A Forrester Consulting Thought Leadership Paper Commissioned By Castlight Health May 2015 *Updated May 2016 Managing The Healthcare Crisis Leaders Look To Health Benefits Platforms To Lower Costs And Boost Engagement
Table Of Contents Executive Summary... 1 Healthcare Costs Are Growing... 2 Companies Lack The Tools To Contain Costs And Serve Employees... 3 Increase Success Through Investment In Platform Capabilities... 5 Key Recommendations... 7 Appendix A: Methodology... 8 Appendix B: Endnotes... 8 ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2015, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com. [1-TSPX6R]
1 Executive Summary Enterprise healthcare has become a major issue for executives. HR decision-makers hope to expand access to services and improve employee wellness. 1 However, spiraling costs that are increasing year over year are forcing changes in the opposite direction. As enterprise healthcare is changing, so are the tools and processes that employees are using to get things done. The advancement of cloud and mobile technologies means that for many functions, workers can access real-time, relevant information wherever they are in their time of need. While other areas of the business utilize such technology to optimize their processes, the benefits function is often left behind. Companies still rely on quarterly reports and manual back-end calculations to inform their strategy for managing rising costs and improving employee wellness. They try to inspire behavioral change through broad push communications to employees. While many benefits leaders are attempting to optimize their health benefit strategies to manage costs and increase employee engagement, they have not had access to technology to do so effectively. issue is the top overall HR priority for 2015. The business impact of controlling costs and improving benefits is significant, while the risks will continue to escalate. Companies lack the tools to optimize health benefit strategies. Many companies rely on outdated third-party reports, disparate systems, and manual processes to make decisions and administer programs. Similarly, employees often have to navigate through complex health plan websites to gain information about benefits and coverage. The lack of user-friendly tools impedes the management of programs, the decision to invest, and employee engagement with benefits. Investment in new processes and technologies is required to keep up with a dynamic and changing marketplace. Companies must invest in new processes and technologies in order to successfully administer programs, make investments, and engage employees. A health benefits platform can enable decision-makers and employees alike, creating opportunities to increase wellness and employee retention while reducing costs. Companies that are able to invest and transform healthcare will be better equipped to control rising costs and benefit from increased employee engagement, reduced turnover, and greater morale. In March 2015, Castlight Health commissioned Forrester Consulting to evaluate the hypothesis that companies are unable to efficiently manage employee benefits programs in the face of rising healthcare costs because they lack effective tools, resulting in higher costs, reduced employee health, and lower productivity. To test this hypothesis, Forrester conducted a quantitative survey of 120 executives in the US with influence and decision-making responsibility regarding healthcare management, along with a qualitative study consisting of three interviews with respondents of the same profile. KEY FINDINGS Forrester s study yielded three key findings: Growing healthcare costs have created a crisis for companies. Survey respondents agree that the persistent increase of healthcare and benefits costs has created a crisis for the enterprise, and that tackling this
2 Healthcare Costs Are Growing Eighty-nine percent of enterprises in our survey agree or strongly agree with the statement, Rising healthcare costs have become a crisis for US companies. The upward trend of increasing healthcare costs is a considerable concern: More than two-thirds of our survey respondents have experienced healthcare cost increases of at least 7% over the last three years, and over 30% have experienced cost increases of 10% or higher. Consequently, healthcare cost management is listed as the top human resources priority over the next 12 months incredibly taking precedence over hiring and retaining talent, managing performance, and launching learning and development initiatives (see Figure 1). HR decision-makers desperately seek a solution to this problem so that they can maintain employee health and wellness and focus their time and budgets on other activities. Our study found that: Healthcare costs will keep on rising. Already a high proportion of HR spend, healthcare and benefits costs are set to increase and amplify the upward historic trend. These costs are growing much faster than other areas of HR spend. Eighty-three percent of companies expect healthcare and benefits costs to be one of the top three categories of HR spending growth over the next year, and 44% expect them to be the very top-growing category. Costs