Employers spend millions on health promotion initiatives, believing the programs are a key strategy to reducing health care costs. Yet, many struggle to measure the return of investment on those programs.

In Mercer's 2009 National Survey of Employer-Sponsored Health Plans, 37% of employers provide health management programs through specialty and health plan vendors. Of those, only 45% have attempted to measure the ROI on the programs.

Measuring the ROI on a health promotion program is difficult and complicated, given that "you are trying to measure how much you will save from a health event that has not happened," Beth Umland, Mercer's chief analyst on the survey said at a conference sponsored by the Employee Benefit Research Institute.

The conference occurred a month before Massachusetts voters elected Scott Brown (R) to fill the Senate seat vacated by the late Ted Kennedy. Thus, speakers and attendees still were anticipating a first-quarter 2010 passage of a final health care reform bill and were focused primarily on reform legislation's impact on employers.

Obamacare proposals, especially its "pay-or-play" provisions, would force employers to examine some status quo issues around workforce health and health benefits. Under a pay-or-play system, employers would have to provide a certain level of health benefits to avoid tax penalties.

Some employers have been clamoring for years to get out of the health benefits game and saw the pay-or-play approach under the health care legislation as an opportunity to do so.

Employers that elect to "play" rather than "pay," eventually would ask, "What is the competitive advantage to the business if the company stays in the health insurance game?" instead of paying the penalties, said David Guilmette, former managing director of Towers Watson's global health and welfare unit.

Executives at those companies will want to measure the competitive advantage of offering health insurance under a pay-or-play system. "Measuring ROI is going to be hugely important when you decided to continue spending huge amounts of money on health care," including health management programs, Guilmette noted.

Health management programs aimed at preventing prediabetic individuals from becoming diabetics have shown a lot of success in producing a large ROI, explained Jeffrey Munn, a principal in Hewitt's Washington, D.C. consulting office.

Even with health care reform, employers and their health partners will continue to create health management programs. "About 50% of our health care spending is associated with behavior," said Munn.

Debate over defining health

Health management programs are not without their critics. Research by the Centers for Medicare & Medicaid Services shows some health management programs don't live up to their promises of reducing health care expenses.

"As an actuary, I run the formulas of disease management companies on large databases and understand why they can show an ROI increase in their formulas and what the flaws are within those formulas," said Bruce Pyenson, a principal and consulting actuary with Milliman, a New York-based actuarial and consulting firm.

Pyenson pointed out that Americans are living longer, disability rates are lower and events associated with some chronic conditions are at an all-time low. "Americans are healthier than ever, despite the obesity epidemic," Pyenson contended.

"The key question there, however, is how do you define health?" asked Hewitt's Munn. "If you look at the ability of the medical system to intervene and prevent some complications resulting from bad health habits, then we are better off. Yet when you look at the underlying issues of health, such as nutrition and exercise, then we have been declining for years," Munn explained.

Pyenson explained that the idea "you spend more money now in order to save more money later is an idea that does not work."

Health care reform puts the spotlight on "some bad behaviors that employers have gotten into with benefit plans designs. Now is the time to sweep out some of that trash that accumulated over the years in benefits plans," asserted Pyenson.

For example, employers can save money by dropping disease management and employee assistance programs, and value-based insurance designs. "It's been proven that the stuff doesn't work," Pyenson said. Employers instead should aim for tighter formularies on prescription drugs benefits and challenge the commissions of brokers and consultants.

According to Pyenson, employers also can earn substantial dollar savings by moving to a limited network, tightening medical management, limiting out-of-network benefits or offering no out-of-network benefits.

Over the years, employer-sponsored health benefits have gotten slimmer and slimmer, leading some to compare the shift in health benefits to the shift in retirement benefits from defined benefit plans to defined contribution plans.

"It's an apt comparison as far as it goes, because we are talking about a potential fundamental shift in how health benefits are provided," noted Munn. What's overlooked, however, is that employers still remain the entity that gives advice to workers about those benefits.

If an employer is talking about getting out of the health benefits business, the company can still expect its employees to turn to the HR/benefits department and ask "What should we do about government-sponsored health insurance?" said Munn.

Most employers will balk at setting up an in-house structure that offers advice to workers about a government-backed exchange with 100 health plans. For that reason, some companies will think twice about getting out of the business of offering health benefit plans.

Reform is fundamentally going to come down to a question around effective compensation, noted Guilmette.

Offering health benefits is an important issue that helps to define the relationship between employer and employee. An employer that abruptly pulls out of the health benefits game will fundamentally change that relationship, explained Guilmette. -L.C.B.

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