Direct vs. Indirect Health Costs
| Cost Category | Examples | Typical % of Total |
|---|---|---|
| Direct medical | Medical claims, pharmacy, dental, vision | 30–40% |
| Disability | Short-term and long-term disability payments | 10–15% |
| Workers' compensation | Injury claims, medical treatment, lost time | 5–10% |
| Absenteeism | Lost productivity from unplanned absences | 15–20% |
| Presenteeism | Reduced productivity while at work due to health problems | 25–35% |
The Presenteeism Problem
Presenteeism — reduced productivity while at work due to health problems — is the largest component of total workforce health cost. An employee with uncontrolled diabetes who comes to work but operates at 70% capacity costs the employer more in lost productivity than in medical claims. Yet most employers focus exclusively on medical claims and ignore presenteeism.
The Total Cost Multiplier
IQ Insight
For most employers, the total cost of workforce health is 2–3x the direct medical cost. An employer spending $5 million on medical claims may be spending $10–$15 million in total workforce health costs when absenteeism, presenteeism, disability, and workers' comp are included. This multiplier is the foundation of the business case for wellbeing investment — even a 10% reduction in total cost saves $1–$1.5 million.