As the Aids epidemic bites ever more deeply, companies are reeling from a massive upsurge in HIV-related disability claims. The steep increase in such claims could result in insurance cover becoming unaffordable.
This emerged from an attempt to quantify the effect of HIV infections on the business sector and gain insight into the hidden costs the epidemic is having on economic productivity.
The stark findings of a survey conducted in five companies, over a three-year period, showed that disability claims almost doubled as a result of HIV-related illnesses. Disability claims refer to compensation given to an employee who is no longer able to work as a result of ill-health or injury.
The survey was conducted by Lifeworks, a health risk management company, and encompasses 85 000 employees. It looked at companies operating in sectors such as telecoms, clothing and textiles, food and insurance.
“Increased disability and death insurance claims are the most obvious tangible evidence of the impact of HIV/Aids in the workplace,” Sean Jelley, Lifeworks’s chief executive officer, told the Mail & Guardian. “As HIV-positive employees progress to the symptomatic stages of the disease — leading rapidly to total incapacity and then death — the number of disability and death payouts will increase.”
In Gauteng Aids-related disability claims in a telecoms company for 2001 were 18% of the total disability claims made by employees — for 2002, such claims were 31% of the total. A food company’s disability claims increased from 10% to 25% a year later. In KwaZulu-Natal a clothing and textile company showed a 25% annual increase. An insurance company in the Western Cape had disability claims of 3% for 2001 and 16% for 2002.
The large increase in such disability claims leads to increases in premiums paid per month by contributors. Premiums are calculated on the perceived insurance risk.
“Insurance will essentially become unaffordable,” warned Jelley. “Without effective medical management in reducing the number of future claims, a significant portion of South African employees will within three to five years most likely become uninsurable.”
But the impact of HIV/Aids is not only experienced in the claims increase. There is also “presenteeism”: “During the employees’ progression through the symptomatic stages of Aids, they become progressively less productive … As long as they clock in, they are paid,” said Jelley. “While the employer’s absenteeism risk can be easily capped, presenteeism cannot.
“For some time prior to the claim,” said Jelley, “the company would have experienced a gradual loss of productivity from the employee and in all likelihood would have had to replace the employee some time before the date of disability or death, leading to productivity losses, [and] increased [human-resources]-related, recruitment and training costs.”
Jelley calculates that an employer experiencing an average of two deaths or disabilities per 1 000 employees a year now could see this rise to as many as 20 to 30 a year.
The sector likely to be hardest hit in financial terms, in the long run, is insurance. Such companies provide group life and disability cover. To compensate for future risk, most insurance companies are factoring in the likely increase in HIV/Aids claims. “Unless effective disease management is implemented for insured employees, claims are expected to increase by as much as 10 to 15 times,” Jelley said.
“Obviously at those levels insurance becomes too expensive — quite simply, employers will be unable to offer employees the same level of cover.”
He said that the imminent anti-retroviral plan (due to be announced by the Department of Health next week) paves the way for companies to get involved in all aspects of health-care provision. “No longer can business leaders hide behind the indecision and lack of direction of the Department of Health,” said Jelley.
The Life Office Association (LOA), the regulatory life insurance body, told the M&G that it has seen an increase in disability claims from companies with group life cover, but not from individual policies.
“Over the past 12 to 18 months we have seen an increase in HIV/Aids related disability grants and there has been an increase in premiums,” said Gerrit Stander, operational manager disability claims at the LOA. He said it is unlikely that life insurance will become a “luxury” because new products are constantly being launched that will provide more options for life cover.