Insurance: Health

Part of the responsibility of a family business consultant is to assist in identifying problems that should be referred to other professionals. My specialty is in business management, but in my 25 years advising family companies I have often come across a business problem, or a people problem, that turned out to be a health problem, requiring the attention of a physician.

Managers of family businesses are susceptible to the same range of health risks and chronic ailments as the rest of humankind—heart trouble, high blood pressure, cancer, arthritis, depression, drug abuse, alcoholism, and so on. These and other problems can lead to sluggish performance, poor business judgment, and erratic decision-making in top management. In many cases, the person with the problem is the owner-manager or another family member.

Like most of us, busy owners and managers frequently deal with the problem by avoidance—and denial—putting off their regular checkup or refusing to see a doctor at all. In his seminal book on family business, Beyond Survival, LÈon Danco wrote that business founders tend to believe in their immortality. Whether or not they really believe that, they often seem to act that way. When they do consult their physician, moreover, they may demand an instant cure, or argue with the doctor, or ignore his advice. Doctors are as powerful in their own bailiwick as entrepreneurs are in theirs and often the clash of titanic egos generates sparks.

What follows are examples of some of the health problems I've encountered in family companies that have turned into business problems and how they were resolved. I will also offer some observations on general attitudes toward health in family businesses and on such issues as how to choose a doctor and maintain the privacy of your medical records.

Diagnosing a Performance Problem


The grandson and namesake of one business founder I once encountered was considered a chronic marginal performer by his supervisors. In their evaluations, they reported the young man seemed to lack motivation from the time he joined the company. The grandfather was in poor health and no longer running the company, which is a multi-store retail operation. The CEO, a middle-aged cousin of the young man, was perplexed about how to handle this delicate situation. Seeking an independent view, he referred it to me, a consultant to the company on management development.

The grandson, 25 years old, seemed to me to be a fine fellow. During a major company reorganization, he had been put in charge of a department of a retail store. Before that he had been working on a project to apply computer software to the firm's accounting systems. In this one-year assignment and two prior ones, he had performed marginally. Not poorly, but not with distinction.

When I investigated further, I found that his first two supervisors were not very good managers. In his third assignment, the software project, he had worked for a family member who is a superb manager. However, another senior executive had been in charge during the initial phase and the project had been poorly thought out and hurriedly implemented. The family member who succeeded this man was unable to reverse the damage; the project was canceled, through no fault of the grandson.

His new assignment, in the retail store, posed other challenges. His department involved complex merchandising and was undergoing many changes One problem was too little storage space for high-volume items, which required close attention to computer printouts for turnover history, forecasts, orders-in-process, advertising promotions, and schedules.

A few weeks into this new assignment, his new boss wanted him removed. There were too many items out of stock, too many lost sales. The young man was floundering and, untypically for him, often seemed angry. I suggested that he take a series of aptitude tests and also consider a physical exam.

The aptitude tests had to be halted when the psychologist suspected that the young man suffered from dyslexia. People with dyslexia, even some with exceptional intelligence, have problems with reading and with numbers. The young man's problems were deep and longstanding. Why hadn't this been diagnosed earlier—in school or in a pre-employment physical exam? Nobody knew. Family members weren't required to take the company physical. Why hadn't he been sent for aptitude tests after the first two evaluations? Because it wasn't clear after both whether the young man himself, or poor supervisors, were to blame for his mediocre record.

The grandson was referred to specialists. As suspected, the diagnosis was dyslexia. My job then was to recommend ways the company could avoid similar instances of poor supervision. I also recommended that all family employees follow the company's personnel rules, and that management stop overlooking family non-compliance with policy.

Finally, the professionals and the family considered what the next career step for the grandson should be. The medical people suggested a different line of work. I agreed. The aptitude tests had suggested that he work with his hands. He had always enjoyed carpentry and is now an independent contractor in that field.

Two Cases of Alcoholism


It is difficult for a company to distinguish between executives who imbibe occasionally but have their drinking under control, and others who are incapacitated by it. Delay in dealing with a problem drinker, however, can lead to a loss of confidence in the company, both internally and externally, and damage to the executive's reputation.

In defining how much drinking is acceptable—and when it becomes a problem for both the executive and the company—the example set by the CEO looms large. Companies in which the senior managers drink a lot tend to attract employees who drink a lot. The CEO who regularly enjoys two or three drinks plus wine for dinner is likely to tolerate similar habits in his subordinates. Other chief executives, who are total abstainers, may ban drinking at the office or in other business settings. For decades IBM was famous as a “dry” company. Employees were forbidden to drink while on company business. Booze consumed at business lunches could not be expensed. The policy did not adversely affect business, and it saved a huge amount of money.

The majority of firms are much less strict, but few keep liquor on the premises. Outside the office there is much less pressure today to drink with customers who want to be entertained. A fair amount of drinking still makes its way onto expense accounts, however. The health effects on the consumers may be cumulative. But it's not easy to tell when it interferes with performance. In family companies, moreover, it may be even harder to deal with the problem.

In one company in the food processing industry, the cousin of the CEO made a huge error that proved costly to the division he headed. The CEO wanted to remove him. The father and brother of the division head, however, together controlled 50 percent of the stock. They admitted to the CEO that the 46-year-old manager was an alcoholic, and said he needed treatment. But they resisted removing him from the job. Neither the management committee nor the board would approve that approach.

There were a number of ways of dealing with the business problem, and helping the manager solve his problem, while maintaining family harmony. For example, the company could have offered to keep him on the payroll while he went through a detox program, or to find another business he could run, or to give him early retirement so he could pursue his other interests (he already had a net worth of $6 million).

What actually happened made everyone unhappy. The cousin's branch of the family was unable to cash out—or force out—the CEO's branch, so they insisted on splitting the company. It's not likely that members of the two branches will ever speak to each other again.

The trend in business today is to treat excessive drinking with a firmer hand. People who are believed to drink too much can quickly become an expensive liability. If an employee's habit reaches the problem stage, it should be treated as a medical problem and referred to a doctor or clinic.

Preparing for the Worst


The CEO of a 75-year-old family business, a longtime client of mine, was very aware of his family's history of heart trouble. His father had died of a heart attack while he was in high school; his brother had died before reaching 60.

This executive was very conscientious about his health. He had regular checkups and a moderate lifestyle, and had been to the Pritikin Clinic for instruction in nutrition. Early in 1995, he and his family and friends celebrated his 60th birthday.

Four months later he felt flu-like symptoms, which persisted. The preliminary diagnosis was a relatively rare form of cancer. The causes of this cancer are uncertain, but its course is not. Two review centers confirmed the bad news: The CEO was a short-termer.

With anywhere from three months to several years to live, he has had to follow the rule: “Hope for the best, but prepare for the worst.” Succession was an urgent concern: Two of his three sons were pursuing other careers. The one son in the business was several years away from being capable of taking it over, even with coaching and accelerated development. Fortunately, because of his longtime concern with the family's history of heart trouble, the CEO had a contingency plan. He had always maintained a “farm team” of two or three managers who might be able and willing to serve as interim CEO. He had identified the candidates in his mind and done everything he could to prepare them for the role, without telling them. Within three months of receiving the news of his disease, this far-sighted and courageous CEO already had his interim successor (a former outside director of the firm) in place.

There are many types of cancer, and few families do not have a victim of one or another type in their histories. The symptoms are usually elusive, and that's one reason why an annual physical is essential. If the CEO is reluctant to go, the board should require it. Advances in tests of prostate cancer now make it possible to diagnose the problem at an early stage. For female executives there's no excuse for avoiding mammograms and X-rays for breast cancer and pelvic exams for cervical cancer. To excuses that most people make for postponing such exams, the best reply is Joan Rivers's comment, “Oh, grow up!”

A Case of Impaired Judgment


Dr. Lawrence Knight, a Montreal physician who has cared for a number of family business owners in Canada, tells the story of a CEO whose wife came to see him. The woman was concerned because of signs that her husband's memory was failing. At her request, Dr. Knight examined the 70-year-old business owner and decided to refer him to a neurologist. Tests confirmed the presence of early Alzheimer's Disease.