have an impact on employees as well as the business. The rise of healthcare costs means consequences across the enterprise. Most significant is the resulting drain on company resources, which was reported by 62% of companies. Respondents also feel that rising healthcare costs hurt employee health and well-being (29%), the ability to be a competitive employer (24%), and the ability to engage or retain employees (21%) (see Figure 2). Organizations have varied strategies for tackling rising healthcare costs. We asked respondents how they are tackling rising healthcare costs and found little consistency from organization to organization. Sixteen percent of respondents told us that they have no plan at all. Of the remaining companies, the top two most common strategies involve either sharing costs with employees or reducing benefits, both of which further threaten employee health and wellness and the ability for companies to attract new talent. FIGURE 1 Healthcare Cost Management Is The Top HR Priority What are your organization s top human resources priorities in the next 12 months? Healthcare cost management Retaining top talent Healthcare/benefits program improvements Increasing employee engagement Talent acquisition 5% 10% Learning and development 1 2 3 7% Performance management 5% 9% and rewards 3% Measuring HR and employee 4% 6% performance 3% Transforming HR into a 4% 5% strategic partner 3% Restructuring the organization 6% 3% 8% 13% 18% 13% 10% 30% 15% 13% 9% 12% 18% 17% 13% 17% 7% 15% We want to show growth to our stockholders, so we have to transfer a portion of [healthcare] costs to our associates, and [these costs] also impact our bottom line. Healthcare and employee benefits in general are expensive so if we are slow, that is the first thing to cut. You will see jobs impacted as those costs rise. HR director for a Fortune 500 distributor of industrial, medical, and chemical gases
3 FIGURE 2 Rising Healthcare Costs Drain Company Resources What is the impact of these rising healthcare costs on your company? Drain on company resources/ investments Negative impact on employee health/well-being Negative impact on ability to be a competitive employer Decreased employee engagement or increased employee turnover Negative impact on shareholders Other Base: 112 US healthcare decision-makers at firms with 1,000+ employees whose healthcare costs have increased over the past three years Companies Lack The Tools To Contain Costs And Serve Employees Healthcare costs pose a mounting business challenge for companies that are relying on outdated tools for managing programs and serving employees. These outdated tools make it difficult to make decisions, manage programs or investment, or engage employees with their benefits programs. Our study found that: 4% 16% 24% 21% 29% 62% Companies rely on outdated third-party reports and services. Our study found that companies have little access to real-time data that allows them to administer programs and make decisions. Seventy percent of companies surveyed rely on reports provided by their health plans to manage programs and make investments for healthcare. Additionally, 57% of respondents also rely on consultants and brokers (see Figure 3). The reports generated by both health plans and third-party vendors are typically received on a quarterly basis; only 5% of respondents receive reports more than once per month. This lack of access to real-time data impedes firms ability to react to short-term trends in healthcare spend and is reported as at least a significant challenge by 50% of respondents. For example, demand for mental health services might increase during a stressful company transformation, but HR isn t made aware of the health impact to their employees until months later. If they were made aware of this trend in real time, they could steer employees toward available benefit programs and costeffective treatment. The lack of these inputs hinders the creation of a competency in managing healthcare within self-insured companies. Only 19% are currently able to use internal analytics tools to manage benefits programs and investments in this way. The data is crucial. When I got here we didn t have visibility into why costs were rising, and the mentality was like, Let s pass the costs along, which isn t helpful in 21 st century employment environments. CFO for a wine and liquor distributor with 3,000+ employees The healthcare ecosystem is increasing in complexity. Accurate and timely inputs are more important for managing health plans and making investment decisions as the healthcare ecosystem increases in complexity. Driving this complexity is a complicated regulatory and compliance environment, which 65% of respondents reported as being a significant or very significant challenge to managing their organizations healthcare programs (see Figure 4). Employees are just as confused as their employers on how to manage their healthcare benefits. Fifty-four percent of respondents said that their employees not understanding or valuing benefits packages is a significant or very significant challenge, and 45% reported a lack of employee satisfaction with benefits as a significant or very significant challenge.
