By Dr. Lorna Friedman, MD, MBA, Partner, Mercer

Multinational employers are developing global health and wellness strategies as they realize that the health of employees affects both health care costs and employee productivity. Poor health increases expenses such as medical claims, absence, and disability rates. At the same time, studies show that involvement in employee health programs is bringing value through higher productivity and improved employee engagement.

A healthy workforce also mitigates the risk of operational shutdowns and reputational damage. Thus, in the current challenging economic environment, multinationals are finding it advantageous to adopt a global health management strategy to mitigate costs and address employee engagement, employee morale, and talent attraction and retention.

Rising Health Costs

Health care cost trends are showing no signs of slowing. Data varies by country, but some estimates indicate that in 2010, health care cost inflation was running at more than double the underlying inflation rate in many countries. In key growth markets such as India, the annual health care cost inflation rate is, by some measures, more than 13 percent. In addition to this inflation trend, economic factors and policy changes are resulting in increased cost-shifting from government to employers and their employees.

Generally speaking, the reaction to global health care cost increases over the past 15 years has been to address supplier pricing. Companies have sought to negotiate with their vendors, including third party administrators, brokers and insurers, to reduce their fees. In addition, a number of multinationals have sought to manage costs via various global care networks, risk pooling, and captive insurance company arrangements.

However, none of these approaches tackles the underlying trend of rising claims costs.

In response, most employers today have or are in the process of developing, a prominent wellness strategy globally.  To tackle the underlying health issues of a workforce and the associated rising claims costs to the employer, it is necessary to transform wellness into an aggressive health management strategy.

The first step in this transformation is to move to a data-driven approach, so that investment in health care can be properly targeted at the right conditions among the right employee segments. A data-driven approach involves analyzing data from a mix of internal (e.g., biometric screening results, medical claims utilization, demographics, engagement survey results) and external sources (e.g., World Health Organization and benchmarking information) to identify key return on investment opportunities.

Health Management Program Drivers

Health care cost increases are not the only drivers of interest in global health management programs. Other key drivers cited by multinationals as part of Mercer’s 2009 Employee Choice Survey (across Canada, Europe, Latin America, and Asia Pacific) were:

• No. 1: Providing benefits as part of a competitive total rewards package.
• No. 2: Employee retention.

In addition to poor health driving cost, four other key reasons exist for investing in employee health:

• Poor health can damage the business (from safety, business continuity, reputation, and financial perspectives).
• Ill health affects productivity (including customer service, creativity, and decision making).
• Health management programs can help differentiate companies as “employers of choice,” which increases brand equity and preference among customers.
• Employee health programs can show a positive return on investment.

Against the Riptide

Moving to a data-driven, analytical approach to the design of, investment in, and delivery of a global health management program represents a fundamental shift from a single focus on premiums to a complementary focus on claims and health improvement. By taking this approach, employers can expect to generate savings by addressing a much wider range of health care cost drivers and improving workforce effectiveness.

Taking this data-driven, analytical view of how health is managed, and where health care investment is targeted, will mean changing the way many employers think about their employees. Looking at health care from the perspective of premiums is, of course, extremely important in ensuring that the most competitive price is paid for any given health care plan or product. However, combining this with a focus on improving employees’ health represents a real opportunity for organizations to manage the underlying cost trend and escape, or at least swim against, the riptide of rising global health care costs.

Tips on Getting Started

Leaders of multinational organizations need to think about which aspects of health management should be managed at the global level and which should be localized. Health issues and health management opportunities vary significantly by location, but global involvement ensures that:

• duplication and reinvention are avoided and economies of scale and better prices are seized where possible;
• quality standards are in place to maximize effectiveness, reduce moral/legal liability and maintain consistency with the external brand;
• employees have a similar experience, regardless of their geographical location or business unit; and
• measurement methodologies are as consistent as possible to enable cross-country comparisons.

An employer may have a global strategy and governance structure, along with global shared initiatives such as branding. However, many health interventions are determined and tailored locally to reflect the unique health issues and cultural aspects of the markets.