Alzheimer's, which made more news when President Reagan disclosed that he suffers from the disease, affects an estimated 4 million people in the United States. There is still no proven cure or way to arrest the disease, which is characterized by progressive deterioration in memory. Diagnosis, moreover, is difficult, because Alzheimer's is easily confused with other forms of senility (for example, dementia caused by small strokes in the brain). Executives displaying some of the symptoms should be screened for the disease by a multidisciplinary medical team. Though a large majority of those who develop serious symptoms are over 75, many are younger. Even some people in their 40s have been known to develop Alzheimer's, though it is relatively uncommon at that age.

Unlike public companies, privately held family companies often have no established retirement age for their owner- managers. When Alzheimer's strikes a powerful CEO with ownership control, the family thus faces sticky issues in figuring out how to persuade the leader to step down voluntarily.

The CEO examined by Dr. Knight, like many owner-managers, ran his business as a one-man show. “I tried to convince him to sell his business,” Dr. Knight told me. “He refused. ‘This is my whole life,' he said. ‘What else would I do? I'd go nuts.' ”

He held on, the disease progressed, and he made mistakes. The business was run into the ground and, eventually, was reduced to the value of the used equipment.

“Alzheimer's is particularly difficult to deal with if there are several siblings at the top and one of them is developing impaired judgment,” Dr. Knight added. “How does one approach the mentally deteriorating—often elder—brother? This is a sensitive area where a trusted physician may play a crucial role.”



Long-running depression is more common than people realize. An estimated one in five women and one in nine men suffer from this illness, which, unless treated, can interfere with both judgment and productivity. Only recently have people suffering from it become more willing to talk about their symptoms and efforts to conquer it. General Colin Powell's disclosure of his wife Alma's depression at his press conference last November may foster more open discussion of the symptoms and what can be done to control them.

Millions of people experience some depression from time to time. They may speak of having “the blues” or being “down in the dumps.” These dips in mood are considered normal if they're not too frequent and don't persist.

What psychiatrists call clinical depression can be longer lasting and more disabling. The National Foundation for Depressive Illness reports that serious forms of depression are accompanied by a chemical imbalance in the brain. The psychological roots are usually more complex and highly individual. Some physicians maintain that unresolved feelings of anger is a common underlying cause. I have observed this in some family business clients. For example, I have interviewed successors in their 30s or 40s who are angry and seriously depressed because a parent will not relinquish any authority to them. Family members who were pressured to join the business when they were young, and have never worked anywhere else, may have a deep sense of disappointment. They are resentful because they feel that they missed something; they may vehemently deny having feelings of anger and are, instead, deeply depressed.

A third group, sometimes overlapping with the other two, consists of family members who have never gained self-confidence. They have always worked in a building with their family name on it. Promotions and raises have come from other family members. A persistent question nags them: “Could I have succeeded on my own?”

The warning signs of depression include chronic fatigue, signs of aimlessness and flagging productivity, excessive sleep or withdrawal, outbreaks of tears. Sometimes a drinking problem masks a depression. Business executives who exhibit such symptoms should, of course, be checked out by a doctor. Physicians who specialize in treating executives know the right questions to ask to determine whether depression is the underlying cause of feelings of apathy or burnout.

Suprisingly, many executives remain skittish about consulting a psychiatrist or psychologist when their doctor suggests it. Today there is hardly any stigma attached to seeking help for a problem that may be psychological in origin (though privacy may be an issue—as we will see). Anti-depressives such as Prozac and Zoloft on the market today promise victims relief from their misery while they try to grapple with the underlying causes. Moreover, shorter-term therapies are available that can help many patients avoid recurrences.

The Harsh Truth About Drugs


In the past year, several high-profile executives have been in the news because of serious trouble with drugs. Two overdosed on cocaine and were found dead in hotel rooms. In both cases their close colleagues were surprised to learn of their habit. The vice-chairman of one of the top five airlines was arrested for possession of marijuana. This under-50 executive, who has a record of enormous accomplishment, is now dead-in-the-water in his industry. Beyond the headlines are dozens of quiet removals, forceouts, buyouts, and shuntings to the side track in other companies.

Here's a statistic that startled me: Donna Shalala, U.S. secretary of health and human services, reports that 75 percent of regular drug users are employed. These employees are more prevalent in certain high-pressure lines of work, such as advertising, film-making, and stock and currency trading. If you have more than 100 employees, chances are you have at least a couple of drug users on the payroll. Others may appear on your premises as suppliers or customers. They quickly identify with fellow users, and forge links with them.

All too often in family businesses, the problem employee is a family member. Within the family, moreover, there may well be sharply divergent attitudes toward drug use. It can become a more troublesome issue in businesses controlled by several branches of a family, with a number of third- and fourth-generation members working in it. One branch may be adamantly opposed to drug use, in which case, when a problem arises, it may have to battle another branch that has a more permissive attitude.

The company has to have an explicit, consistent policy for dealing with drug users. You can't cut the kids a little slack and hold other employees in line. It won't work, never has. If you want a drug-free company, the kid with the habit has to go unless he can kick it. Period. Likewise, the family member who chooses to go through detox has to abide by the same rules after returning to the company as any other employee. Surely, the family will want to do everything it can to help the drug user get free of addiction. The harsh truth, though, is that some of them don't want to be free of the habit. They just want the money to support their lifestyle.

It's clear that many customers, banks, and other constituencies of family businesses take a dim view of drug use in the workplace—and, for that matter, outside of it. For that reason alone, owners should have a tough policy. Beyond the social stigma of having drug-abusing employees, there are the effects on efficiency and productivity. According to a U.S. Chamber of Commerce study, chronic drug users are 33 percent less productive than employees who eschew drug use. Their medical insurance claim costs are an average of 300 percent higher than the average claim costs of non-users. It should be noted that some claims in this group are not for employees but for a dependent family member.

A Mother's Graceful Exit


The aging widow of a business founder has had two strokes but wishes to remain a member of the board of directors of the company even though she seems to lack the energy and interest to attend most board meetings. What should the CEO—her son—do?

I had known the woman for a decade. She had worked in the business in the early years, but she was now 80 and retired. Since her husband's death, she had occupied his seat on the board.

Over lunch, we discussed the board, its functions, and the company's long-range needs. The company had been gradually moving toward having a majority of outsiders on the board, and we also talked about that. This elderly woman was as sharp as she had always been. She asked, “Are you going to recommend that they fire me?” I told her no, adding:

“The need is for an effective board of experienced people who can help your son carry out the plans for expansion. As the founder's wife, you can remain [on the board] as long as you like. What help do you need in order to be able to be a good director next year?”

She promised to think about it and asked me to call her in a week. When I did, she told me that she had decided it was time to resign. She wanted to continue as a trustee of the family foundation, where she felt competent and comfortable. I suggested that she not resign but simply not stand for re-election. That was several months away and would allow time to recruit a successor.

Irrational behavior


Some years ago I received an urgent phone call from a CEO who had inherited a very old family business and run it for more than a decade. He was locked in combat with his chief financial officer, who had acquired a 10 percent interest in the company. The CFO was insisting on being named CEO and on being given an option to buy the company. He had long been a smart and aggressive executive, but this sudden, inappropriate demand was a surprise to everyone.

While the day-to-day business went on as usual, the executive offices were totally preoccupied with the problem. The CFO was already acting as if his appointment as chief executive was imminent. He had informed one executive that he would be dismissed and should prepare to leave. My interviews with other executives confirmed the CEO's view that the man was attempting to dominate the company through intimidation.

On my last visit to the company, I met with the CFO, with whom I was only slightly acquainted. After I interviewed him for a half hour, the man launched into a harangue against various other managers. It went on until the end of the day, when I excused myself to have dinner with the CEO and his wife.

“There's a good chance he's mentally ill,” I told them. “We need to talk with your attorney, your outside directors, and his wife.” When we met with the attorney, he expressed the same opinion about the CFO's condition. At his urging, we scheduled a special board meeting for the following afternoon.

Meanwhile, the next morning the CEO's wife visited the CFO's wife to convey the group's concerns about her husband's health. Was she worried, too? She was. The CFO had become so intimidating that she was afraid to disagree with him about anything. She, too, believed that his expectations for taking over the company were unrealistic. Could she get him to a doctor? No, she told the CEO's wife, she could not.

At lunch that day the CEO, the attorney, and I worked out a plan to propose to the board. It called for relieving the CFO of his duties and placing him on medical leave—provided he consulted a doctor. When we returned, the CFO buttonholed me and, in his office, launched into a long denunciation of his boss and the way the company was managed. I countered by expressing concerns about stress in the executive group, and asked him when he had last visited a physician.

