Measuring ROI for healthcare benefits

There is widespread evidence to suggest that strategic investments in employee health can help promote workforce productivity, engagement, and satisfaction.

Willis Towers Watson’s Global Workforce Study, for example, has revealed that they can lead to a fourfold uplift in productivity, talent management and public image.

But while many decision-makers will accept this as a given, without compelling evidence some board room executives will continue to regard benefits-led employee healthcare initiatives as a nice-to-have rather than a strategic imperative.

HR departments can have their work cut out demonstrating a return on investment (ROI) in advance for benefits-led employee healthcare initiatives. Often, they may have to resort to indirect, rather than direct, indicators.

With a little data mining and forward-planning however, high level business intelligence or well-founded empirical observations can invariably be drawn upon to reveal meaningful risk indicators and measurable ROI opportunities.

A sickness absence antidote

Managing sickness absence should be a key consideration behind the introduction of healthcare benefits. The business cost can be considerable from paying salaries or sick pay, to replacement staffing costs – not to mention its impact on customer satisfaction and workforce morale.

This business cost can be calculated if robust processes for measuring absence are in place, such as automated recording systems that offer consistency in data capture.

If possible, employers should look to measure sickness absence before healthcare benefits are introduced, and again when they have had the chance to impact business performance.

A simple way to calculate the cost is to multiply the average daily salary bill by the total number of days a workforce is absent for each year.

Useful additional calculations, which can be done automatically by absence software programmes, include ‘lost time rate’ measuring the percentage of total time lost to absence, ‘frequency rate’ measuring the average percentage number of absences per employee and the ‘Bradford factor’ measuring the number of spells of absence.

By drilling down into these types of statistics, companies can identify patterns such as the prevalence of absence caused by mental or musculoskeletal illnesses, for example. They can also demonstrate improvements that have been brought about by benefits that facilitate early intervention, such as PMI, EAPs or cash plans.

Realising recruitment and retention rewards

Healthcare benefits can help promote a strong sense of employee health and wellbeing, helping employees to improve their personal health to minimise stress and illness.

By doing so, companies are able to position themselves as employers of choice – delivering the feel-good factor, improving staff morale, motivation, and commitment to help boost recruitment and retention.

Business intelligence in this area may include comparative overtime payments and recruitment for replacement staff. Longer term analysis may include metrics that illustrate variances in staff retention rates.

Valuable staff feedback on the extent to which healthcare benefits are appreciated can be solicited using satisfaction or engagement surveys. If conducted at regular intervals, such consultations can help determine if benefits are accommodating employees’ healthcare priorities and shape future provision.

A boost to workforce productivity

Proving a cause-and-effect improvement in productivity and employee engagement from healthcare benefits can be difficult, as numerous factors can have an influence on these metrics.

An analysis of performance improvements across a range of operational activities, before and after implementation of health benefit strategies, however can certainly help in adding weight to a business case.

A helping hand controlling insurance costs

Medical insurance costs, particularly in the large corporate sector, are driven directly by claims made in previous years and an assessment of future risk.

An effective health benefits programme should directly impact on claim costs over the medium to long term – and analysis of claims patterns or trends should help highlight where health benefits are best targeted.

If a disproportionately high rate of medical insurance claims is associated with lifestyle-related conditions, for example, the introduction of health screenings or online health risk assessments may help highlight future health issues in advance, before they develop into more serious problems.

Similarly, improved access to physiotherapy services via cash plan provision may help promote early intervention and tackle a disproportionate high rate of claims relating to musculoskeletal conditions.

By drawing upon such business intelligence companies may, in some cases, discover opportunities to better utilise and communicate the availability and value of existing benefits.

ROI measures will ultimately depend on each company’s goals and objectives, but by adopting a strategic approach to healthcare benefits strategy from the outset, employers should be able to target clear outcomes that will help establish the business case.

Consultancy advice from specialist advisers can help in the development of this strategy, identifying risks, and targeting benefits where they are most needed to support wider corporate goals.

Mike Blake is director at Willis Towers Watson.

This article was provided by Willis Towers Watson.