Covering employee health insurance can mean a sizable investment. In 2017, premiums to cover an individual employee ran $6,690 — and $18,764 for a family plan.
So if your organization has made the commitment to offer employees health benefits, the leadership team will want to know that your health insurance plan is the best use of that company money. Successfully navigating a conversation about benefits — whether you’re trying to maintain the company’s current offerings or argue for a higher-quality package — requires an understanding of human resources strategic planning.
With that in mind, here’s an action plan for convincing stakeholders and leadership alike that investing in health insurance pays off.
Gather Your Data
The most challenging part of assessing your health care offerings will likely be finding quality data. It might take several years, for example, to determine whether a program actually improves health outcomes. If employees start eating healthier, premiums won’t drop overnight — but it might lead to cost savings over the next five years. Since tracking patterns in your data is only effective over a long period of time, if you don’t have a log of data already stored, you’ll have to rely on statistics, surveys and projections.
You may also be able to lean on your health insurance company for assistance, as it likely has data of its own — and, considering the large pool of customers to draw from, probably much more of it. The insurance company may be willing to share trends for your analysis, especially if it knows your goals.
Make sure you approach them with specific questions already in mind: When a client launches a smoking cessation program, how much of a drop do they see in total sick days? Have any clients noted increases in their overall productivity when they offer additional benefits? Tapping into these resources can be a shortcut to having years’ worth of results.
Create a Strategy for Analyzing Your Data
Return on investment, or ROI, is one of the foundations of financial analysis. It’s used to compare the value of different projects and show which one is delivering greater value based on the money spent. A project that generates the highest revenue might not be the best investment if its costs are also incredibly high.
The actual formula for determining ROI is the net benefit of an investment divided by its total cost. Say, for example, you spend $100,000 to buy a new machine, and it leads to another $250,000 in revenue. First, calculate net benefit by subtracting costs from earnings: $250,000 – $100,000 = $150,000. Then divide that by the initial investment to get ROI: $150,000/$100,000 = 1.5, or 150 percent. Simply put, you earn $1.50 for each $1 you spend on the project.
When you calculate the ROI for a business investment, you can estimate how many extra sales the project will generate. But how do you go about measuring value in health care benefits, since signing employees up for health insurance doesn’t directly lead to sales?
Some outside-the-box thinking could help your case. Ask yourself, for example, how you can measure the dollar value of the productivity lost by sick days, and multiply that by the number of sick days generous health benefits could shave off.
For another example, you could argue that insurance benefits don’t just improve employee health — they make your workplace more attractive to employees. Turnover is expensive, of course: Replacing an employee costs 33 percent of their salary. So poll employees to ask whether an upgrade in benefits would increase their job satisfaction. While the numbers won’t be exact, you can use this to help predict whether or not better benefits could decrease turnover and avoid major expenses.
Present Your Findings
It’s not enough just to do the legwork of gathering and analyzing all this data — you have to communicate it, too. It’s all too easy to see workplace benefits solely as an added cost rather than an investment that helps the company, which means your battle could be uphill.
When you present your research to leadership, focus on the takeaways, not the data itself. Streamlining your findings into manageable highlights is an extra step, but one well worth taking. Often, people try to explain every single data point and the audience absorbs nothing. Instead, concentrate on the big-picture trends and insights. You don’t need to present the Excel sheet showing how you calculated that a new plan will lower turnover, just explain how it will.
Keep in mind that measuring the ROI value of your health care offerings won’t just help you pick the right plans — done correctly, it can also improve your standing in the eyes of the rest of the leadership team. By explaining the ROI of different plans, you show that you’re thinking about how benefits can achieve long-term financial goals, from lowering expenses to raising profits. Suddenly, HR becomes a strategic partner in achieving business success.
Measuring value in health care takes some extra research and skillful human resources strategic planning. But by following this approach, you can start making more financially informed decisions for your next plan and beyond.
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