Chapter 5

1. Chapter 5 Costing the Effects of Employee Assistance and Worksite Health-Promotion Programs

2. The Facts • Substance abuse & mental illness cost U.S. companies over $100 billion per year in lost time, accidents, health care, and workers’ compensation costs. • Substance abuser are absent 3 times more often and use 16 times as many health-care benefits as nonabusers. • 65% of all accidents on the job are directly related to drugs or alcohol. • Substance abusers are 6 times more likely than their co-workers to files a workers’ compensation claim. • Nearly 4 million American women suffer domestic abuse each year. The abuse exists at every level of society, and the effects spill over into the workplace. Victims of domestic abuse miss 175,000 days of paid work annually and costs $3 to $5 billion a year in absenteeism, reduced productivity, and increased health-care expenditures.

3. Employee Assistance Program • An EAP is a system that provides confidential, professional care to employees whose job performance is or may become adversely affected by a variety of personal problems.

4. Prevalence of the EAP Programs • Two major forces, legal and economic, have combined to fuel the development of EAPs. • Legally, civil rights legislation, the Americans with Disabilities Act, federal rehabilitation laws, and erosion of the at-will doctrine severely constrain an employer’s ability to fire employees. • Employers are becoming more economically aware of the considerable “sunk” cost invested in employees in the form of recruitment, selection, and training.

5. Critical Attributes for a Successful EAP • Critical attributes include the following: • Top-management backing • Labor support • Confidentiality of EAP data • Easy access • Supervisor training • Union steward training (if applicable) • Insurance involvement • Breadth of service components • Professional leadership of the EAP • Follow-up/evaluation to measure the effectiveness of the program

6. Costs and General Benefits • EAPs cost employers only $20 to $30 per employee annually but can save many times that amount by reducing insurance claims and absenteeism.

7. Example of EAP Cost Saving • At NCR Corp., the company offered financial incentives to employees to use its EAP before seeking mental health care of substance abuse treatment elsewhere. After a year, 80 percent of the cases were resolved without using health-care benefits.

8. Difficulties in Evaluating EAPs • Two types of evaluation: • Ex ante evaluation refers to forward-looking assessment of the likely future effects of new policies of proposals. • Ex post evaluation of policies refers to backward-looking assessment of the effects of introduced policies of proposals.

9. Difficulties in Evaluating EAPs • Evaluating EAPs quantitatively lead to 3 major problems (the form most operating executives demand): • How to establish all program costs and benefits • How to express and translate the costs and benefits into monetary values • Unless proper experimental controls are exercised, cause –effect relations between EAP involvement and one or more dependent variables may be difficult or impossible to identify.

10. Expressing an EAP’s Economic Returns • One method of determining the productivity cost (ex-ante) attributable to employees who abuse alcohol uses the following recommended formula: Number of workers in age-gender cohort in workforce × Proportion of workers in age-gender cohort with alcohol abuse problems × Annual Earnings × Productivity decrease attributable to alcohol = Cost of alcohol-related reduced productivity

11. Expressing an EAP’s Economic Returns • A more general formula developed by the City of Phoenix: • To determine the average annual wage of employees, divide average total number of employees into annual payroll for employees. • To obtain the payroll for troubled employees, multiply average annual wage by 18% of the total number of employees. • To determine the present loss due to troubled employees, multiply the result of step 2 by 25%. • To identify the potential amount saved per year by an EAP, multiply the result of step 3 by 50%.

12. Turnover • Turnover savings through the implementation of an EAP may be termed “opportunity savings” because they reflect costs that were not actually incurred (ex-post).

13. Outpatient Versus Inpatient Treatment for Substance Abuse • There is a large difference in costs between outpatient and inpatient treatment for substance abuse. For example, outpatient costs range from $5 to $100 per counseling session, and generally last from six weeks to 18 months. The cost of a typical month-long residential program ranges from $9,000 to $12,000 or more.

14. Absenteeism • With an EAP in place, employers are able to help employees at earlier stages of such things as alcohol or drug abuse, personal-emotional problems, marital or family problems, and obstruct the cycle before absenteeism becomes a crisis in that employee’s work.

15. Supervisors’ Time • Without EAP’s available, supervisors are forced to deal with employee problems. Supervisors are then left with less time to carry out their duties and spend valuable time counseling employees.

16. Accidents • Troubled employees are involved in more on-the-job accidents than employees who are not troubled. An EAP might be able to save a company money if the number of accidents is reduced.

17. What can we conclude about EAPs? • Judicious choice of the outcomes in interest, careful measurement of costs and benefits in economic terms, and the use of one or more control groups will permit stronger inferences regarding the practical impact of EAPs.

18. Costing the Effects of Worksite Health-Promotion Programs • The theory of WHP is Simple: it is cheaper to keep an employee healthy and on the job than it is to pay the costs of ill health, rehabilitation, and replacement.

19. Levels and Types of WHP Programs • WHP Strategic features: • Identify individual risk factors among employees, using screening and assessment tools. • Educate employees about risk factors and their relationship to disease. • Motivate employees to reduce the risk factors. • Encourage employees to make a personal commitment to risk reduction. • Offer specific programs to control major risk factors such as smoking, substance abuse, excess weight, and high blood pressure. • Follow up and support employees in their efforts to change.

20. Levels and Types of WHP Programs • Three functional levels of implementing WHP programs: • Level I – Attempt to make employees aware of the consequences of unhealthy habits. • Level II – Target lifestyle modifications by providing specific programs such as stress management. • Level III – Attempt to create an environment at work that will assist employees in sustaining their healthy lifestyle and behaviors.

21. Incentives for Participation • Before any company starts a WHP program, it should be aware of a major problem: employ participation. To boost low participation rates in WHP programs, some companies offer inducements to employees. One example would be employee discounts on insurance premiums if they agree to have their blood pressure, cholesterol, and body fat checked and to fill out detailed health-risk questionnaires.

22. Cost of WHP Programs • It is estimated that comprehensive WHP program that includes direct and indirect costs will cost between $70 to $130 per employee annually.

23. Exercise 2 – Alcohol Abuse

25. Future of Employee Assistance and WHP Programs • It has become clear that EAPs and WHP programs can yield significant payoffs to organizations that adopt them. However, it is also clear that the programs do not work under all circumstances and that the problems associated with assessing relative costs and benefits may be complex. At the very least, we need more well-controlled, longitudinal studies to investigate program costs and benefits and the extent to which behavior changes are maintained over time.