Personalising health benefits can cut costs

Employers can drive down both absenteeism and insurance costs by tailoring health benefits packages to the needs of their employees, explains Alex Bennett.

The Health and Safety Executive estimates that 27 million working days were lost in Britain as a result of work-related illness in 2011/12.

However, while most employers agree that absenteeism and the subsequent cost is a problem, very few monitor their work-related absence rates and fewer still seek to discover the root causes of it.

As a consequence, many organisations are ill equipped to be able to predict what the future may hold when it comes to their employees’ health. This, in turn, has an effect on employee insurance premiums.

Employers are also broadly open to the concept of health-related benefits packages for their employees, but they are often seen as a “nice to have” rather than a necessity.

This is usually because they offer the same benefits to all employees and therefore there is little or no perceived value of the benefits by either the employer or employee. Also, once a health-related benefit has been added to an employee’s benefits package, few organisations monitor whether or not it is having an effect on employee wellbeing, let alone absenteeism.

Considering this, let us take the example of an organisation that takes a complete audit of their absenteeism and maps this against employees’ health risk factors to understand the primary and chronic causes of sickness leave.

It can then start to spot trends and, in turn, plan and provide a benefits package that will not only be valued by employees, but will drive down absenteeism and ultimately the cost of its insurance premiums.

The first step to organisations being able to achieve a lower insurance premium and a healthier, happier and more engaged workforce is to look at absenteeism.

Nearly all organisations log absence, both short and long term. Few, however, log really granular detail – such as the employee’s age, the precise nature of the individual’s role and where they are based. This is especially the case for short-term absence.

However, if these details are captured, then it is possible for organisations to look for patterns in absence.

If an organisation had been logging all sickness and absence in a detailed manner, it may find that one particular department has greater levels of absence.

Alternatively, it may find that absences increase at particular times of the year or are higher among groups of individuals who all share similar roles.

Once this data has been captured, it is then possible to look at the causes of the absence and assess how best to intervene and take preventative action in the future.

Benchmarking risk factors

In addition to looking at absence data, which most organisations should possess, employers can look to audit the health of their workforce.

They can do this by benchmarking how employees’ health fares in regard to common health risk factors, including weight, blood pressure, cholesterol, exercise, smoking, sleep, diet, family history, age, gender and ethnicity.

The best way to benchmark common health risk factors is to engage with employees by surveying them on a regular basis to find out statistics such as blood pressure and BMI, and how well they are sleeping.

By carrying out this research, an organisation can start to gauge the overall health of its workforce and look for patterns. Having a barometer for employee health is also an important first step in reducing insurance costs around employee liability.

If an organisation can accurately tell an insurer what its risk profile is, the premiums will be more accurate and, in taking action to improve the health of its staff and demonstrate a reduction in absenteeism and sickness, they could even be reduced.

While the notion of reducing insurance premiums will be a compelling proposition for many organisations, the transition from identifying a problem to finding a solution can be a tricky business.

In fact, it is one of the reasons organisations may be put off carrying out the often costly exercise of benchmarking absence rates and employee health, because once the results are in and have been analysed, the onus is on the organisation to address and solve the problems highlighted by the patterns in the data.

For instance, if an organisation has found that a department is suffering frequent absences and the health risk analysis has shown that a higher proportion of employees in this department have high blood pressure and admit to sleeping badly, then it is likely that stress is at the root cause of employee absence.

Once stress has been found to be an issue, the organisation is presented with the challenge of addressing and rectifying it.

Good HR management will play a role in any solution to reducing absence. In reference to the example about a department wracked by stress, it will then be a case of reviewing whether or not employees are being supported adequately, assessing whether or not more resources are required and potentially seeking additional training for employees.

However, many organisations may overlook leveraging their employee benefits package as a means to tackle OH issues. This is where having a flexible online benefits platform becomes a useful tool. An organisation can identify a health issue and then respond relatively quickly and simply by introducing a new health benefit and applying it to affected employees, helping to mitigate the risk of sickness.

Returning to our example about the stressed workforce, the employer now knows it is likely that if nothing is done absenteeism will continue to be high in the affected department.

To counteract this, it could decide to offer cognitive behavioural therapy as a new employee benefit and encourage take-up through communicating with employees. On the premise that this benefit helps to improve the health and wellbeing of the affected employees, the company may start to notice a decline in absenteeism. It can then report this to its insurer and legitimately seek to reduce its premium.

Measuring success

This is just one very niche example, but there are a range of benefits that are available and are being used by some companies to combat a range of health issues.

For instance, companies are now offering diagnosis-focused or cash-plan-based health benefits to their workforce, as these plans often include funding towards health screening or access to therapies that can help combat musculoskeletal and mental health issues.

Once this process of auditing, analysing and, if necessary, amending benefits accordingly is put in place, measuring success becomes much less onerous, as organisations are effectively continuously measuring and monitoring.

In addition, a lot of the data around measuring success can be captured through a flexible online benefits portal, where the employee can log their health details, absence and benefits choices.

Cost savings

Through constant observation, an organisation can be much more agile, tackling health and potential sickness as soon as trends start to emerge. It will also be better able to take preventative action.

If an employer knows the risk factors that usually result in absence and can spot the trends in data that would indicate a rise in those risk factors, it can intervene, amend employees’ benefits packages, and engage with staff to prevent absences occurring in the first place.

The financial advantage of operating an employee benefits package in this manner is significant.

Not only can it mean lower insurance premiums, but a personalised approach to benefits encourages enhanced employee engagement and satisfaction, and it can result in improved retention rates.

Earlier this year, Capita Employee Benefits carried out a survey of 3,000 employees and found that 74% would be more inclined to stay with an employer if they felt they were offered a good benefits package. Considering the expense of hiring, this potential cost saving is significant.

Lastly, an employer spends a significant amount of money on benefits. Capita Employee Benefits estimates that, on average, the equivalent of around 12% of an employee’s salary will be spent on their benefits package alone.

Although this is a significant expenditure, it can offer a return on investment when allocated and managed properly.

Overall, employers must start looking to tailor their health benefits packages to the needs of their employees.

In doing so, they can seek to influence employee health and wellbeing and ultimately they should be able to reduce absence, workplace sickness and potentially their insurance premiums.

In order to achieve this, health benefits and flexible online benefits portals need to be realised as an absolute necessity in helping a business to manage OH.


About Alex Bennett

Alex Bennett is a senior health management consultant for Capital Employee Benefits.

One Response to Personalising health benefits can cut costs

  1. Avatar
    Sheila massey 27 Mar 2014 at 11:38 am #

    It’s amazing to think that many companies still don’t monitor their employee absent rates. it can save them thousands! Every business is different and a tailored package should be standard.

    Great article,
    Health Surveillance Services | @HSS_Tweets