How to Take a Data-Driven Approach to Employee Benefits

Data can tell important stories about employee benefits, much like it can with compensation. Are employees engaged with and using their benefits? Is a proposed insurance renewal rate higher than it needs to be? Do changing employee demographics require a new approach to benefits?

To find and act on these stories requires employers to cast a wide net to capture the necessary data. With that data in hand, employers can then interpret it and use it to create more competitive and appreciated benefits programs.

How can HR and benefits leaders best capture and evaluate the right data when it comes to developing and refining employee benefits programs? Here are some ways to get started.

Who Are Your Employees?

Employee demographics can be a good place to begin. “The demographic makeup of employee populations drives relevant data,” said Ryan Ramsey, vice president of strategic alliances for employee benefits platform Espresa.

To generate the necessary dataset, he suggested using a combination of on-demand analytics based on demographics, current vendor utilization and employee feedback. “These data points are highly relevant in decision-making on what will achieve the greatest employee engagement,” Ramsey said.

“Demographics are a big piece of the puzzle,” agreed Lauren Winens, CEO and principal consultant with Next Level Benefits, an HR consulting firm based in Pittsburgh. “Slice and dice the data to come up with a prospective design and strategy” for employee benefits.

Identifying where people are in their life stages can provide a wealth of ideas for benefits. For example, younger employees might be building families, so fertility benefits are likely to be welcomed by this group. Older employees may be caring for children and older relatives, making programs like caregiving benefits more important.

Once an employer has made changes to employee benefits, the next step is to measure what happens. “Utilization data is key,” Winens said. “Are employees using the benefits available?”

Data can also help employers measure how well they are communicating benefits and whether lack of communication could be impacting utilization rates. After all, employees are unlikely to use benefits they do not know about or have forgotten about. If this analysis indicates that communication is adequate but people are still not using the benefit, that creates an opportunity to repurpose those funds for something that is more relevant and meaningful for employees.

Expanding the Effort

There are many avenues employers can explore to uncover data. For example, insurance claims data is a key source of insight into how employee benefits are meeting employee needs—as well as employer needs.

“We use anonymized data from employee demographics and historical claim data to find benefit solutions for our employees,” said Kim Jones, vice president of HR for Toshiba America Business Solutions. The company’s goal is to improve employees’ health and lower their overall costs.

For example, when the company noticed a rising rate of musculoskeletal insurance claims, it started a pilot program for free virtual physical therapy so that proper care was as convenient as possible for employees to access. The initial results are encouraging, with employees seeing improvements in their conditions. 

“We will continue to analyze the data to ensure it is helping our employees and providing the results we are hoping for,” Jones said.

Other types of data analysis can show whether employees are using and obtaining value from specific benefits programs.

When analyzing utilization data, Linda Lee, chief people and culture officer at HR tech company Velocity Global, looks for any data that can show levels of true engagement with specific benefits.

For instance, a meditation app appeared to be quite popular with employees at Velocity Global, with 60 percent of employees downloading it. However, when data revealed how employees were using the app, the number of downloads was less impressive. Only 15 percent of those who downloaded the app were using it for its intended purpose—to meditate. The other 85 percent of users were listening to music through the app or just using it as background noise.

Casting a Wide Net

A key challenge involved in leveraging benefits data is identifying internal and external sources for that data. HR and finance teams often focus on their own data, but that may only tell part of the story.

“You need data to understand trends, what benefits are going to look like [in the future] and what is happening in the market,” said Cara Kahan, CEO of 1706 Advisors, an insurance and benefits firm based in Northfield, Ill.

This can require external data on things like deductibles and co-pays by specific population, company size and geography. “A broad array of data, both median and the top quartile, can help employers understand the relevance and achievability of their goals, which in turn can support strategic planning now and over the next five- and 10-year periods,” Kahan said.

Actuarial data, including demographics, utilization, and employees’ claims history and likely future claims, is essential when conducting benchmarking or developing a strategy for group insurance renewals, especially health insurance.

This data can help employers counter insurance renewal rates they consider to be too high. For example, one employer that was facing an 18 percent increase on its health insurance renewal was able to reduce that increase to 6 percent. To do this, the company had to build a data-based case for the reduction using actuarial data and data on the employer’s health plan utilization.

“These situations should not be a negotiation but a transparent conversation,” Kahan said.

This is an area where having a strong broker or consultant relationship can pay dividends.

“It’s important to get on the same playing field with the insurer so you are working from the same baseline as the carrier,” Kahan said. “For example, you can look at future costs and make a case for why you think the carrier is overinflating those numbers.”

Adding to the Data Mix

Using data to manage employee benefits can also highlight what is missing from the dataset.

“You have to actively choose to monitor key data points,” Winens said. “Without that, it will limit the ability to be agile and make quick decisions.”

For example, an employer that is tracking its communication efforts will know the frequency of communication, methods used and whether employees are engaging with that communication. That allows employers to see how many employees are opening a given email about benefits and how many are clicking the links inside.

The right data can also help HR and benefits professionals maintain a stronger understanding of what is happening within the employee benefits offering. For example, good data tracking can offer a warning of potential premium increases well ahead of insurance renewals that can give employers time to plan and shift priorities to accommodate the higher cost.

Ultimately, “having access to employee benefits data makes it easier for employers to track progress,” Winens said.

That is why more data is often better. In a dynamic benefits environment, new data is likely to be useful in unexpected ways. For this reason, Winens urged employers to track as much data as possible.

“You never know what will be useful, so it is better to have the data on hand than to wish you had it,” she said.

Joanne Sammer is a freelance writer based in New Jersey.