experienced in making referrals into the program when they are working with a colleague who needs support from the EAP.”
Servizio stressed the importance of utilizing data that shows the return that employees are receiving from EAPs. Until recently, he said, it has been very difficult to do this.
“Like a lot of other wellness programs, EAPs have incredible value, but until recently people didn’t realize it,” he said. “Everybody had to have one, and the prices came down. They became commoditized and underappreciated.”
Illustrating the dollar return employ-ees can receive from an EAP, Servizio referred to the example of the 500-employee high-tech firm shown above. “Using the 2% average national utilization rate, those employees would save a total of $2,592 per year by using the EAP services. The healthcare company with 5,000 employees in the example above, again with a 2% utilization rate, produces a savings of $25,592 for its employees using the EAP.”
Sometimes EAPs are called upon to respond to a crisis situation affecting many people in a workforce at the same time. “The death of an employee is the most common traumatic issue that we deal with. This can be a moment of truth for the EAP,” Moeller said.
Moeller and Servizio pointed out that EAP counselors also have responded to traumatic events such as mass shootings and severe weather events, helping employers and employees get through horrendous experiences. In Brazil, where Servizio is based, a large number of counselors are providing support to victims of flooding caused by a break in a mining company dam.
The more common situations an employee assistance plan responds to—such as depression or family problems—are highly private in nature. So, some employers might not promote the EAP as visibly as they do traditional wellness services. Moeller cautions that the success of an EAP depends upon its promotion by the employer.
Quoting Kathy Greer, the founder of KGA, he said, “An EAP can be only as valuable as it is visible and trusted.”
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Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.