The LSI Logic Corporation

The Modular Path to Integration -
A case study presented by the Integrated Benefits Institute:

Semiconductor fabricator LSI Logic of Milpitas, California, took a direct route to health and productivity management through outsourcing its disability benefit functions. The building of its modular initiative began in 1986 with self-insurance and now incorporates three components of integrated disability management. Without significant startup cost or reorganization, LSI has created a truly modular initiative—a model for other employers interested in outsourcing.

LSI Logic is a developer and fabricator of specialized computer chips; its complete system-on-a-chip; products drive consumer and professional video equipment by Sony, Panasonic and others. During the 1990s, LSI nearly tripled in size, growing to 6,800 employees by 2000—5,800 of them in the United States.

Rather than build a substantial HR infrastructure to manage disability benefits, LSI chose outsourcing through a third-party administrator (TPA). LSI self-insured workers’ compensation (WC) in 1986 with Matrix Absence Management and added another TPA for short-term disability (STD). Consolidating to one TPA in 1993 cleared the path for integration and later addition of long-term disability (LTD) and Family and Medical Leave Act (FMLA). With all benefits under one TPA, LSI efficiently rolled out a medical management component beginning in 1997 and a transitional work assignment (TWA) program beginning in 2000. Pam Porter, hired in 1998 to head LSI’s disability management and related programs, was named integrated disability programs (IDP) manager in 2000 following the TWA program startup.

Highlights of LSI's Experience

The modular path to benefits integration made sense to LSI for several reasons. Among them:

1 The relatively high opportunity costs of absence within the semiconductor industry had already made medical management of disability part of LSI's corporate culture and HR budget.

2 Because all disability benefits at LSI fell under a single manager in HR, outsourcing was an efficient option and potential turf struggles often experienced by other employers were not an issue.

3 Special needs in accommodating disabled employees in fabrication plants required a specialized TWA program.

4 Importing a new return-to-work (RTW) solution required customization to accommodate diverse operating cultures in different plants.

5 Physicians treating non-occ injuries need extra help to specify functional restrictions for TWAs—a task that WC providers are prepared to perform.

Program Savings

• Outsourced medical case management serving 5,800 U.S. employees replaced three on-site clinics serving 2,200 California employees—for the same cost.
  
• WC litigation dropped dramatically, from 12 cases in 1995 to 2 cases on 2001, due to multiple factors improving employee satisfaction.
  
• Under outsourced medical management, average STD per-employee claim costs for 1998—2000 dropped 34% from the prior three-year period.
  
• In the TWA pilot, reduced disability days returned twice the program's $55,000 startup cost.
  
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  The entire Report is available for IBI members to download at: http://www.ibiweb.org/publications/case_studies