MARKETING
PMA brings IDM to the middle market
By Dennis Pillsbury
Leo D. Tinkham, Jr., is The PMA Insurance Group's vice president of Integrated Workers Compensation and Disability.
The PMA Insurance Group, Blue Bell, Pennsylvania, has been writing workers compensation insurance for more than 85 years and they've gotten pretty good at it. In fact, although PMA is a regional company, operating primarily in the eastern part of the United States, it is the 27th largest writer of workers compensation insurance in the United States, according to data compiled by the A.M. Best Co., Oldwick, New Jersey. But even more startling is the fact that PMA writes the largest number of integrated disability management (IDM) accounts in the country, according to the Integrated Benefits Institute (IBI) in San Francisco. For a company that started writing disability insurance only in 1996, that's quite an accomplishment.
We talked to Leo D. Tinkham, Jr., vice president of Integrated Workers Compensation and Disability, about the reason for PMA's success in implementing IDM. "We built it internally from the ground up," Tinkham says, "using all our own employees to keep control and focus. We built it as part of workers compensation rather than as a separate operation, with short-term and long-term disability (STD and LTD) embedded into the workers compensation model."
PMA One®, the company's integrated disability product, essentially provides for the consistent management of all disability-related absenteeism, whether occupational or non-occupational. It includes absences that may involve LTD, STD, workers comp, the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA) and Social Security. One case manager handles the information for all disability-related absences. This "eliminates duplicate efforts in administering lost-time programs," Tinkham points out. "It also eliminates gaps and overlaps in coverage that may occur with uncoordinated programs."
Because it is based on PMA's workers compensation model, the IDM program provides for contact with disabled employees within 24 hours of notice of loss. The nurse case manager explains what benefits will be paid, clarifies ambiguous information, outlines an expected course of treatment, and defines an expected return-to-work date. This quick response helps to alleviate employees' concerns about what will happen and also shows the employees that their employer really is concerned about their recovery and anxious to get them back to work.
The PMA Insurance Group executives are (left to right): Tim Golden, PMA One corporate sales manager; Leo Tinkham; Monica O'Neill, vice president of managed care services; and John Santulli, senior vice president of marketing and field operations.
The quick response also makes employees less likely to become frustrated and seek help from the legal profession. As anyone who has had the dubious pleasure of watching daytime television may know, the programming is literally littered with commercials for attorneys who are willing to help you "recover" from any type of injury. Employees who are home on disability and haven't heard from their employers may very well dial one of those "800" numbers and suddenly, the cost of the claim has risen precipitously. As Tinkham notes, "our integrated disability program has a remarkably low litigation record. This is a direct result of managing all disabilities proactively." He goes on to point out that reduced litigation serves to reduce absenteeism, as well as keep costs down. "According to a Lou Harris survey, disabilities last an average of 12 weeks longer when an attorney is involved."
LTD contract supports return-to-work program
The use of the workers compensation model also is reflected in the disability insurance product. "Our LTD contract contains features that reflect our mission to return employees to work quickly and safely," Tinkham says. The features include:
* A return-to-work incentive benefit that provides a monetary incentive to motivate employees to return to work;
* A family care assistance benefit that subsidizes the cost of day care for the first 12 months of returning to work;
* ADA compliance support under which PMA reimburses organizations that modify their work sites to allow disabled employees to continue performing their duties; and
* Synchronized rehabilitation which supports return to work with an employee's current employer or another employer.
Advantages for agents
IDM provides several competitive advantages to agents, Tinkham points out. "It diversifies and augments the revenue stream in a positive way. It also positions the agent as a solution provider who is interested in helping the client save money."
Jean Brennan, consultant with Palmer & Cay Consulting Group in Richmond, Virginia, says that they used PMA One for one of their clients who was looking for an integrated disability package. "It's been great," she says, pointing out that "it has saved them a lot of money on both their short- and long-term disability. The client this year got a three-year rate guarantee for its disability coverage.