4 FIGURE 3 Most Companies Rely On Third-Party Reports To Inform Healthcare Management Decisions What healthcare management platforms, tools, or systems are currently used to manage your company s healthcare benefit programs and your company s investments in healthcare? Reports provided by health plans Reports from benefits consultants/brokers Individual vendor reports ERP/HRMS/HRIS Manual processes Data warehouse 22% 19% 30% 40% 57% FIGURE 4 Costs, Regulations, And Lack Of Employee Understanding Challenge Healthcare Management How significant are the following challenges to managing your organization s healthcare programs? Rising healthcare costs Complicated regulatory and compliance environment Employees don t understand or value their benefits Little real-time insight into employee needs and trends Lack of employee satisfaction with their benefits Lack of actionable insights 6% 5 Very significant 4 15% 18% 23% 32% 49% 27% 37% 31% 35% 33% 70% (top six responses shown) 32% Benefits are communicated through traditional channels. Both to increase employee satisfaction and help encourage lower-cost behaviors, companies should strategically engage in dialogue about health benefits with their employees. Fifty-four percent of respondents told us that they have in place (or plan to put in place) incentives and disincentives to create behavior change, and 52% plan to drive engagement of employees in their benefits (see Figure 5). Despite this, we found that benefits information is typically communicated through push channels (such as companywide emails) or directly from the health plan provider. Traditional push channels and periodic communications (such as open enrollment) may not be sufficient to provide the information that the employee needs in the context of his or her situation. Additionally, channels such as provider-supplied online health tools and benefits portals are notoriously difficult to navigate and may not be optimized for a specific company s policy or the experience of a specific employee. Our costs are primarily driven by poor utilization of our benefits. We have an underutilization of preventative care, which drives up the cost when there is a bigger issue. CHRO for a food service company with 3,000+ employees The employee bears a significant portion of the burden of rising healthcare costs. While companies reported that the primary business impact of their healthcare management challenges is cost to the enterprise (63%), many reported increased expenses to the employee as well (56%). In lieu of increasing employee contributions, another 36% of companies are reducing healthcare and benefits offerings. Either way, the result is bad for employee morale, retention, and wellness: 43% reported an increase in employee complaints and questions, 37% reported a negative impact on employee morale and engagement, and 24% reported lost productivity and increased absenteeism (see Figure 6).
5 FIGURE 5 Companies Manage Healthcare Costs Using A Variety Of Different Methods When it comes to managing healthcare costs, which initiatives does your company have in place (or is your company evaluating or planning to put into place in the next 12 months)? Make changes to health plans/ plan design Provide employees with incentives and disincentives to create behavior change Drive engagement of employees in healthcare/wellness benefits Shift rising healthcare cost burden to employees Introduce new vendors/ programs to address emerging programor employee needs Implement a technology solution to drive healthcare consumerism Provide an integrated platform for single integrated employee experience FIGURE 6 Healthcare Management Challenges Affect The Employee As Well As The Company What is the business impact of your healthcare management challenges? Increased expenses to the company Increased expenses to employees Drain on company resources/ investments Increased employee complaints and questions Negative impact on employee morale/engagement Reduced healthcare and benefits offerings Lost employee productivity and increased absenteeism Reduced ability to recruit/retain the best talent 24% 20% 20% 34% 32% 32% 37% 36% 43% 54% 52% 56% 55% 63% 65% Increase Success Through Investment In Platform Capabilities Platforms and tools exist to plug the gaps that currently inhibit companies abilities to control costs and serve employees. While the most common strategies to managing healthcare costs are making changes to existing plans and/or providing incentives or disincentives to employees, technology solutions are piquing the interest of decisionmakers. Sixty-four percent agree or strongly agree that fixing enterprise healthcare requires a disruptive change to the status quo. Companies can mitigate the challenge of rising healthcare costs through investments in key capabilities that will enable integration of all vendor programs, timely and targeted communications, and realtime insights into benefit use to monitor and adjust benefit programs. Companies are actively looking for solutions to healthcare and benefits challenges. While only 12% of companies currently have a technology to help manage enterprise healthcare spend, we found that 59% of companies are currently researching market options or evaluating solutions. Only 15% reported that they are not considering technology options to help manage enterprise healthcare spend (see Figure 7). Decision-makers look for HR solutions to manage costs while improving employee health and satisfaction. Healthcare cost management is the top HR priority, and it is linked to other key initiatives. Companies that are able to improve healthcare programs and keep costs in check will improve employee retention and engagement. As such, this is the top business benefit that 74% of companies said they aim to obtain from a healthcare technology solution. Additional benefits include improved employee health and well-being (66%), improved employee perception of the value of benefits (59%), and improved employee productivity and engagement (54%). Businesses desire a user-friendly, real-time solution. Technology features to support application adoption are ranked as the most important, with 85% of executives believing that a user-friendly and personalized experience for employees is important or very important in order to enable better decision-making. Base: 113 US healthcare decision-makers at firms with 1,000+ employees
