More employers are realizing that it's probably not ideal to manage incidental absences, short-term disability and long-term disability separately, since they generate big health care costs. Consequently, employers are trying to be more strategic about their health management programs, consultants say. 

About 39% of employers strongly agree that improving employee health is a core business value, while 41% agree, according to a recent survey from Mercer Consulting and insurance broker Marsh. 

Roughly 23% of companies witnessed their short-term disability (STD) claims increase between 2005 and 2006, while 15% indicated the average length of the disability period had gotten longer, the survey indicates. 

However, only 11% of firms reported a drop in STD incidence, and 66% acknowledged their absence rates had remained the same, even though the company had become more strategic about managing employee absences. 

The hidden cost of absence in terms of replacing labor and losing productivity is estimated to equal about 3% of annual payroll. Cancer, stress, depression, musculoskeletal problems, heart disease and low back pain continue to be top cost drivers. 

For these reasons, some businesses are integrating health and absence management programs to improve productivity. For example, 17% of employers have integrated their health care and disability programs, while 6% of large employers with 10,000 or more workers require those on STD to enroll in disease management programs, with another 4% offering an incentive to do so. Nearly 80% of employers with a return-to-work program for workers' compensation have expanded the program to cover recipients on STD and LTD. 

Sue Willette, head of Mercer's health and productivity management group, says, "Employers are looking at cost of nearly a quarter of payroll for health and absence programs and health-related productivity losses. These costs are related, but until recently employers have managed them separately."