Sometimes organizations and HR leaders can feel confined by data. In today’s world, big data is everywhere and the expectation is that you’ll be able to easily apply it to every challenge you face. For employers, one of those challenges is often tackling their ever-increasing health benefits spend and their Health Benefits ROI.
For most employers, health benefits are one of their largest expenses. Yet, it’s also an expense that business leaders and HR teams feel they have the least control of.
In a previous post, we talked about different metrics CFOs and HR leads should seek out when it comes to measuring the effectiveness of health benefits and wellness programs. Now it’s time to determine if you are getting value from the spend. To set the scene, we spoke with a CFO and HR leaders who have been through this difficult process before.
Measuring health benefits ROI generates results
“Measuring the amount of claims filed by employees each year is a provable benchmark that both accounting and HR can agree on,” says Bob Shoyhet, a CFO with experience working as an auditor for a Big 4 accounting firm and serving as CFO for an international consulting and IT manufacturing company. “The trick, from year to year is to reduce the cost of those claims.”
Shoyhet recommends looking not at benefits reduction as a single health benefits ROI measurement, but focusing on overall improvements in business productivity, engagement, tenure and work satisfaction as measures of wellness program success.
“Proven results of such programs have shown employees to feel more engaged in their workplace and miss less days due to sick time, a measurable ROI. Workers’ compensation insurance costs decrease as well, plus your business will get an additional benefit of reduced turnover.”
The same goes for wellness programs.
Laurie Brednich is CEO of the HR Company Store in Chandler, Arizona, and an HR professional with more than 25 years of experience working for organizations such as American Standard, the National Basketball Association, Pinnacle Foods Group, GoDaddy and Sprouts Farmers Market.
“My wellness programs have successfully ‘bent’ healthcare trends—our year-over-year costs were negative two percent and that happened without cost shifting to employees or decreasing benefits,” she says. “It was true wellness.”
When measuring ROI for wellness, Brednich, says organizations should examine four key items: participation, engagement, utilization, and cost.
“In other words, you need to look to determine if people are participating in the programs (e.g., biometric screenings, engaging with resources you provide like wellness coaches), which specific healthcare services they are using (e.g. which classes of prescription drugs) and how your programs directly impact the cost you pay for your plans (e.g. healthcare).”
These are “the most obvious examples,” she says, but not the only metrics CFOs and HR leaders should be monitoring. She points to a number of best practices based on her experience:
In addition to regular cost calculations, extract high cost claims and then compare the rest year-over-year to determine any impact on the cost of everyday healthcare issues. In addition, develop an in-depth understanding of your contracts.
How are you being charged for out-of-state claims, administrative fees, specialty prescriptions, etc.? “If you don’t understand it, you can’t manage it,” says Brednich. In terms of participation she suggests to look not only at healthcare-related items, but to also incorporate EAP usage data and financial data—e.g. 401k loans and hardship withdrawals.
Make sure you really understand the engagement funnel for any health and wellness programs you are outsourcing. Every vendor you use may define this differently. “There are as many definitions for engagement as there are companies,” says Brednich.
Look at how your healthcare dollars are being spent to glean insights about potential workplace impacts that could be controlled or managed. For example, “If you have a high utilization of GERD medication, that usually indicates a workforce with stress-related issues,” says Brednich.
When reviewing participation numbers for on-site activities “You need to take into consideration the number of people physically on-site that day vs. the number of employees assigned to that location. This may impact your participation numbers.”
Brednich believes most CFOs and HR leaders don’t have a deep understanding of the nuances of healthcare and how healthcare costs can be controlled. Partnering with HR/benefits professionals like League can help; their role is to “create an easy-to-digest scorecard with the key indicators that the CFO and HR leader can easily digest.”
Measurement is just the starting point. Along with the education and training implemented, CFOs and their HR/benefit administration colleagues should share information about health benefit impacts not only with leadership, but with employees as well.
The more everyone understands how health benefits can positively impact not only the bottom line, but employee health and wellness, the broader the support for such initiatives will be.
In addition to health benefits ROI, it’s also critical to measure value on investment (VOI). Learn more about how large organizations are improving their total rewards programs to boost VOI.