Lost productivity due to avoidable workforce absence and low performance accounts for
almost 63% of the cost of benefits

SAN FRANCISCO – Nov. 15, 2018 –

US employers paid nearly $880 billion in health care benefits for employees and dependents. However, illness-related lost productivity costs them another $530 billion per year, per a new report from the Integrated Benefits Institute (IBI), a nonprofit health and productivity research organization. That amounts to 60 cents for every dollar employers spend on health care benefits.

Employees covered for sick time, workers' compensation, disability, and family and medical leave benefits are absent about 893 million days due to illness and incur an estimated 527 million lost work days due to impaired performance. This totals almost 1.4 billion days annually of employees absent – greater than every nurse in the US missing a year of work.

“To put this in further context, the cost of poor health to employers is greater than the combined revenues of Apple, Amazon, Microsoft, Netflix, EBAY and Adobe,” said Thomas Parry, PhD, IBI President. “There’s not a CEO or CFO that can placidly accept their business expending the equivalent of almost two-thirds of their health care dollars on lost productivity. Illness costs this country hundreds of billions of dollars and we can no longer afford to ignore the health of our workforce. These results demonstrate the need for a more holistic, integrated strategy when it comes to managing health.”

American corporations commonly hold that their greatest asset is their workforce. There is a growing body of evidence that investing in a healthy workforce can have profound impact on the bottom line.

“Our research helps employers understand what ill health really costs their businesses so that investments in health and productivity are more informed and more effective,” said Brian Gifford, PhD, Director, Research and Analytics for IBI. “It’s critical that employers understand how strategies for managing health care spend – such as cost shifting to employees or ensuring better access and more cost-effective care – can impact the kinds of conditions that drive illness-related lost productivity.”

The estimate for total US health costs is calculated using the IBI Full Cost Estimator (FCE), a proprietary online tool that analyzes the full costs of health and productivity based on several large databases. The tool can be used to show the full health and productivity costs for a specific industry, or even an individual company. For this research, the FCE was used to calculate the costs for nearly 143 million employees (roughly the size of the US workforce in 2017).

The estimated costs of poor health to US employers are categorized into the following major areas:

Cost $ Billions
Wage and benefits (incidental absence due to illness, workers’ compensation and federal family and medical Leave) $178
Impaired performance (attributed to chronic health conditions) $198
Medical and pharmacy (workers’ compensation, employee group health medical treatments, employee group health pharmacy treatments) $48
Workers’ compensation other costs (absence due to illness, reduced performance) $25
Opportunity costs of absence (missed revenues, costs of hiring substitutes, overtime) $82
Total $530*

 

The estimates factor sick days, short-term disability, long-term disability, federal family and medical leave, workers’ compensation and impaired performance. For this estimate, IBI used the most recent data (2017) from the US Bureau of Labor Statistics (BLS) as input values (nearly 143 million workers in the national workforce, and total wages and benefits at $10.6 Trillion) as well as input values representing the latest 2017 IBI Benchmarking Data based on 66,000 US employers. The FCE tool also relies on a large dataset of employee self-reported information on chronic health and lost time and other national datasets.

By comparison, employers paid nearly $880 billion in health care benefits for employees and dependents, based on the BLS estimate of $0.12 for health insurance for every dollar in wages.

An infographic with additional details can be found here.

About Integrated Benefits Institute

As the leading research organization in health and productivity, the Integrated Benefits Institute’s (IBI) work emphasizes that healthy, productive employees promote healthy business. Founded in 1995, IBI is an independent nonprofit serving more than 1,320 members employing 22 million people in the US. IBI provides unbiased research, insights and tools so employers and providers can make health decisions that positively impact people, productivity and performance (3Ps). For additional information, please visit www.ibiweb.org and follow us on Twitter and LinkedIn.

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