Improve organizational health with a measurable return on investment to manage future benefits plan costs
Organizations are facing benefits plan cost increases, which are driven by healthcare inflation, increased utilization, and an aging workforce with rising health and societal responsibility pressures and challenges. Benefits plan sponsors intuitively understand that health and wellness initiatives should lead to more effective management of employee support programs and will positively impact employees’ productivity. Unfortunately, concrete documented evidence of return on investment (ROI) for wellness initiatives undertaken by benefits plan sponsors has been relatively rare in Canada.
The Alberta School Employee Benefit Plan (ASEBP), however, may just provide that concrete documented evidence. It used predictive analytics and modelling to determine an ROI—specifically on its Healthy Living Program (HLP) initiatives (which include biometric screening, health risk assessments, lifestyle coaching and development of wellness committees).
The ASEBP—which delivers health and benefits programs and services through approximately 60 school boards to more than 55,000 employees, early retirees and their dependents in the public education sector in Alberta—implemented its first HLP in 2006.
Integrative, long-term and collaborative, the ASEBP’s wellness approach assists public education staff to become more aware of their current health status and risks. The HLP is based on a comprehensive workplace model and involves a multi-year commitment between school boards and the ASEBP.
Read: Look ahead with predictive modelling
“The ASEBP believes that employee health is a shared responsibility between the employers and employees,” says Jennifer Carson, executive director and CEO of the ASEBP. “We wanted to create an environment where a positive focus on health was part of the school jurisdictions’ everyday culture.”
The participating school jurisdiction leaders embraced the HLP initiative and encouraged all employees to participate. “Leaders leading by example has been one of the keys to our success,” says Carson, adding that the ASEBP embraced the concept that an individual health journey has no end date. “Our plan participants do care about their own health and are thirsty for integrated health information, solutions and coaching support. Employees support and encourage one another on lifestyle issues and feel even more valued by their employer when there is an interactive focus on health.”
More Proof
Although the ASEBP trustees supported the HLP concept in general, they wanted more concrete assurance that there was a measurable and sustainable ROI before they made more and larger HLP investments. And many more school boards were interested in participating in their own HLPs.
In 2012, the ASEBP enlisted Aon Hewitt to help assess the HLP initiative spend and provide an ROI analysis of the completed HLPs (four had been completed by 2011), compared with similar-sized school boards that did not participate in the initiative. The analysis tracked the benefits plan experience for the periods prior to, during and after the HLP activities. This process helped the ASEBP better understand each HLP school board’s costs, trends and risks by benefit and by health risk category—and they were all different.
Aon Hewitt built an integrated predictive model to assess the benefits plan costs during the six-year period (2006–2011). (For more on the predictive modelling approach, read Predictive modelling for benefits plans).
The Findings
The ASEBP total benefits plan cost was expected to increase by 123% from 2007 to 2018—without recent generic price drug reductions and the impact of the HLP (see Figure 1, above). The recent and projected government and patent expiration drug-related changes decreased the expected cost increase to 102%, from 123%, for the same period. The HLP is improving participants’ health, while assisting to additionally decrease the expected cost increase a further 11% to a 91% increase. These savings are time-sensitive. This means that the ASEBP’s HLP continues to generate savings and the ROI will continue to grow.
Extended healthcare (EHC) and extended disability plans have been, and continue to be, the highest risks to the ASEBP. HLP participants displayed substantially lower per capita costs, trends and benefits cost volatility. And, over time, school board participants demonstrated lower extended disability per capita cost than non-participant school boards.
As a result of the HLPs for the period ending 2011, the average per capita cost trend decrease was 4% for EHC and 5% for the extended disability benefit (EDB). Substantial savings had been delivered; the ASEBP had achieved a 700+% ROI on its HLP investments by 2011. In the process of completing the ROI review, Aon Hewitt segmented participating HLP members by their risk profile (see Figure 2, below) using the following categories:
- paid claims amount;
- utilization;
- year-over-year trend; and
- therapeutic categories.
Definition of risk as a combination of the probability of having a higher or lower cost than expected, and potential cost fluctuations, is a crucial part of understanding the analytics related to employee health risk segmentation. Risk is not a cost itself; rather, the risk is the uncertainty of cost. Therefore, year-over-year trend analysis is a key health risk segmentation parameter. Not only do high claimants represent significant risk for the benefits plans as their cost continues to grow, but relatively low claimants with higher trends are also substantially increasing risk. Benefits plan risk management is all about the ability to identify and to manage these health risk groupings that each has significant potential for varying cost fluctuations.
