The Increase in wellbeing products has made it harder for employers to work out how best to spend their healthcare budget, says Sam Barratt
For years, offering a healthcare benefits package has meant either providing staff with private medical insurance (PMI) that gives them access to treatment faster than on the National Health Service or a healthcare cash plan to help them with everyday healthcare cost
But with an increase in the number of wellbeing products and initiatives on the market, it is becoming more difficult for employers to decide how to spend their healthcare budgets.
According to Working Well: A global survey of health promotion and workplace wellness strategies published by Buck Consultants, online healthy lifestyle programmes, healthy food options, onsite healthy lifestyle classes, health risk appraisals and work-life balance support are rapidly increasing in popularity among employers in Europe.
However, employers have to balance their needs for wellbeing benefits against those for more traditional perks when managing their healthcare budgets. This exercise is even more critical in these troubled economic times. Iain Laws, account director at consultancy Enrich, explains: “The prevailing economic conditions are forcing employers to think about what they provide in terms of healthcare benefits and the value they deliver to the business. They are looking at striking a better balance between delivering employee and employer benefits with their healthcare spend.”
Traditional benefits, particularly PMI, have tended to be viewed more as employee perks, allowing staff to access treatment if they become unwell. While wellbeing perks offer both employees and employers key benefits.
“Insurers argue that PMI can reduce sickness absence but I’m not convinced. However, if employers help employees improve their health it can have significant benefits in terms of productivity, reduced sickness absence and improved morale,” says Laws.
Wellbeing benefits are also more preventative than traditional perks. Nick Homer, senior propositions manager at Norwich Union Healthcare, says: “PMI can nip a condition in the bud but it won’t treat the cause and therefore it could recur. If employers use wellbeing benefits to encourage employees to lead healthier lifestyles they could avoid all manner of health problems that might require medical treatment.”
Recognising employers’s increasing interest in sickness prevention, some providers have amended their traditional healthcare products to incorporate aspects of these wellbeing services. Several PMI products, such as those from Bupa, Norwich Union Healthcare and Standard Life Healthcare, now include access to online health assessments, and supporting advice and information, while PruHealth’s Vitality programme rewards employees who take steps to improve their health with reduced PMI premiums.
Similarly, healthcare cash plans have been evolved by providers to deliver more wellbeing options such as employee assistance programmes and occupational health services, as well as minor surgical operations and appointments with consultants.
But while there is some overlap between these two types of benefits, they each have such different properties that it is essential for employers to consider the return they will ultimately deliver to the organisation, as well as from any additional wellbeing initiatives.
Cost is a key consideration, not just in terms of current premiums but also future financial commitments. Although cash plan premiums are typically fairly static, PMI costs can escalate sharply year-on-year, with medical inflation as high as 10% a year. Ann Greenwood, director of business markets at Bupa, says employers can save on PMI premiums by reducing the level of cover. “A slimmed-down version with an excess can cost as little as £300 a year per employee. This will still give staff access to diagnostics and in-patient treatment,” she explains.
In contrast, wellbeing benefits tend to have much lower price tags. For example, online health assessments cost around £12 a year per employee, sickness absence services from £8 to £25 a year per employee, and employee assistance programmes between £5 and £25 a year per employee. The cost of softer benefits such as fruit, pedometers for walking groups and water to keep employees hydrated will depend on the size of the organisation.
It is possible to put together a wellbeing package that doesn’t cost anything more than the administration and promotion required. Mark Eaton, director of Personal Group, says: “Services such as health screening can be done on a voluntary basis, [while] bikes-for-work schemes, which are growing in popularity, don’t have to cost employers anything.”
However, employers can also end up spending quite a bit on wellbeing programmes without producing a return on their investment. Jessica Colling, product director at Vielife, says: “Employers can spend a lot of money without affecting [the health of] staff.”
She recommends obtaining buy-in from senior management and line managers before introducing interventions. “Employees won’t take a healthy-eating programme seriously if there is a culture of the management taking long lunches in the pub. Let staff have some flexibility, for example, [permitting] longer lunches if they go to the gym, and you will see positive results. Giving them greater control over their time will [also] help to reduce stress,” she says.
Targeting spend on wellbeing benefits can make an employer’s strategy more coherent as well as improve its return on investment. Norwich Union’s Homer says: “An online health assessment will highlight problem areas in an organisation so employers can spend their money more effectively. For example, if staff score poorly on nutrition their employer could look at health interventions such as free fruit and better meals in the canteen.”