We talked of many things: his family, his life, his hopes. When the outside directors walked by his office, he leaped up and followed them into the boardroom.

As the meeting began, he interrupted and demanded to be heard. He insisted on being given control and laid out his plans for the company. When he had finished, the crustiest director broke the silence and said there was no way any of what the CFO described would happen. For about an hour, the directors discussed the reports of the man's behavior. Then they asked him to leave. The attorney presented the plan for removing the CFO from office, with conditional medical leave. Unanimous approval.

At 9 a.m. the next day, the CEO and the attorney relieved him of his duties. His two sons then took him to see a psychiatrist recommended by the human resources people at a nearby manufacturing company. A few weeks later, the CFO resigned and was cashed out. About 18 months later he bought a business that he now operates successfully.

The strong resistance of some family business owners to consulting with specialists in mental health continues—surprisingly—to this day. Doctors I know have attributed this resistance to delusions of various types, narcissism, grandiose egos, and the like. I have found that quite often it is due to their fierce desire for privacy.

Privacy and Responsibility


We all want privacy for our medical histories. Many even believe that they have it. Those people do not understand how the insurance industry works to protect its underwriting. When you apply for life or health insurance, or enter a hospital or clinic, you usually have to sign broad waivers of your privacy rights.

The risks are obvious. Dr. Knight of Montreal tells of an executive who ordered “key man” insurance for his sons in the business. The broker returned with word that the oldest son could not be insured. The underwriter's checks of an industry network turned up evidence of a longstanding cocaine habit, documented in lab reports.

In an era of far-flung computer networks that share information, it's hard to hide personal information of that kind. However, the free market has provided one solution. Within the huge insurance industry, specialist brokers have emerged who deal with sensitive and difficult situations (see box on this page).

Doctors and other health care professionals are obliged to supply such information to insurers when you have signed waivers. You hope that these professionals can be trusted to follow good practice and at least not gossip about you and your family with others. However, if you are a well-known, powerful figure in the community, don't expect they'll all keep their lips buttoned. Some won't.

If you or other family members have a reputation of being difficult or litigious patients, moreover, local physicians may talk among themselves about you for self-protection. You may find that doctors who treat you practice a good deal of “defensive medicine,” asking for an excessive number of tests, for example, in order to avoid being sued. Finally, if you are wealthy and likable, some doctors will share details about you with fund-raisers, so you can be tapped discreetly for contributions.

When an owner-manager is diagnosed as having a terminal or disabling illness, a conflict may arise between the right to privacy of medical records and the need to keep the business going and to implement estate plans. Just such a problem has arisen in the case of the terminally ill business owner mentioned earlier. About six years ago, his corporation and a similar firm in another state formed a joint venture that has, since then, been very successful. His partner was grieved to learn of his condition, but is also concerned to know whether his death will create a sudden demand from the family for cash to pay the estate tax bill.

This is a classic family business tale. When the venture was created, all the attorneys insisted on a buy-sell agreement. The principals, however, elected to ignore the agreement that was drafted because they did not want to value the business at that time. This was a conscious decision, not an oversight. The partners understood, and were willing to live with, any complications that ensued.

The partner's concern with having to do business with an estate that has a huge need for quick cash is legitimate. My client's desire not to have to disclose all the details of his personal estate is also legitimate. As it happens, this good planner has provided for enough liquidity in his estate to pay the tax. The delicate question is whether verbal assurances to his partner will suffice, or whether the partner will be entitled to detailed documentation of liquidity in the estate.

Doctor-Patient Tensions


Both the business owner and his personal physician are accustomed to being in charge and giving orders. That's one of the principal reasons there is often tension in their relationship.

When treating business owners, physicians who are inaccessible, uncommunicative, and act like gods quickly find themselves dealing with a visibly irritated patient. The CEO is used to having all the information about a problem and then deciding or managing the decision process. The physician who insists on total control of the treatment options—and does not explain them adequately— is in for trouble.

Family business owners who are happy with their physicians usually praise them for their expertise, discretion, and understanding of the pressures in the mixture of family relationships with business. Their most frequent gripe is the doctor's insensitivity to the value of their time. Doctors are keenly aware of the demands on their own time, but frequently don't care whether others have the same problem.

A longtime friend of mine who is a consultant to doctors confides that some doctors like to goof off, too; their office people are instructed to provide standard cover stories when patients call. “Too often, while the office backs up, Doc is at the hospital coffee bar with his pals,” my friend told me. Business executives are infuriated by delays and evasions when trying to contact their physicians. They are quick to switch doctors if it happens too often.

They also do not suffer doctors who offer off-the-cuff comments about business matters. When doctors make inane comments on matters outside their expertise, they undermine their credibility.

Similarly, leaders of family businesses irritate doctors when they deny illness, don't stick to the prescribed regimen, or keep putting off appointments that might bring bad news. According to some doctors, business owners tend to feel their wealth should protect them from illness. They are used to buying whatever they need or want, and will travel far to seek the best medical advice. As a result, they find it hard to accept when told there is no treatment available, at any price, that will cure them or speed up their recovery.

Senior leaders of family businesses must also consider the health of their executives and their employees. A healthy executive team and a healthy family are precious assets. The CEO's own habits and attitudes toward health set a climate that shapes the attitudes of others in the company. Many businesses that can afford it offer broad health and fitness programs for all employees. At a minimum, a family company should see to it that key managers are regularly examined by a doctor.

Besides the common health risks that I've discussed, there are, of course, others that can be equally debilitating and harmful to the team effort. How much a business owner wishes to be—or should be—involved in the personal medical problems of his team depends on individual circumstances. When illness poses a threat to the well-being of the company and its future, however, the boss is obliged to intervene and to act—especially if it is the boss who is ill.

James E. Barrett, is managing director of Cresheim Management Consultants in Philadelphia and head of the firm's family business practice. He is also a director of the Southeastern Pennsylvania Chapter of the Alzheimer's Association.

Privacy and Executive Treatment

It is not inconvenient today to travel an hour or two to see a doctor in a distant city, unless frequent visits are necessary. Those in good health often make do with a local physician for such minor complaints as tennis elbow or flu, and a distant executive health program for monitoring and treatment of serious health problems.

The rise in status of some suburban hospitals and their new links with the major teaching centers have created one new option for many patients. In major metropolitan areas, it is now less necessary to go to a giant hospital. The labs of some larger hospitals in cities are linked with the better suburban hospitals, and members of the medical staff may, in fact, practice in both places.

Another option are the several dozen medical centers or programs specializing in treatment of business executives. The Executive Clinic at the Greenbrier Resort in White Sulphur Springs, West Virginia, and the Mayo Clinic Executive Program in Rochester, Minnesota, are two of the best known and oldest examples. The Menninger Clinic in Topeka, Kansas, specializes in mental health problems. Most of the other programs are hospital-based, in major metropolitan areas, and usually staffed by a variety of specialists supported by modern, high-tech labs and testing equipment. They provide comprehensive physical exams, second opinions, and, if the patient chooses, surgery or other follow-up treatment. — J.E.B.

Specialists in High-risk CoverageThese specialized brokers help people with pre-existing medical problems get coverage. They usually represent insurance companies with which your broker does not have a business relationship. But your broker, or anyone from whom you buy any insurance, can usually help you find a broker's broker in your community. If the broker's broker gets coverage that's acceptable to you, your regular broker will get a piece of the commission.

Certain insurance companies develop special risk pools for particular medical conditions such as high blood pressure. The companies need a very large pool (over 100,000 is desirable) to make the actuarial odds work. But they can fine-tune their pricing because they become extremely knowledgeable about the condition and its risks. Most other insurance companies protect themselves by simply refusing you coverage.

Companies come and go in this marketplace. The specialist broker's network, however, is well developed and mature. Any metropolitan area of 100,000 people will have one or two that your broker can find without too much trouble.

As for what the coverage costs, don't ask. This market serves people with conditions for which being without insurance is an unacceptable risk.

— J.E.B.


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While manufacturers across the country are losing money because of yearly increases in worker's compensation claims, a Massachusetts-based makerof men's suits named Grieco Brothersis saving a bundle. The average numberof compensation claims filed by Grieco'sworkers has declined from 73 in 1987 toonly 15 in 1989. During that period, thenumber of days lost due to workers' accidents dropped from 1,769 to 452. Thecompany now spends far less than itused to on insurance premiums.