About 35% of the HLP participants were in the very high risk group, and the remaining 65% were in the other four segmented health risk groups (see Figure 2, above). The first finding (marked A) pointed to the importance of continuing with preventative activities so that relatively healthy members—who represent two-thirds of the participating employees—do not migrate to a higher risk group.
The study’s second finding (see Figure 3, marked B, below) was the importance of having operational wellness strategies that will assist to move the average per capita claim cost and trend down across each of the five health risk groups. The very high risk group exhibited a per capita claim cost of more than 200% of the average of all the health risk groupings.
The third finding (see Figure 2, marked C, above) illustrates the importance of continuing to develop strategies that move plan participants from the very high risk group into a lower health risk category.
Aon Hewitt’s employee health risk grouping methodology was successful in aggregating employees according to their health risk. The analytics process was also able to identify plan participants with changing (positive or negative) health status. This has allowed the ASEBP to “refresh and refocus” its health support team’s focus. The ASEBP recently integrated its disability return-to-work and wellness support teams with a total member health focus—and is considering a similar approach for its early retirees. “It is now apparent to us that wellness activities and investments for employees on extended disability will also assist in improving the health of our covered population and assist in decreasing the total benefits cost,” said Carson.
The ASEBP has achieved decreases in associated volatility. Furthermore, the ASEBP has been able to move many of its very high health risk plan members from a higher risk group to a lower one. But the study showed that if wellness is a one-time project, it’s unlikely that the intervention will be sustainable—even though some savings may be generated. The ASEBP’s ultimate goal is to achieve a series of wellness interventions where the positive variance between baseline and actual cost is increasing year over year. “Predictive modelling has assisted us in analyzing sustainability of the benefits cost and members’ health changes as the result of the HLP,” says Carson.
The Future
When organizations such as the ASEBP provide effective wellness programs with a demonstrated ROI, the beneficiaries are not only the employees of the organizations but also the broader population. Employees who benefit from wellness programs for at least some period of time will have lower associated cost for both public and private benefits plans, when compared to the cost of plan members who are not participating in wellness activities.
Healthier employees will become healthier retirees, who may reduce associated retiree benefits costs for both public and private plans. And one individual’s decision to focus on a healthier lifestyle permeates throughout employee connections and has an impact on family members and friends. In other words, wellness reduces medical costs at three levels: public plans, benefits plans and individual out-of-pocket costs. For instance, the Alberta Health & Wellness (the province-wide public health plan) has also benefited proportionally from the ASEBP healthy living initiative.
Is it time to have a formal, integrated public/private wellness partnership to combine the efforts of the private and public sectors to improve population health and mitigate future cost increases for both public and private employee programs? The ASEBP’s HLP experience and results suggest that it is possible to have a comprehensive business case based on actual experience as well as strategic frameworks, based on predictive modelling and employee risk analysis. Decision-makers could learn from the joint population health experience to manage outcomes and to deliver substantial ROI for both private and public plans.
It is time for a new era of public/private health population pilot projects. With monetary and non-monetary health management incentives funded by provincial governments, the organizations that have a wellness business case process in place can deliver a positive sustainable ROI from wellness investments. This can have a positive and significant influence on a large portion of the population across a province and across generations, and can make a meaningful positive contribution to population health on a provincial scale. With the help of predictive analysis and modelling, the ASEBP has been able to determine that its wellness initiatives have a measurable ROI. The direct benefits plan cost savings for the ASEBP are substantial—4% of the current cost and rising to as high as 9% with full wellness implementation. These approaches were keys for the wellness comprehensive business case and detailed ROI calculations. And now the ASEBP has a unique opportunity to reinvest a portion of savings from recent legislative drug price reductions to expand the scope of its wellness strategy.
The ASEBP’s experience with HLP predictive analytics and modelling suggests that all public and private benefits plans have a unique opportunity to embrace wellness as a business strategy with a quantifiable ROI. The ASEBP achieved 700+% ROI; other benefits plans can, too.
Alexander Uborcev is a senior associate, and Perry Dorgan is senior vice-president, health and benefits, with Aon Hewitt. alexander.uborcev@aonhewitt.com; perry.dorgan1@aonhewitt.com
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