George Booth, a client executive with Palmer & Cay, adds "PMA did it for a client with 300 employees. Other carriers require a larger number of employees. The product provides a coordination of benefits and administrative ease that the client really likes." He continues: "Having one adjuster handling both workers compensation and disability claims is the key component in reducing the cost of lost-time claims. PMA really has figured it out and I am not aware of anyone else attempting to do this on middle market business."
Tinkham adds that IDM also facilitates a "more collaborative model within the agency. Producers can go out and do team sells." He continues that the product "puts the agency in control of more lines of business, which enhances persistency." It also opens more doors within the client's company. Agents primarily work with the risk management side. "However, disability normally is handled from the human resources side. This product allows the agency to begin to interact with human resources and perhaps set the stage for their entry into other employee benefit offerings."
John Bloomstine, president of Insurance Management Co. (IMC), Erie, Pennsylvania, agrees that IDM "helps with persistency. No one has come in with a similar product." Bloomstine admits that "price always has a lot to do with the insurance purchase and PMA's price is competitive. But, what normally closes the deal is PMA's unique product and service." He continues that IDM "really facilitates our efforts to maintain a close relationship with our clients and within our agency. We sell IDM as a team."
Bloomstine continues that "we have a number of meetings with clients every year and this allows us to talk about short-term and long-term disability and how to get employees back to work. We're also dealing with more people at the client's office. The people buying the comp are different from those buying the disability. We've gotten those people talking to each other and that's really helped get our foot in the door for other sales." He concludes, "PMA is great." (Apparently, the feeling is mutual. IMC is PMA's broker of the year. IMC also was the Rough Notes Marketing Agency of the Month in September 1995.)
The savings
PMA piloted its IDM program on its own population of 1,000 employees starting January 1, 1996. The results were a significant reduction in LTD claims from 14 in 1995, before the program was implemented to three in 1999. Tinkham attributes the improvement to the "application of return-to-work and ergonomics which served to shorten the length of disabili-ties so they didn't pierce the LTD."
Other companies have experienced similar savings. IBI compiled information on the results of several IDM programs, including:
* Owens Corning reduced the costs of disability by 48% over four years and generated a 90% employee satisfaction rate.
* Hughes Electronics reduced workers comp costs by 50% over five years. Total lost days fell 44% over a two-year period.
* Pitney Bowes reduced lost-time days by 42% in two years. Between 1991 and 1998, workers comp claims per employee fell 29%, cost per employee dropped 38% and cost per claim fell 11.6%.
In these days of rapidly rising premiums for both workers comp and disability, IDM allows agents to offer a proactive solution that may help to alleviate some of the impact of rising costs. It also places the agent in the position of helping reduce the indirect costs of lost time. According to the Washington Business Group on Health, between 8% and 12% of payroll is spent on benefits and indirect costs for employees absent due to sickness or injury. And IBI suggests that the majority of this arises from the indirect costs. One IBI study of a manufacturer's 65,000 employees over a three-year period found that the costs of lost productivity due to absenteeism were three times greater than the direct benefit costs paid those workers. The study looked at lost productivity based on the cost of maintaining the pool of workers necessary to cover the shift needs.
Tinkham concludes by noting that the transition to IDM can be accomplished quite easily. "A return-to-work program is essential, as is the education of management and the supervisory staff concerning the importance of early reporting of accidents." He says that implementation can take only a few weeks for small companies with one location. The time frame is longer for larger companies with a number of locations.
The PMA Insurance Group includes three primary insurers, Pennsylvania Manufacturers Association Insurance Co., Manufacturers Alliance Insurance Co., and Pennsylvania Manufacturers Indemnity Co.; a reinsurer, PMA Reinsurance Corp.; and Caliber One Indemnity Co., an E&S insurer. *
"Our integrated disability program has a remarkably low litigation record. This is a direct result of managing all disabilities proactively."
-- Leo D. Tinkham, Jr.
Vice President, The PMA Insurance Group
For more information:
The PMA Insurance Group
Web site: www.pmagroup.com