With employer healthcare costs on the rise, companies are looking for innovative point solutions that meet the needs of their employees. Healthcare point solutions include family-forming programs and programs related to chronic diseases or mental health. The vast number of point solutions and features is growing, which can make it difficult for business leaders to understand which ones will meet the needs of their employees and how to measure their return on investment.
ROI should be measured to ensure that companies are improving health outcomes while balancing the investment in the program. Ultimately, this will result in improved population health, employee productivity, retention, and attracting new talent.
In this article, we will discuss some approaches to calculating the ROI of various healthcare point solutions — from an actuarial point of view — to help companies evaluate whether a point solution truly adds value, improves outcomes, and reduces overall costs.
Types of Point Solutions
Here’s what to know about some of the most common point solutions.
Family-Forming Programs
Family-forming programs help individuals navigate fertility treatments and manage the emotional and financial aspects associated with such treatments. These programs may provide access to specialists and a vetted network of clinics, and help improve overall company satisfaction. In addition, there are cost savings to be realized by implementing such programs. Family-forming programs like Progyny offer a full continuum of support that can result in savings included in the following:
Pre-conception and fertility treatment support: One can decrease the spend on unnecessary treatments and medical utilization through improving access to the best providers, which leads to healthier pregnancies. In addition, patients will be given support in terms of nutrition, and mental and financial health in their journey through treatments.
Maternity and postpartum care: Access to prenatal care and mental health services can reduce complications and costly hospitalizations.: Access to prenatal care and mental health services can reduce complications and costly hospitalizations.
Chronic disease management: Certain conditions such as autoimmune diseases or depression can occur throughout a woman’s pregnancy and specialized care can target these situations early on reducing costs.
Menopause management: Early intervention and proactive support can help with symptom management and reduce costs through decreased urgent care and specialist visits.
Enhanced employee retention and attracting new talent: Family-forming benefits can be a tool to improve retention rates and attract new employees. By offering a benefit that supports all paths to family building, companies are supporting the needs of a diverse workforce. Seventy-six percent of job seekers in a survey considered a diverse workplace an important factor when accepting a position.
Example of an ROI calculation
([Cost savings from reduced specialist and urgent care visits + reduced costs from less turnover-program costs]/program costs)*100
Chronic Disease Management
Chronic disease management is a delivery model that addresses various health conditions such as cancer, diabetes, and musculoskeletal disorders. According to the National Library of Medicine, chronic conditions make up 85% of overall healthcare costs. Companies want to ensure that the programs they invest in result in savings and improved population health. Some things to consider in an ROI calculation:
Early detection and treatment savings: Preventive care, including screening programs at earlier disease stages, have shown to reduce the overall costs associated with a less invasive treatment plan.
Patient retention: Comprehensive care can result in patients utilizing lower cost healthcare services, which will reduce long-term costs, such as reduced hospital readmissions.
Improved quality of life: There are metrics such as Quality-Adjusted Life Years which assesses the costs as well as the overall quality of the patient’s life through implementation of various cancer screening and prevention programs, and health interventions. Although independent of an ROI calculation, this is an important indicator to consider for the benefit of the employee population.
Example of an ROI calculation
One can first determine the cost savings from early detection by evaluating an individual going through similar treatment who did not engage in early detection and one who did engage in early detection. For example, savings can be determined by decreased costs associated with less hospital readmissions.
ROI = ([Cost Savings from reduced readmissions-Cost of the Program]/Cost of the Program)100Example of Quality Adjusted Life Years calculation: An individual who lives one year in perfect health would get 1 year1 utility = 1 quality adjusted life year. Another individual who lives half of a year in perfect health would get 0.5 years*1 utilization =0.5 quality adjusted life year. One can determine improved quality of life by taking the quality adjusted life years of the impacted population post program/quality adjusted life years of the impacted population pre-program implementation.
Mental Health Programs
Mental health programs offer a holistic, coordinated approach to manage stress, address mental health needs in a safe space, and develop healthier habits. There is often a stigma associated with mental health outreach, but having such programs easily accessible to employees allows them to address their needs early, improving the overall outcomes.
Some things to consider in an ROI calculation:
Preventive programs: One should consider programs focused on the education about mental health, stress management, and recognizing early warning signs to improve health outcomes and reduce costs. Reduced costs can be measured through reduced absenteeism, reduced turnover, lower healthcare utilization, and fewer disability claims.
Utilization rates: First, it is best to determine the percentage of employees engaging in mental health services.
Clinical outcomes: One should always monitor improvements in an employee’s mental health using standard clinical measures such as the PHQ-9 for depression, according to the National Drugs Library.
Productivity and employee retention: One can measure and track absenteeism or turnover rates. For example, a lower turnover rate may be associated with a more effective program.
Healthcare costs: One can compare medical and pharmacy claims associated with mental health before and after the program implementation.
Data: It is best to use a full year of claims data to avoid seasonality in determining the pre- and post-program mental health costs. In addition, this can vary based on the employer size. Here is a sample calculation of how savings can be determined:
- Credibility X = Min [1, square root of (# of employees/10,000)]
- Credibility Adjusted Claims Pre-program Costs Y = X(full year’s of company specific mental health pre-program claims)+(1-X)(industry wide full year’s of pre-program mental health claims)
- Credibility Adjusted Claims Post-program Costs Z = X(full year’s of company specific mental health post-program claims)+(1-X)(industry wide full year’s of post-program mental health claims)
- Savings in Mental Health Costs = Z – Y
Examples of an ROI Calculation
First determine the mental health costs before and after program implementation. The savings equal the mental health costs post-program implementation minus the mental health costs pre-program implementation over a defined period such as two years.
ROI = (Savings in Mental Health costs +Savings from Preventive programs – cost of program/cost of Program)*100
Another method: First determine the cost per turnover. Then determine the pre-program turnover rates and post-program turnover rate and apply it to the number of employees. The savings from reduced turnover would = (post-program turnover rate – pre-program turnover rate)# of employeescost per turnover. The ROI = ([Savings from Reduced turnover – cost of the program]/Cost of the program).
Actions Companies Can Take
- Companies should work with their advisor in gathering costs associated with their employee population pre-program implementation.
- Determine the period of which the population will be tracked.
- Consider normalizing for seasonal, geographical, and demographic changes from pre- to post-program implementation.
- Determine the cost savings opportunities such as reduced costs from decreased readmissions, decreased NICU admissions, or less turnover costs.
- Determine ROI = ([Cost Savings – Program Costs]/Program Costs)*100.
- Consider non-financial metrics such as improvement in the Quality Adjusted Life Years.
How Sequoia Can Help
“True wellbeing ROI goes beyond cost savings. It’s about helping people flourish in all areas of their lives,” said Shannon Arens, Sr. Wellbeing Strategist, Sequoia. “When we provide resources that help employees thrive, we’re not just reducing healthcare costs — we’re investing in people who will transform those resources into engagement, innovation, and a culture where everyone can do their best work. Our Sequoia Wellbeing Bundles help companies offer holistic wellbeing programs that meet the physical, family, and emotional needs of employees while realizing savings on vetted solutions.”
If you’re interested in exploring wellbeing bundles or have questions about your benefits and wellbeing strategy, connect with a Sequoia advisor.