Grieco hasn't discovered some sort ofmiracle drug, nor has the company's600-person workforce suddenly becomeimmune from medical problems. Thestitchers and pressmen still suffer fromrepetitive motion syndrome and loading-dock workers still lock up with backpain.

The company's savings are the resultof a new policy regarding employee injuries. By taking an active approach tomanaging compensation claims--thatis, carefully monitoring an employee'smedical treatment and then assigninglight.tasks to those still recuperating--Grieco has kept health costs down.

Nationwide, workers' compensationinsurance premiums grow by more than10 percent each year. Anthony Sapienza,Grieco's vice-president of manufacturing and the nephew of the firm'sfounder, says his company's insurancepremiums have decreased by 50 percentsince instituting a so-called "managedclaims" program 18 months ago.

In mid-1989 Grieco hired LynchJones & Associates, a consulting firm,to train its supervisors to manageworkers' compensation cases. Beforeadopting the program, Grieco's managers (like many of their counterpartsat other companies) had a laissez-faireattitude toward injured employees, whowere out of sight and out of mind untilthey returned to work.

A key element of Grieco's aggressive approach to health care was hiring Carol Nolan, an occupational health nurse, who plays several roles. She is first of all an advocate for injured workers. When a serious accident occurs, she accompanies an injured worker to a hospital, makes sure he receives prompt medical attention, and helps him get answers to questions about diagnoses and treatments.

When an injury requires an employee to miss work, Nolan acts as a liaison between worker and employer. She makes weekly telephone calls to injured employees and their physicians, reassuring employees that the company is interested in their condition and eagerlyawaits their return. Nolan mentions thecompany van that takes injured workers to a doctor or physical therapist. Andthe company pays a full-time salanr evenif a worker can return only for light duty.

Nolan also plays the role of mediatorbetween workers and their insurancecompanies. If Nolan receives an independent medical report stating that aworker is able to return to light duty ora less strenuous version of his job, shesends the employee's doctor the reportalong with the worker'sjob description.Even if the physician agrees that lightwork is acceptable for his patient, theworker doesn't have to return to work.However, an insurance company willthen file a court petition to decrease theworker's insurance payments by the amount hewould have earned fromlight or modified duty, oreven to discontinue all benefits except medical costs.When an employee refusesto comply with a doctor's approval to resume working,courts often side with theemployer and its insurer.

Getting a court date,though, can take as long assix months, a period dunngwhich the employee continues to collect benefits. Nolanpoints out that some employees mayget comfortable at home collecting pay-checks and lose their incentive to return to work. Since Grieco began tomanage its compensation claims, how-ever, injured workers generally haveagreed to perform light tasks, theircases are settled much faster, and someemployees with minor injuries haven'thad to miss any work at all.

"A lot has to do with the motivation ofthe person," says Nolan. "Some peopleknow how to beat the system and willtry to do so. But our program has improved morale and made workers morecooperative and more willingto stav in the workplace."

The Department of Laborestimates that five out ofevery 100 American workersare injured on the job eachyear.About80percentoftheinjuries cause moderate backproblems, and one quarter ofthose result in more than sixmonths of missed work. Almost 100 percent of thesecompensation claims end upin court, says Peter Rousmaniere, chief financial officer of Lynch Jones & Asso-ciates. The situation hasbecome a crisis in somestates such as Maine, wherethe country's largest workers' compensation carrier,Liberty Mutual, refuses to issue newcompensation insurance policies.

Preventing accidents is the best wayto keep workers' compensation costsunder control. But when accidents dohappen, the idea is to get people backto work as soon as possible. One out ofevery four moderate back injuries usually results in more than six months oflost time, according toRousmaniere. Then em-ployers such as GriecoBrothers actively manageworker compensationcases, only one in 50 backinjuries causes an employeeto be out of work that long.

States regulate the workers' compensation system,but companies are far frompowerless when it comes tocontrolling their own costs.Here are some key areasthat can help businesses rein in theircosts:

Accelerate diagnosis and treatment. Weeks may elapse between visits to a doctor. Claimants sometimesconsult with several physicians, whomay repeat tests and not be aware of diagnoses or treatments offered by otherproviders. A better alternative is to encourage employees to get treatmentfrom a preferred provider network thattreats compensation cases on a prioritybasis, coordinates treatment, and forwards test results to different specialists. Personnel managers should keepin touch with all doctors involved in acase, making sure everyone knowsabout tests, treatments, anddiagnosesotherspecialistshave made.

A supervisor shouldcontact injured employees and their doctorsonce a week. By showinggenuine concern for injured workers, the supervisor demonstrates thatworkers are valued employees--an important incentive to get a workerback on the job. Talking candidly with doctors isequally important. When a doctor signspapers stating a worker cannot return tothe job for several weeks or months, anemployer can discuss the option of aworker returning earlier to less demanding work.

Get quality medical care. It is in thebest interest of an injuredworker, the employer, andthe insurer to treat medicalproblems effectively,thereby allowing the employee to return quickly towork.

Audit every hospitaland providers' bill for accuracy. Workers' compensation fees are restricted inhalf of the states. Companiesthat are based in those statesshould make sure that everymedical and chiropracticprocedure is within thescheduled fee. Intracorp, aPennsylvania-based disability management and healthcare cost-control company,claims that it found $200 million in errors and overcharges to itsclientslastyear.

Find a vocational rehabilitationprogram. Workers who are so severelyinjured that they can never return totheir old job don't have to accept retraining for a new job, although refusalto do so could affect long-term benefitsif the employer challenges them incourt. One workers' compensation carrier, Liberty Mutual, has its own vocational rehab program in Boston. Itsrehabilitation team--orthopedic surgeons, internists, therapists, nurses, vocational counselors, and a psychologist--provide physical therapy andcareer counseling.

Insurance carriers can recommendsome top-notch programs. For thoseworkers who are self-insured, a third-party administrator can suggest goodlocal programs.

Try to prevent accidents. Insurancecompanies such as Liberty Mutual inspect work sites and recommend waysto improve safety. Finally, consider financial incentives for employees withperfect safety records.

Jayne Pearl is a senior editor of FamilyBusiness.

Rising Compensation Costs
  1984 1989 Change
Average medical cost per claim $2,310 $3,420 +48%
Average cost of lost time per claim $4,202 $5,805 +38%
Average lost workdays per claim 63 75 +19%
Sources: National Council on Compensation Insurance Occupational Health and Safety Agency

Managing the claim

Jones & Associates recommends that supervisors of injured workers take the followingsteps:

Personally escort injured employees to the hospital or doctor. Insist that they be seenpromptly. Ask questions abouta doctor's diagnosis and recommended treatment.

Investigate immediately thecause of an accident and subtmit A written report recommending corrections in workprocedures, equipment, orphysical layout of the plant to prevent accidents in the future.

Contact injured workers atleast weekly and ask how theyare feeling to let them knowtheir colleagues miss them.

Encourage injured workersto return to the plant for lightduty as soon as possible. Likegetting back on a horse afterfalling off, part of the cure of aworkplace accident is returning for modified work. Injuredworkers will therefore not feelforgotten or neglected and canconcentrate on being producltive, not disabled.

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Last year health insurance premiums for business rose 20.4 percent. To hold the line, more and more companies, large and small, are auditing their health care bills. It can be done by outsiders or with selfauditing programs that offer incentives to employees who catch hospital billing errors. Savings can reach 24 percent of a typical hospital bill.

Government and private studies show that most hospital bills contain errors: charges for procedures never provided or medicine not dispensed. That's why most large corporations and insurance companies have big hospital bills audited. Three years ago Equifax, an Atlanta auditing firm, checked 40,000 suspicious-looking hospital bills that exceeded $10,000. It found that 97 percent of the bills, with an average total of $39,283, contained errors of $1,300 to $1,500, or about 3.5 percent. The hospitals were three times more likely to overcharge than undercharge.

Companies with fewer than 50 employees, whose health insurance rates are generally based on the pooled claims experiences of several small firms, may not see an automatic drop in premiums if they lower employees' medical bills. But for family businesses that have many relatives on staff, finding billing errors can lower copayments.