6 Access to data is also an important capability, both in the form of real-time data, analytics, and insights (79%) and the integration of existing programs and benefits into a single, personalized experience (72%) (see Figure 8). Potential cost savings will outweigh budgetary constraints. Investing in capabilities for effective healthcare cost management often makes a strong business case. Our study found that decision-makers in roles that carry and approve a budget, such as finance, are less likely to consider lack of budget as an obstacle to implementation of a healthcare cost management solution. [A technology solution] would be very valuable. If you re able to give cost predictors to allow people to be more proactive, that would be a huge benefit. FIGURE 8 Benefits Platforms Must Be User-Friendly And Offer Real-Time Data How important to you are the following features of a healthcare management platform? User-friendly, personalized consumer experience for employees Real-time data, analytics, and insights Integration of all existing programs and benefits Self-serve metrics and dashboards Cloud-based solution 5 Very significant 4 Other 20% 17% 16% 27% 29% 43% 14% 36% 52% 51% 52% 42% HR director for a Fortune 500 distributor of industrial, medical, and chemical gases FIGURE 7 Firms Are Considering Technology Solutions To Help Manage Enterprise Healthcare Spend Are you considering investing in technology solutions to help manage enterprise healthcare spend? We are researching market options We are currently evaluating one or more technology solutions 27% 32% We are not currently considering technology solutions We already have a technology solution 15% 12% We are interested but have no plans 10% Don t know 3% (percentages may not total 100 because of rounding)
7 Key Recommendations As the market becomes more complex due to regulatory factors and the proliferation of delivery options, healthcare costs continue to rise unabated. Companies must both manage the costs of benefits and optimize their value to attract and retain the best talent. Forrester recommends that HR decision-makers: Gain ownership of data and reporting capabilities. By integrating data sources, bringing reports in-house, and using analytics tools, companies can gain the real-time insights required to manage their programs effectively. HR executives should seek to identify problems before they incur cost, and evaluate the levels of engagement and success of programs on an ongoing basis. Improve your decision-making capabilities with an investment in the business processes, technology, and skills to leverage the wealth of data available. Engage their employees. Many businesses are not communicating with their employees in a way that recognizes employees individual needs and provides them with contextual, relevant information. Provider portals and third-party websites are notoriously complex and impersonal, leaving employees confused and unable to take full advantage of their benefits in ways that are advantageous to both them and the business. Design processes and invest in tools that allow for more dynamic, relevant, and timely communication with employees. Communicate proactively to employees to promote benefits programs and enable them to best leverage their healthcare benefits while choosing the most cost-effective healthcare delivery channels. Enhance the user experience and adoption with a health benefits platform. Tools are only effective if they are used, and many tools currently being used to manage healthcare and benefits lag behind the expectations of end users. By investing in a health benefits platform with modern application design and rich functionality, companies will see significant benefits for HR goals such as improved employee awareness and engagement and improved analytics on the back end to inform program strategies. Look for solutions employing cutting-edge UX practices and straightforward interfaces to enable all stakeholders to better understand and manage their healthcare and benefits.
8 Appendix A: Methodology In this study, Forrester conducted a global online survey of 120 human resources and finance leaders with responsibility for decisions regarding their company s healthcare benefits. Forrester also conducted three phone-based interviews with respondents of the same profile. Respondents were from enterprise organizations (1,000 employees and above) in the US only, from across industries, and were at a director level or higher within their organization. Respondents were offered a small incentive as a thank you for time spent on the survey. The survey began and was completed in March 2015. Appendix B: Endnotes 1 Source: Healthcare Transformation Is Driving Disruption For Payers Business Capabilities, Forrester Research, Inc., December 3, 2014.