Another consideration is employees’ engagement with a benefit, as this will affect their perception of the perk and, in turn, could influence how they feel about their employer. While most staff would welcome the opportunity of being treated privately or receiving financial help with trips to the dentist, the same degree of enthusiasm is not necessarily applied to wellbeing perks. “With wellbeing benefits, it can be difficult to reach the people who would benefit from health interventions. The employees who start using these benefits first tend to be those who are already engaged with health and fitness activities,” says Greenwood.
Some benefits can also be used more frequently than others, helping to increase the value employees attach to them. For example, a healthcare cash plan that includes dental and optical benefits can be used at least once or twice a year by every employee. On the other hand, PMI schemes are unlikely to be used by more than 10% of employees in the course of a year, although this will depend on the profile of the workforce.
Employee demographics can also influence employers’ choice of benefits provision. For example, Homer says that senior management are more likely to expect PMI as part of their package and could be bemused if they are offered a healthcare cash plan instead. “Employers must consider what is right for employees. This could be affected by the benefits packages offered by competitors, as well as an employee’s age and seniority,” he explains.
If employers have diverse workforces, one way of satisfying their differing needs is to offer both traditional healthcare and wellbeing perks through a flexible benefits scheme. “With flex, everyone can pick the benefits they want. For example, a 21-year-old [employee] might want gym membership and dental insurance but by the time they have reached their forties comprehensive PMI and a regular health screening may be more appropriate. Enabling staff to choose makes benefits more relevant and improves employee engagement,” says Laws.
But whatever benefits employers deliver, communication is key to enhancing returns. “Communication is essential as employees can forget what is available. Promoting benefits will increase take-up and help change the culture of organisations, bringing significant rewards,” concludes Colling
Measuring return on investment
Calculating the return on investment for any healthcare benefit can be tricky, particularly as it is not always possible to measure the outcome against an alternative scenario where the perk had not been put in place.
Ann Greenwood, director of business markets at Bupa, says: “It is difficult to measure return on investment, particularly for wellbeing benefits. If you return someone to work quickly with medical insurance you can say you saved those days but it is not so easy to say what the impact of that health improvement is.” Although it may be tricky to work out a precise return on investment, there are a number of key criteria that can form the basis of an organisation’s calculations. These are: sickness absence, including additional costs such as overtime and temporary staff; productivity; staff turnover; claims on private medical insurance and income protection benefits; and employee morale.
Monitoring these factors before and after any healthcare intervention can provide some indication of its value to the organisation. But there are some potential problems. Health improvement programmes can take years to have an effect and where changes to key indicators, such absence levels, can be identified they are not always directly traceable back to the health intervention.
It is also important for employers to take account of other factors that may influence results. For example, Greenwood says sickness absence can be affected by the state of the economy. “When there is a downturn in the economy, sickness absence falls because employees are more concerned about job security and redundancy so they don’t take days off sick when they are not genuinely ill,” she explains.
Case Study: Unilever
Last year, Unilever extended its traditional benefits package, which includes private medical insurance, with the launch of a wellbeing programme, Vitality into Action.
Its first wellbeing initiative was a 15-minute health screening which checked details such as employees’ weight, blood pressure and cholesterol, and provided tailored health information or referrals where further investigation was necessary. Although this was voluntary, around 50% of the workforce took part.
Unilever used the results to determine its health strategy. Dean Patterson, health and productivity manager, says: “We noted three key issues: body mass indexes and blood cholesterol levels were high and a lot of staff were not getting enough exercise.” To address this, the company introduced physical activity and improved nutrition initiatives by including MiLife, a nutrition-focussed programme which provides participants with short-term, but achievable, goals. Unilever also targeted the seven sites where its initial screening findings were poorest.
This has produced results. “We are seeing growing evidence of the popularity of healthier menus at all our sites, and where we have gyms there has been a significant increase in use, in some cases up [by] more than 30%.
“Also, the 250 staff who trialled MiLife lost an average of 3.4 kilograms over a 12-week period. The data showed us that unless we encouraged people to make significant lifestyle changes, nearly a quarter of those participating were at risk of developing cardiovascular disease within10 years. We have made a good start to a long journey,” adds Patterson.
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