It may not make sense to hire an auditor to screen every hospital stay. But when an employee submits a whopping bill, most auditors will do a free "prescreening," advising you whether an audit is likely to turn up significant savings. The auditor looks at the history of the facility and whether the bill includes a high volume of errorprone areas (such as pharmacy charges, central supply, and lab services).

A Snellville, Georgia, construction company, E.R. Snell Contractor Inc., employs 260 people (including 25 second- and thirdgeneration family members). The company, which began selfinsuring last year, had a few large claims this year, which its thirdparty administrator, a contractor that processes claims, submitted to an auditing firm. "One lady was confined to a hospital for 30 days with a digestive tract disorder. If they had given her all the drugs they 'listed on the hospital bill, they probably would have killed her on the first day, " says Eldred Floyd, president of TPA of Georgia, Snell's claims administrator. "When we got into the audit, we found that those drugs were never given to the individual, and we deducted 60 percent of the pharmacy charges. In dollars, that came to about a $14,000 savings, or 9 percent of the total bill."

Many auditors only scrutinize bills larger than $10,000; that's where errors are most likely to add up and justify the expense I of the audit. Fees can be based on hourly rates (generally $55 to $75 an hour, depending on regional wages), a percentage of the bill being audited (usually 1.5 to 2.9 percent), or a percentage of the savings generated (25 to 35 percent). If you chose an hourly rate, the auditors may spend a specified number of hours on a bill, after which they can call to report their findings so far, and let you decide whether or not to go further. 'We cap hourly charges to not exceed 2 percent of the hospital bill in question," says Dave Mooney of Equifax. Most auditors prefer not to charge by a percent of savings, because it makes hospitals less cooperative if they suspect auditors have an incentive to be less diligent in sniffing out undercharges.

Ethically, auditors are obligated to report any undercharges they uncover. "Most of our customers make up the difference of an undercharge," says Douglas Leland, vice-president of product management and development at Intracorp.

Assuming hospital billing errors are not deliberate, there should be a similar frequency of overcharges and under-charges. There is, explains Paul Miller, Intracorp's manager for hospital bill reviews. "However, the magnitude falls on the side of overbilling, for a number of reasons. For instance, a doctor may tell the nurse, 'If Mr. Smith should be in pain tonight, here's a prescription for Darvon.' Mr. Smith sleeps through the evening, but they went out to the pharmacy to fill that prescription. That doesn't mean Mr. Smith used the pills and should be billed for them," says Miller.

Auditors refer to medical documentation when contesting such items. 'There's a lot of negotiation. If it's not in the medical record, generally we argue it didn't happen," says Miller.

Surprisingly, most auditing companies don't bother to check whether the price of a hospital service or product is correct or "reasonable," however. So don't expect an audit to catch errors such as a few extra zeroes for hospital gowns. "We have no basis for comparison in a lot of cases," says Miller. "We don't know what it costs a hospital in Agawam, Massachusetts, to provide a tonsilectomy, compared with one in New York City. Hospital charge masters are proprietary."

Many employers are providing incentives for employees to audit their own bills, and report discrepancies. "The patients were there," points out Dave Garratt, managing consultant with A. Foster Higgins in Washington, D.C. 'They know how many times they got x-rayed and had blood taken." About 20 or 25 percent of his company's clients (mostly those that self-insure) have installed an incentive program. Some split the savings, usually up to a limit such as $500 or $1,000. Others offer a flat amount. To set up a program, just decide the type and size of financial incentive you want to offer, and announce the new program, perhaps with some fanfare.

Dave Mooney of Equifax points out, "Most insurance companies set reasonable charges for supplies and procedures. Consumers can get a list of those charges from their insurance company." The Health Insurance Association of America, based in Washington , D.C., also publishes cost guidelines that the large insurers use. And the government publishes Diagnostic Related Groups, a list of what Medicare will pay for various medical procedures.

The best way to spot overcharges is for the employee to ask the doctor for the cost of a procedure before hospitalization. In non-emergencies, patients can even ask the doctor to Est all lab work, x-rays, and medicines that he expects to prescribe. The patient can then ask the hospital what each procedure will cost, and later compare that with the itemized bill. "We always a a estimate when we get our car repaired," insists Mooney. "But we rarely ask for an estimate when we get our body repaired."


Jayne Pearl is a senior editor at Family Business.


Berwyn, PA

Managed Care Services Group
Westport, CT

Axiom Review Inc.
Millburn, NJ

HealthCare Compare Inc.
Downers Grove, IL

The Sunderbruch Corp.
West Des Moines, IA

Source: Business Insurance magazine.

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Honey Siegel is quick to tell you how lucky she is. Her 90-year-old mother, who lives with her, required emergency homecare after falling and breaking her arm, and then soon again after fracturing her hip. Both times Honey called an experienced eldercare consulting group retained for just such occasions by her employer, Fel-Pro Inc. of Skokie, Illinois. The consultant put her in touch with an emergency home healthcare service for the elderly which looked after her mother when Honey could not.

"I don't know how I would have managed otherwise," says Honey. She got through the emergency with only minimal time off from her job as assistant to Paul Lehman and the three other family members who preside over Fel-Pro operations. "Eldercare is one of the areas in which a company can help an individual solve problems outside the workplace that impact on job performance," says Lehman. "I know it was comforting to Honey not to have to sit at her desk and agonize over how her mother was making out. She cares about this company and gives 150 percent all the time," he says of his employee of 13 years, "so it was important to the company that we be able to do this for her peace of mind."

In providing eldercare services, FelPro is still a rarity in the business world. It has plugged into the embryonic, low-cost network of private and public eldercare service organizations serving businesses of all sizes. Tapping this resource, Fel-Pro has developed a package of eldercare information services that is nothing short of a lifesaver to those, like Honey Siegel, who need it. And Fel-Pro has done so at a surprisingly low cost — only $10 per employee for information and referral services.

Fel-Pro is in the forefront of what promises to become a major workplace issue of the nineties. Demographics tell the tale. Baby boomers, the largest single group in the work force, are buffeted on one side by the responsibilities of childcare and, on the other, by the obligation to care for aging parents. People have always had to deal with these problems, of course, but in today's typical family, in which both spouses work, problems with kids or seniors translate into time and concentration lost at work.

While giant companies are spearheading the development of formal eldercare support systems, it is small and medium sized family businesses that have the greatest need for affordable solutions. For most family businesses, lacking the management depth of large corporations, eldercare problems can have an immediate impact. Problems can occur when the older generation retires and turns the company over to the kids. Should the need for continuing care arise, the children are distracted from running the business. The family needs to know how to take care of the older generation and the business at the same time.

Family businesses can also be severely hurt when employees face eldercare problems, especially if the person is a high-ranking nonfamily executive. In a study by the American Association of Retired Persons and the Travelers Corporation, workers with eldercare problems reported devoting an average of 12 hours a week to caregiving. Many of those are spent during work hours, in endless telephone calls to doctors, agencies, and insurers available only during the day. Many are also spent during unscheduled days off, late arrivals, and early departures. Many caregivers spend less time with their own families, pay less attention to their own health, and not surprisingly, get sick themselves. Some leave their jobs or cut back on their hours.

It is up to companies, then, either to provide some measure of assistance to their employees or to absorb the costs associated with absenteeism and inattention. Providing such assistance need not be costly or difficult.

How toget started

"Smaller companies need to realize there are many alternatives between the extremes of doing nothing and picking up the cost of nursing homes or home healthcare — incredibly costly alternatives no one realistically expects corporations to adopt any time soon," says Christine DuSell, program director of the Aging and the Workplace Program at the Metropolitan Chicago Coalition on Aging (MCCA) that serves Fel-Pro. "It's important for every family business to understand that there are forms of eldercare services that are not beyond their budget."

In Fel-Pro's case these services include:

  • A semiannual eldercare educational fair on Saturdays at the company.
  • A weekday visit once a month in the company cafeteria by a counselor armed with brochures and advice.
  • A quarterly newsletter designed expressly for Fel-Pro employees.
  • Access via phone any time to the group's eldercare experts.
  • Referrals to appropriate services (the services, not the referral, are paid by the employee).
  • Follow-ups to help judge the effectiveness of the referral.

