Does a health risk management strategy pay off?

If you read nothing else, read this…

  • Using health risk management to measure return on investment on health perks is a new idea in the UK.
  • The idea is to invest in health and wellbeing benefits to improve both employees’ health and the cost of benefits provision.
  • Measuring the effects of healthcare benefits, such as health screening or physical activity, can produce robust data to help calculate ROI.
  • A strategy can include absence recording, occupational health provision, and employee education.

Case study: Telegraph reports tangible benefits from health strategy

Over the last five years, Telegraph Media Group (TMG) has developed a health and wellbeing strategy that has delivered measurable outcomes.

Its key results include a significant fall in the number of sickness absence days taken; increases in gym usage; and sizeable reductions in private medical insurance premiums, due to its work with PMI Health Group. TMG believes its health strategy has played a part in ensuring its turnover, operating profit and balance sheet net assets have all improved over the past three years.

Key to its success has been a holistic and integrated approach. Its health and wellbeing committee brings together all the stakeholders – HR, health and safety, employee assistance programme (EAP) and healthcare providers, physiotherapist, nutritionist, GPs and gym manager – to share information, develop ideas and discuss cases.
TMG’s package includes twice-a-year ‘know-your-numbers’ sessions with GPs, nurses, physiologists and physiotherapists measuring BMI, blood pressure, cholesterol and lung capacity.

The strategy acknowledges the importance of staff engagement. It now offers salsa classes, for example, recognising that people’s ‘fitness motivations’ will vary, and dancing can improve heart and lung capacity just as well as a gym workout.

Richard Morgan, head of human resources, says: “We have worked to create an environment where health, wellbeing and safety are at the forefront of employees’ minds. Because of this, we have high levels of employee engagement and this translates to measurable benefits for the business.”

A health risk management strategy promises savings for employers, but return on investment is still hard to calculate, says Peta Hodge

The idea of using health risk management to achieve a return on investment (ROI) on healthcare benefits is relatively new in the UK. Perhaps because of this, the services on offer vary wildly and employers need to read the small print to understand exactly what they are buying.

Stephen Hackett, head of employee benefits at Bluefin, says that at its broadest, health risk management sees employers invest in employee wellbeing “not only to make the employee more healthy, but to improve the balance sheet”.

Interest in health risk management has grown as employers see the link between health and productivity, says Iain Laws, account director at PMI Health Group.

There is also the expectation that health risk management, and the resultant improvement in employee health, will have a positive impact on the cost of providing a range of benefits, including incapacity pensions, income protection and private medical insurance (PMI).

So what does an effective health risk management strategy look like? At its core should be an appropriate health and wellbeing programme, says Laws. “This would involve a range of initiatives, including a comprehensive health risk assessment, an employee education and awareness campaign, absence recording and management, high-quality occupational health provision, positive health intervention and provision of access to healthy lifestyle pathways.”

He adds that when such interventions are delivered in a co-ordinated way, “it is possible to measure ROI in terms of a reduction in the direct and indirect costs of absenteeism, effective employee rehabilitation and return-to-work rates, all of which can positively contribute to the control or reduction of expenditure on insured benefits and staff retention”.

Provider Healthcare RM uses a variety of interventions to target areas such as sickness absence, musculoskeletal and stress-related conditions. Employers can also cut the cost of healthcare benefits by about 30% using strategies such as shifting certain conditions out of PMI.

Save costs on healthcare scheme

Pamela Gellatly, chief executive officer at Healthcare RM, says: “Deciding to manage cancer via the NHS, either by a change to the rules or by active case management, can save significant costs on the healthcare scheme on just one condition.”

There are clearly savings to be made, but employers need to examine how ROI figures are achieved. Many focus on savings from reducing sickness absence levels, but Bluefin’s Hackett says these figures are often based on the Chartered Institute of Personnel and Development’s average value for a day’s absence, not the experience of particular employers.

Chris Bailey, principal at Mercer, is concerned about the quality of data available from employers. “The key to developing an accurate ROI that stands up to a finance director’s scrutiny is the quality of the data
captured,” he explains. “Most organisations do not have systems that capture the real cost of ill-health, so the ROI stated makes too many assumptions and prevents investment in health management from being signed off.”

Apart from recording absence, there are steps employers can take to ensure health and wellbeing strategies generate robust ROI information. Commitment from the top is essential. “If you look at the best case studies, such as Royal Mail and Adidas, it is always driven by the senior team,” says Hackett.

Long-term commitment is also needed. Monitoring has to be carried out over a number of years for figures to be meaningful. Hackett believes staff health screening is also essential. “If you take something like high blood pressure, it is only when I, as an individual, know there is a problem that I start doing something about it,” he says. “If an employer was providing bi- or tri-annual screening, this would have a big impact and, over time, the screening provider would be able to produce generic reports.”

One approach is to add value by increasing productivity rather than cutting costs. Axa Icas’s Imperative Health service, for example, focuses on increasing employees’ physical activity and reducing weight, using US data to correlate these factors with productivity. Chris Tomkins, head of personal health risk management at Axa Icas, says he plans to make health risk management a harder, more numerate, evidence-based discipline.

Increase physical activity

Past interventions to increase employees’ physical activity or reduce their weight have tended to rely on subjective feedback from employees themselves. By contrast, Axa Icas is producing hard evidence, for example by using wireless scales and an accelerometer to measure physical activity. Tomkins adds health risk management is firstly about engaging people, then about getting them to change their behaviour. “We’ve got the published papers,” he says. “We know we get people more active, get their blood pressure improved. So having that gravity and efficacy of intervention at the end of the process helps draw people in at the beginning.”

As for ROI, Tomkins estimates that for every £1 spent on Imperative Health, an employer could expect to get the £1 back plus £1.30 in year one, £2.60 in year two and £4 in year three. But he points out it is early days for the service, which does not have any clients yet and currently relies on US data.

Hackett says the industry is only at the start of the ROI journey. “This is a positive step to take. I am sure there will be a breakthrough and people will be able to prove ROI and there will be productivity increases, but we are not yet at the point where people can say ‘do this’ and you will get this ROI.”

But Joanne Anderson, senior consultant at Towers Watson, warns focusing solely on ROI risks underplaying the complexities of health risk management. As she explains: “It involves the integration of employee benefits, from prevention through to rehabilitation, which improves staff engagement and clinical outcomes while delivering efficiency savings to the employer.”

Top tips for generating return on investment

  • Get support from the top. Without it, you are unlikely to reach the whole organisation and produce meaningful data.
  • Get employees engaged. Without them, there will not be anything to measure.
  • Commit for the long term. Managing employee health is a continuous process and improvements need to be measured on an ongoing basis.
  • Record absence management consistently throughout the organisation (many do not).
    Offer regular health screening to all staff. It is a solid basis for measuring improvement.
  • Produce data: measure and record wherever possible.

Read more articles on health risk management strategies