Survey Reveals Top Priorities of CFOs
Impact of Health on Medical Costs, Productivity Acknowledged
Thomas Parry, Ph.D.
President, IBI
By Thomas Parry, Ph.D.
President of Integrated Benefits Institute
How can employers effectively transform the conversation about health from the cost of healthcare to the value of workforce health? And, as part of that transformation, how can health be connected to tangible, quantifiable outcomes, such as absence, disability and productivity? New research by the Integrated Benefits Institute (IBI) based on a survey of 343 chief financial officers gives a clear path to connect ill health to business relevant outcomes.
CFO Cost Concerns
Controlling health plan cost is critical to CFOs and ranks as the single most important objective over the next two years for survey participants. Second-most important, however, is the goal to manage all health-related costs, including absence and disability. The third most important objective is improving employee health, which can be expected not only to reduce costs but also to improve outcomes. Few CFOs will seek to expand benefits over the next two years.
CFOs also recognize how ill health flows through their organizations. Ninety-six percent of respondents link ill health to higher medical costs. At the same time, 90 percent acknowledge that ill health degrades their employees’ ability to focus on their work, which is called “presenteeism,” while 86 percent understand that it drives increased employee absence.
Value of “Monetizing” Lost Work Time
“Monetizing” the way a company responds to absence and presenteeism is a viable – and methodologically sound – way to quantify the opportunity costs of ill health. Most in our survey understand that the true cost of lost work time goes well beyond the cost of wage replacement for absent workers. Survey participants tell us they are more likely to use overtime and temporary help to replace absent or ill workers than they are to allow lapses in product quality or revenue loss associated with lower production levels regardless of whether the time loss is associated with presenteeism or absence.
These reactions suggest that CFOs will tend to use flexible “human capital” responses to ill health rather than suffer the more expensive costs of declining product quality or revenue losses. This, of course, assumes that overtime and temporary help are available as a human capital strategy, which may not be true for highly specialized jobs or skills.
Unfortunately, few CFOs receive information on absence or on presenteeism. Only 20 percent get reports on the amount of absence on a routine basis, and 44 percent never receive such reports. More than seven in 10 never get reports on the financial impact of absence. The results are bleaker with presenteeism. More than 80 percent never get reports on the incidence of presenteeism, and 92 percent never receive reports on its financial impact.
Benefits of Quantifying Health Impacts
If benefits vice presidents and risk managers could quantify (and deliver) information on monetized health-related impacts, how would their CFOs use the resulting information? A majority of survey participants tell us that they would bring such information directly into decision-making about health-related benefits strategies. For example, three-quarters would consider such costs against the costs of health plans (and thus recognize the investment value of health) and another seven in 10 would examine the business impact of health plan costs. Between two-thirds and three-quarters would implement programs to reduce absence and presenteeism, while nearly three-quarters would manage all health-related costs. Clearly, CFOs would find this kind of information persuasive and actionable.
CFOs think broadly about what health means in their businesses. Rather than being misaligned with CFOs by a singular focus on the cost of medical treatment, benefits vice presidents and risk managers can align themselves with senior management in the search for programs that deliver health-related value. This strategy will require connecting – and monetizing – health investments to outcomes that matter to the business: absence, disability and lost productivity.