Bob O'Keefe, Fel-Pro's vice-president of industrial relations, is almost apologetic about the annual cost for this basic information and referral service for the company's 2,100 employees: "I wish I could tell you it was a big deal, but it's not. Only about $20,000 per year," or less than $10 per employee. Fel-Pro also goes the extra mile and pays up to 75 percent of the $8-per-hour cost of unskilled emergency homecare, such as Honey Siegel's mother received, up to a set limit.

DuSell estimates that the cost per employee for this package would not be much different for companies significantly smaller than the $230 million (sales) Fel-Pro.

Small and midsized family businesses have several sources of inexpensive eldercare services. Nonprofit groups such as MCCA, which assists Fel-Pro, are now marketing the services they developed for giant companies to smaller ones. And 670 Area Agencies on Aging, established under a 1965 federal law, are starting to create corporate packages based on the eldercare services they had originally developed for the poor and needy.

"Over 90 percent of Area Agencies for Aging provide services for employees," estimates Edward Sheehy, manager of membership services for the National Association of Area Agencies on Aging in Washington. Some of the area agencies are private, nonprofit groups, but most are part of local governments. Some of the wide range of services that these area agencies offer are free to community residents. While the level of service varies from agency to agency, they are increasingly eager to provide a package of services to local companies, possibly on a contract basis. Compensation can vary. "You might reach an understanding that your company provides a grant or a contribution," says Sheehy, "or you might agree on a more structured fee, based on time and service."

Most agencies provide excellent information and referral services, including much information that allows the company to take additional action. Among the services area agencies may provide are interviews and consultation with experienced social workers, help in setting up caregiver support groups and training group leaders, educational seminars for caregivers at the worksite, training for supervisors who have to manage people with eldercare problems, financial and estate planning services for retirees who need to care for an elder, and publications and policy handbooks designed specifically for your company. To find out how to contact the area agency nearest you, call 1-800-Age-Help.

While the costs of information, referral, and support are modest, the returns are incalculable. "When we have our caregiver fair twice yearly on a Saturday, we get quite good attendance, even last February after a horrible snowstorm. We think we see a good feeling throughout the company based on the availability of these services, but it's hard to measure the overall impact," says Fel-Pro's O'Keefe ."We do know that for those who use them, the services are often an answer to their prayers," he says.

Honey Siegel agrees. She's now in the process of seeking long-term care for her mother. "Thank God for the program. Even with their help, this hasn't been easy.

Going beyond information

Beyond providing printed information or referrals for your employees, you can take action that shows your concern and support. You can provide a formal or informal setting in which employees can meet and bring their eldercare problems out into the open and get direct guidance on them. Perhaps the most supportive action is to allow employees reasonable flexibility in their work hours when they need to deal with eldercare problems. You might try some of the following:

  • Give a seminar for employees, or provide space where interested employees can run their own, asking a representative of a local visiting nurse association, agency on aging, or family service agency to speak on eldercare issues such as housing, health, or finances. Some agencies will provide speakers free; others might charge a fee of $100 or $200.
  • Sponsor a support group for caregivers, or simply make a room at the office available for interested employees — whether 2 or 20 — to meet and discuss the issues before or after work. Having a leader is helpful but not always necessary, since "sharing information," says Richard Beinecke of Great Meadows Associates, family caregiving consultants in Concord, Massachusetts, "can be as valuable as bringing in a professional information source."
  • Join with other employers to sponsor a fair in which service providers in your area can show their wares. Such providers — senior housing sponsors, for example, or private geriatric care managers — can give you ideas on getting started, perhaps even organize the event.
  • Distribute a handbook on coping with eldercare issues (see the resource list below). Or better yet, determine if a local agency publishes a handbook with local resources.
  • Clarify company policy with respect to time off, adjusting work hours, and the like. If you are willing to have employees come in late or leave early when necessary to cope with caregiving, tell them so. They'll feel better being aboveboard — and you'll know what's going on. If it's a formal plan, with certain core work hours and flextime on either end, make sure the policy is clearly set forth and equitable. Is it only for eldercare? What about childcare? If it's an informal approach with supervisors making the decisions, be sure to monitor its implementation and impact. "It doesn't need to cost much," says Beinecke, "but flexibility can be the most valuable thing you can give an employee."

Alternatives to nursing homes

The average annual cost of sustaining someone in a nursing home is now close to $30,000, and double that in high-cost areas like New York City. Round-the-clock care at home can cost considerably more.

But many elderly people can get along very well at home — and be a lot happier — with periodic support services. The problem for caregivers is coordinating the services. Here's a sampling of what to look for in your community for both yourself and your employees:

  • Community-sponsored senior centers provide a range of services: hot lunches, recreational programs, health screening, and more. Most services are free, although contributions may be requested toward meals and recreational trips. The centers are also an excellent source of information about support services for the homebound.
  • Meals-on-Wheels and similar programs offer home-delivered hot meals five or more days a week in most communities. Funded under the Older Americans Act, the meals are technically free although a contribution of a dollar or so per meal may be requested.
  • Volunteer chore services help elderly homeowners remain in their own homes when they can no longer keep up with home maintenance. Part-time homemakers, similarly, can help with cleaning, laundry, and food shopping.
  • Adult daycare programs provide supervised full-day programs for frail or disabled elderly who can't be left alone while a caregiver is at work. More than a sitting service, they offer a range of services including recreational therapy, physical exercise, medical monitoring, and mental stimulation for early-stage Alzheimer's patients. Adult daycare costs an average of $30 a day, possibly as much as $50. But there is a severe shortage of facilities in some areas; only about 2,000 such centers exist nationwide.
  • Homehealth workers can make it possible for an ill or disabled person to remain at home. Three homehealth aide visits a week for a year would cost about $5,000 even before being supplemented by periodic visits from registered nurses to perform such specialized tasks as taking blood. However, homehealth workers earn so little that turnover is severe and care is frequently inadequate.


Life care communities (sometimes called continuing care communities) offer the ambulatory elderly a range of housing options within the same facility, from independent living in their own apartment through assisted living to nursing home placement. Many are sponsored by religious organizations; the Quakers, for example, run a number of well-regarded communities that have long waiting lists for admission. Others are owned and operated by commercial hotel chains such as Hyatt and Marriott.

Some communities operate on a monthly rental basis; some require an initial fee of $150,000 or even more, followed by monthly fees. It's important to investigate the financial stability of a community that requires a large up-front payment — you might ask your accountant to review their financial statement — before signing a contract. You should also visit, talk to residents, and sample food and recreational programs before making a commitment.

For more information, send a postcard to AARP for its publication, "Continuing Care Retirement Communities" (D12181).

High-techhelp at home

An elderly person with health problems may not need round-the-clock company if an emergency response system is installed. These electronic tools consist of two parts: a lightweight battery-powered "help" button carried by the user (actually a portable radio transmitter), and a console connected to the user's telephone. If the wearer should trip in the bathroom and be unable to get up, for example, pressing the button activates the console to dial one or more preselected emergency telephone numbers. Most systems can dial out even if the phone is off the hook.

Emergency response systems may be one-way or two-way. In a one-way system, a call is generally made to verify the emergency; if the phone isn't answered, help is sent. In a two-way system, voice contact is established via speakers attached to the phone, and the need for help ascertained. Two-way systems are more expensive but may offer more reassurance.

Systems may be purchased at prices ranging from $400 to over $2,000, or may be rented, often through your local hospital (at $25 to $50 a month). Renting may be preferable. "So many companies are getting out of the business," says Lee Norrgard of AARP's consumer affairs department, "that you might buy a machine programmed to dial a number that no one is answering."

For more information, send a postcard to AARP Fulfillment (EE178), 1909 K St. N.W., Washington, D.C. 20049; ask for publication number D12905, "Meeting the Need for Security and Independence."

Long-termcare insurance

Begun just a few years ago, long-term care insurance is now offered by about 120 insurance companies. Following earlier abuses, the National Association of Insurance Commissioners (NAIC) has issued model legislation governing its terms; the model act, or similar statutes, are now in force in about two-thirds of the states.

Most policies are individually issued, but some companies are sponsoring group plans for employees. Not true group insurance — in part because Congress hasn't yet clarified the tax status of employer-paid long-term care benefits — most plans have employees paying the full cost. That cost may be less than that of an individually purchased policy, but it may be a case of comparing apples and oranges. Group policies tend to have a richer menu of benefits, costing more; they also tend to be taken out at younger ages, therefore costing less.

