Employers don’t just provide health benefits to employees because it’s the “right” thing to do. While employers certainly want to nurture a healthy staff, the reality is that their benefit decisions are based on solid financial strategy, including a healthy ROI. But how do organizations evaluate the ROI of the benefits they offer employees? What health benefit metrics matter the most?
Why is it Important to Measure ROI?
Health care costs are rising, and for organizations, those prices include not only the cost of benefits, but the impact of claims and the impact of employee health and wellness on productivity and engagement. Today’s CFOs and HR leads need tools that can help them administer employee benefits, while also determine the real, bottom line effects of those benefits. Are their benefit dollars being well spent? Are their health and wellness initiatives making a difference? What current workplace trends might affect the health and wellness of the employee population?
Metrics Associated with Bottom-Line Results
There are a wide range of metrics that CFOs might look at to determine the impact of their health benefits. The metrics chosen will differ based on specific goals. For example, if the organization is hoping to switch employees from participation in an HMO (Health Maintenance Organization) plan to participation in consumer driven health plans (CDHPs), they’ll want to measure not only the shift in plans chosen, but determine the demographics of employees who do or do not choose this option— based on age, income, family status, etc. If offering an incentive to employees who elect not to receive coverage due to a spouse’s coverage through another employer, the same types of metrics could be monitored. If tracking the impact of a health and wellness initiative, metrics related to absenteeism and claims data will be useful to study.
Process vs. Outcome Measures
Both process and outcome measures can be smart to monitor. However, it’s important to keep in mind that process measures are leading indicators, while outcome measures reflect actual bottom line impact. For instance, the number of employees enrolling in a wellness initiative is a process measure and a leading indicator that might point to the level of impact such an initiative might make. The actual impact—measured through a decline in claims, for example, linked back to the initiative—would be a more meaningful outcome measure.
Which Metrics Make the Most Sense for You?
Heidi Pozzo is the founder of Pozzo Consulting and the former CFO of Longview Fibre Paper and Packaging, where she was recognized by the Portland Business Journal as CFO of the Year – Large Company. Pozzo explains how measuring the impact of health benefits is a long-term proposition. “If you look at what top performing companies do, you’ll see a commonality across the companies,” she says. “They value their people and it shows up in strong safety performance, strong benefit programs and skills training and development.” Pozzo notes how it’s difficult “to draw a straight line from any one of these areas” to specific impacts; instead, leaders in these top companies will “take a holistic view of the company and what it takes to be a top performer.”
Regardless, there are a number of statistics that are supplied by third party administrators or health care providers that CFOs can track, and which are aggregated so as to adhere to HIPAA privacy requirements. “The easy one to watch is where treatment is provided—ER, urgent care, primary provider,” Pozzo continues. “With education, you can see a fast shift. Another one that is helpful is educating people on in or out of network doctors. Stats are easily available for that as well.” These are both areas where education and communication can result in measurable impacts.
With wellness programs, it’s harder to make a direct correlation between these initiatives and productivity and engagement. There are, Pozzo says, typically a number of other initiatives going on at the same time. “Wellness programs can include nurse lines to discuss nutrition and have built-in accountability, on-site gyms or gym reimbursements, healthy food in the cafeteria, groups that hike, run, compete in team sports, etc.” This is why taking a holistic view over time can provide the best insights.
There’s evidence to support this approach, Pozzo notes, pointing to a study of the bottom line impact of the efforts of a portfolio of companies recognized for their health and safety efforts.
At League we believe that every employee and every company has different health needs. Therefore, we know that what works for one company may not work for another. The only way to be sure you’re getting value from your spend is to determine which metrics will give you the broad picture. And you shouldn’t do it alone. Ask your broker, benefits provider or TPA – they should be your partner throughout.
— League (@JoinLeague) October 7, 2017
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