Because long-term care insurance doesn't have favored tax status, it can be offered as an executive perk for family members or key employees. It hasn't caught on as such, however, in part because it's still so new and in part because most employers are preoccupied with lowering the escalating costs of basic healthcare rather than taking on new obligations.

The Health Insurance Association of America reports that the average annual premium at age 50 for an individual plan providing $80 a day for nursing home care (with an inflation rider), a 20-day deductible period, and four years of coverage is $658. At age 65, the average annual premium for this constellation of benefits becomes $1,395, and at age 79 a staggering $4,199.

Group or individual, here's what to look for in a policy:

  • Benefits, which may be paid for as little as one year to as much as the rest of your life, vary from a low of about $40 a day to a high of about $100 a day. Look for a policy that pays the highest benefit for the longest period, consistent with an affordable premium, and has a provision that raises that benefit to keep pace with inflation.
  • Benefits may be paid for skilled, intermediate, and/or custodial care. Some policies pay less for custodial care, in a nursing home or at home, although over time custodial care may actually cost more.
  • Deductible or elimination periods let you keep premiums down by self-insuring for the early stages of a covered illness. Bear in mind, though, that while most nursing home stays last less than 150 days, premiums saved by taking a longer deductible may pale beside the out-of-pocket cost of an extra month of nursing home care. Before buying, find out what local facilities charge.
  • Find out what conditions must be satisfied before a claim is paid. Policies can vary greatly. Some companies settle for a doctor's note; others apply a "managing the routines of daily living" test before someone who needs help with bathing, feeding, and dressing is eligible.
  • Look for a policy that is guaranteed renewable, which means that it cannot be cancelled by the company as long as you pay the premiums on time. But don't expect that premiums will necessarily remain level. Although premiums are determined by age at the time the policy is issued, insurers do retain the right to raise premiums for an entire class of policyholders. Given the newness of the long-term care product, and the lack of experience insurers have had with pricing and claims, prices may well go up.
  • Before you decide, obtain a copy of the "Shopper's Guide to Long-Term Care Insurance," published by NAIC, and fill out its worksheets. The guide must be given out by insurance agents or direct mail companies before an application for long-term care insurance is made. It is also available free to consumers from state insurance departments and at a still-undetermined charge for business from Publications Department, NAIC, 120 West 12th St., Suite 1100, Kansas City, Mo. 64105.

As you consider various policies, be careful. There are a number of situations that should be avoided:

  • Don't accept a policy that requires hospitalization before nursing home admission. Most people enter nursing homes directly and not from acute-care hospitals. Older policies in some states may contain this provision although it's prohibited by the NAIC model.
  • Don't accept a policy that requires you to receive skilled nursing care for a specifled period before you are eligible for benefits for intermediate, custodial, or home care. Such policies, says the NAIC, "may be of little or no value."
  • Don't accept a policy that rules out coverage for Alzheimer's disease. Some policies exclude treatment of mental and nervous disorders, but in states that have adopted the NAIC standard, Alzheimer's disease must be covered.
  • Don't accept a policy that rules out preexisting conditions longer than the six months recommended by NAIC.
  • Don't be talked into switching policies, unless your older policy requires a prior hospital stay, and you are in good health and qualify for a new policy.

A guide to eldercare resources

You may not be able to provide an onsite adult daycare center for relatives of employees, but you can ease the frustration your employees experience in trying to locate appropriate eldercare services. You might simply make an information sheet available, listing locally available support services. If you'd like to do more, read on.

Where to start

  • The local Area Agency on Aging should be your first call, for information and possibly more. There are 670 area agency units across the United States funded by federal, state, county, and municipal governments, which provide information and, increasingly, referral services on eldercare, though the level of services may vary. The National Association of Area Agencies on Aging provides a toll-free telephone number (1-800-Age-Help) for information on your local agency. Complete information on all 670 agencies is contained in the NAAAA's annual publication, "Directory of State and Area Agencies on Aging: A National Guide for Eldercare Information and Referral." Cost is $30. To find out more, write to the National Association of Area Agencies on Aging, 1112 16th St. N.W., Suite 100, Washington, D.C. 20036.


  • Every state now has a long-term care ombudsman, to investigate neglect, exploitation, and abuse of older adults in nursing homes and at home. The ombudsman is the person to call if you suspect, for example, that a nursing home is applying unnecessary restraints. The services are free, and you can locate your state's ombudsman through the Area Agency on Aging.
  • The Alzheimer's Association, which provides literature and sponsors support groups, is at P.O. Box 5675FB, Chicago, Ill. 60680-5675. Or call 1-800-621-0379 (in Illinois, 1-800-572-6037).
  • Hospital discharge planners can assist with post-hospital arrangements, putting you in touch with both nursing homes and homehealth agencies. Although their assistance can be valuable, the National Consumers League points out that they are often pressured by cost-conscious hospitals to make quick placements. It's up to you, therefore, to evaluate their recommendations.
  • A private geriatric care manager can be very helpful in evaluating your personal eldercare situation, and can make recommendations, at a fee of up to $400. The service can be particularly valuable if you live in one state and your relative in another. If desired, a care manager can also monitor ongoing care when you can't, at rates ranging from $50 to $100 an hour. The National Association of Private Geriatric Care Managers, 655 North Alvernon Way, Suite 108, Tucson, Ariz. 85711 (telephone 602-881-8008), has just published a free referral guide to help you locate care managers in your area. And AARP has a new booklet (D13803), "Care Management: Arranging for Long-Term Care."


  • A "Primer on Long-Term Care," recently published by the National Consumers League, contains a state-by-state list of Area Agencies on Aging along with much other useful information. It is available for $4 from NCL, 815 15th St., N.W., Suite 516, Washington, D.C. 20005. Bulk prices are available should you want to distribute it to your employees.
  • The American Association of Retired Persons publishes a number of helpful free booklets, including "Making Wise Decisions for Long-Term Care" (D12435), "The Right Place at the Right Time — A Guide to Long-Term Care Choices" (D12381), and "Housing Options for Older Americans" (D12063). A free copy of each may be obtained by sending a postcard to AARP Fulfillment (EE178), 1909 K St., N.W., Washington, D.C. 20049. Use the order number shown, and allow several weeks for delivery.
  • The Health Insurance Association of America publishes "A Consumer's Guide to Long-Term Care Insurance." The guide, and a list of companies that offer long-term care policies, is available at no charge from the HIAA, P.O. Box 41455, Washington, D.C. 20018.
  • A comprehensive resource, covering the whole range of issues you'll face as your parents (and you yourself) age, is When Your Parents Grow Old, by Florence D. Shelley (Harper & Row, 1988). Check your library or bookstore, or order a copy, at $10.95, by calling 1-800-638-3030.


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Not long ago, a woman and her husband's brother came to Ed Storti for help. The San Pedro, California, counselor is an interventionist. It is his job to convince drug and alcohol addicts to enter treatment programs.

The troubled husband was the 49-year-old second-generation head of a family foundry. It had been a solid business, but now both the business and the husband were in a bad way. The man drank too much, and the wife and the brother, both of whom worked at the foundry, believed he also used cocaine. "They told me that good employees had quit, accounts had diminished, and they were looking at bankruptcy," recalls Storti.

A confrontation had already failed: The husband angrily told his wife and brother that he was in control and that if they wanted him out of the company they'd have to go to court.

Storti gathered 14 family members, including one who flew in from abroad, to be a part of the intervention effort. In the face of such persuasion, the husband agreed to enter a five-week inpatient treatment center, and undergo continuing therapy. Today the man and the business are both back on track.

In these troubled times, any business is at risk of being disrupted by an employee's addiction to drugs, alcohol, gambling, or other destructive behaviors. According to Leslie Dashew Isaacs, an Atlanta management consultant and family therapist, a generally accepted estimate is that in one out of three families a member of the immediate family has a chemical dependency.

In a 1988 survey by the National Institute on Drug Abuse, more than 8 percent of full-time employees reported using an illicit drug during the past month; 6.4 percent reported heavy use of alcohol (five or more drinks on the same occasion five or more times in the same month). Nearly 19 percent of full-time employees ages 18 to 25 reported using an illicit drug in the past month; 11 percent reported heavy drinking.

The cost of drug and alcohol addiction is daunting. A 1984 government study put the annual cost to society at $60 billion, from lost productivity, absenteeism, theft, prevention and treatment programs, accidents, and loss of trained personnel. The emotional cost is incalculable.

When the afflicted party works in a family business, the stakes are even higher. For one thing, the most powerful reason for getting into treatment may be missing: the fear of being fired. In a normal case, persons close to a substance abuser can recruit an employer to threaten him or her with being fired. "That has been found to be the most effective way of getting people to go into treatment," says Kenneth Kaye, a Chicago psychologist who is a family business consultant and a frequent contributor to this magazine. "But many family members in a business feel immune to being fired. The rest of the family then feels there's nothing they can do," says Kaye, "and that can drive them into the kind of denial that prolongs the problem."

Too, it's sometimes harder for family members to confront a loved one. "Alcoholics and addicts are extremely skillful at making other people feel guilty," says Nolan Brohaugh, a social worker with the Menninger Management Institute at the prestigious Menninger Clinic in Topeka, Kansas. "In a family business people protect someone far beyond the norm. A mother may say to a father about a son, 'If you weren't so bard on him he wouldn't drink so much.' Meanwhile the father is saying to the mother, 'If you didn't baby him he wouldn't drink so much.' Out of desperation they blame each other and neither confronts the person."

Frequently, family and friends actually "enable" the addict to continue the substance abuse, by making excuses and inventing alibis, taking over responsibilities for them, and covering up the problem. This is all done in the spirit of kindness and caring, but it allows the addict to deny his problem and to continue with minimal consequences.

To complicate matters, alcohol abuse may run in the family. "Where heavy drinking is the norm," says Brohaugh, "they may say, 'Grandpa founded this company and by god he drank a quart of scotch every day."'

Often drug addictions aren't apparent until the company or family notices some financial shenanigans. "With cocaine, people don't look much different and are skillful enough to pass themselves off as being okay," says Brohaugh. "It doesn't get exposed until someone realizes there's $10,000 missing or family members compare notes and find the person has borrowed money from all of them."

In addition, in a nonfamily business co-workers might go to the boss with complaints about such a colleague. But if the colleague and boss are both family members, outsiders might hesitate to complain.

"In one case, the father didn't want to believe reports by employees that his son was addicted to cocaine. His denial caused morale problems. Employees were losing respect for the owner. They thought, 'if this can go on what are we working so hard for?"' says Isaacs.

Brohaugh, who holds seminars on dealing with drug and alcohol problems in family businesses, has noticed some patterns of abuse. "One thing we've seen a great deal," says Brohaugh, "is an heir apparent, usually the eldest son, who didn't really want to be in the business. But because of the disappointment he knew would be generated, he couldn't bring himself to say he wanted out. Better to anesthetize his displeasure with alcohol."

This scenario is most common in the third generation, according to one expert. While a founder has a clear challenge to create a viable business-and the second generation must lead the business in a particular direction, the third generation usually takes over a company that runs to some extent on its own momentum. Therefore, he says, there is not a clear challenge that might otherwise motivate a family member who was less than enthusiastic about taking over.

Another problem that Brohaugh has observed in sons driven to substance abuse is some type of undiagnosed learning disability. "It's not that their intelligence is impaired," says Brohaugh. "They have a disability which interferes with learning the business. A kid who knew he wasn't capable would start using drugs or alcohol. Better to be called a drunk than stupid."

So what can be done for family addicts? At Menninger the treatment is two-pronged: therapy both for the addictions and the under lying psychological problems. Those with learning disabilities can also get remedial help. But sometimes the answer is leaving the family business. 'We say, 'Look, if you're going to stay sober you have to make that decision about getting out of the business. We will help you talk to your parents in a rational, non-guilt-provoking way,"' says Brohaugh. "Typically, by the time someone is abusing to that extent, the family accepts his leaving the business as the lesser of the two evils."

Treatment for the addict usually requires an inpatient stay. Sometimes having the addict go away for a period is actually a relief; by the time someone like that opts for treatment they aren't contributing much to the business and may even have been hurting it.

But for some small family firms treatment may mean doing without someone who may have been valuable to the company, even with the disability. "Businesses just have to make plans to do without the person for a month or even more. Other people will often rally to get the job done while the person is gone, but a family business should have a contingency plan for its people anyway," says Isaacs.

The family should be prepared for setbacks. Even with the most careful of preparations, the addicted person might refuse treatment, or will go into treatment but then have serious relapses. According to Brobaugh, usually one-third of patients recover, one-third have relapses and end up back in treatment, and one third don't get better at all or get worse. (The average Menninger patient has made three previous treatment attempts.)

A family must be prepared to make good on its threats to fire an addicted relative who refuses to get help. "A family must make it clear they are not going to continue to enable the addiction," says Isaacs. "They need to make a recovery contract with the person and say, These are the conditions under which you will continue to have a job. This is what the business will do and what the family will do.' A family can say, 'If you have a relapse but admit it and get help we will support you; if you don't admit it within 48 hours, you're out of a job.' Some also need a policy on drug testing," she says. "Addiction is a terminal disease. If it's not treated it leads to death, either by overdose, drunk driving, or physical deterioration of the body. If the family doesn't deal with it, they may lose the person."

If someone believes that a family co-worker may have a problem, Brohaugh suggests first comparing notes with other family members. Then consult a professional about evaluation, intervention, and treatment. Many treatment centers will do an assessment at no charge.

A typical inpatient program for an adult lasts about a month (teenagers require longer), after which there is ongoing therapy. A patient who lives far from the treatment center is often referred to a therapist and support groups in their hometown for follow-up care. Some professionals recommend that recovering addicts attend daily meetings of Alcoholics Anonymous or Narcotics Anonymous for the first 90 days after inpatient care. The greatest success rates come when people stay a part of the recovering community," says Isaacs.

There are good treatment programs and centers all over the country. Inpatient treatment can cost from $4,000 to $15,000, and is covered to varying degrees by health insurance. The cost for intervention runs from $1,200 to $1,800. Most private centers try to accept patients within 24 hours, but some occasionally have waiting lists of a few weeks. "People usually come into treatment as a result of some crisis," says Brohaugb. "When the crisis passes, the pressure to get help passes." The horror stories about people unable to get in for months pretty much applies only to the government-run and government-financed programs. There's usually room at private centers. The question is how to pick the right one.

Counselors recommend that family business members find a center that has an industrial liaison. This liaison keeps in touch with the company, reports on the patient's progress, predicts what the company can expect when he or she returns to work, and suggests ways a firm can assist in recovery.

Family members are usually required to aid in therapy. Al-Anon and Nar-Anon can be especially valuable when the addict refuses treatment. "Even before they're ready to confront someone, family members can get support and guidance from these groups," says Isaacs.

Such groups can also help family members once the recovering addict returns to work. "Many times the family will not deal with their feelings about the addiction," says Isaacs. "They are ashamed of being associated with the addict and what they might have done to contribute to the problem." That puts employees in an uncomfortable position. Nonfamily employees are understandably curious about the addict and concerned about the stability of the business, but may be reluctant to ask questions. This is an opportunity for the family to turn the crisis into an asset, says Isaacs. "They can show employees that when the family and the firm have a problem, they don't cover it up, they deal with it." The family might want to bring in literature about addictions and treatment programs, or even a speaker.

Family members ought to acknowledge how they are handling the issues that affect workers. They should emphasize that the company cares for people who are wounded, and will work with people to bring them up to speed, but will not tolerate workers, in or out of the family, who are substance abusers.

Once back on the job, recovering addicts will have to set parameters about what to tell co-workers, and what to keep private. They should be willing to talk about the addiction, the treatment process, their job performance, and its impact on co-workers, but will probably want to keep mum about personal and family problems that caused and were caused by the addiction. Families should agree what is private and what is public, so all members can be comfortable and clear about what is open for discussion outside the family.

Here are some resources that can help addicts and their families:



  • The National Council on Alcoholism and Drug Dependence (212-206-6770) can help in finding a treatment center.



  • The National Institute on Drug Abuse has an information and treatment referral line (1-800-662- HELP). NIDA also has a toll-free "help line" to provide employers with information about instituting drug education and testing and employee assistance programs (1-800-843-4971).



  • Another valuable resource for families of addicts is the book, The 100 Best Treatment Centers for Alcoholism and Drug Abuse, by Linda Sunshine and John W. Wright (Avon Books, $10.95).



  • Consult your telephone book for local chapters of Alcoholics Anonymous.


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