Corporate health

We discuss the evolving business case for employee health programs and consider regional trends shaping corporate health in different parts of the world.

2 November 2017 | Tags: health, for marketing purposes only

Supporting employee health is a sustainability challenge that many companies are facing today.

Corporate health is the health of a company's workforce and its healthiness as an environment for its employees – health defined broadly as physical, mental and emotional state rather than a narrower definition of health in terms of occupational health.

In our report we find that while the health challenge is global, companies face different circumstances depending on the region where they operate. We also find that there may be a relationship between focusing on employee wellbeing and achieving better financial results. We conclude by outlining common measures that companies around the world can take to optimize their employees' health.

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Regional focus: trends shaping corporate health around the world

Source: UBS

US & Europe

Rise in healthcare expenses is leading to the emergence of a value-based payment model.

In 2016 the OECD countries collectively spent USD 6.5 trillion on healthcare. Over the past 15 years, these costs have risen by 6% annually and their growth shows little sign of slowing. This is a particular challenge in the US where, in conjunction with private insurers, employers tend to to be the primary source of healthcare plans. As costs grow, budget constraints may force a shift from volume-based to value-based reimbursement where payment is given for value one gets from healthcare products and services.

Emerging markets

Rise of non-infectious diseases and strained public finances limit what governments can do to improve workers' health.

Despite being home to almost half of the global population, emerging markets(EM) have a combined healthcare sectors value of USD 1.3 trillion, less than half that of the US. This big gap is due to decades of underinvestment by national governments. As income per capita increases and lifestyle changes, focus in these markets begins to shift from infectious diseases to non-infectious diseases such as diabetes and heart disease. Since state funded provision is weak, companies in China, Brazil, Mexico and India have to play a bigger role for employee health.

APAC

With the role of state owned enterprises declining, private companies, aided by technological shifts, may step in.

Uneven healthcare expenditure in the region is due to differences in tax revenue. In general, public insurance schemes are common in APAC, but the reputation, wait and quality may be sub-par even in developed countries. In many APAC markets, state owned enterprises (SOE) provide comprehensive health coverage for their employees. But as the role of SOEs is declining, private companies need to think about strategies to provide healthcare benefits to their workforce. Technological developments such as Insurtech may help.

Corporate health and company performance

A key aspect in assessing whether companies with employee health and wellness programs will outperform over the long term is the potential link between health and wellness programs and firm profitability. Several studies found that that a portfolio of "healthy" companies outperformed the market. They suggest that a relationship exists between corporate health and company performance. The figure above summarizes the some of the findings by showing the performance of three baskets of "corporate health" portfolios versus the S&P 500.*

Fast Asleep: F1's model to optimize performance

Our partner Mercedes-AMG Petronas Motorsport has long realized that sleep is not only key for a strong health but also a way to achieve superior results. The team is working together with renowned sleep experts who create plans enabling them to get the best out of their hectic schedule.

Measures companies can take

There are a number of common measures that corporations would be advised to take globally in order to optimize their employees' health:

  • Companies should identify industry-specific health problems and implement employee health programs supporting optimal long-term responses . Such problems include not only traditional health and safety concerns but also emerging risks posed by a sedentary office lifestyle and burnout caused by 24/7 digital communication.
  • These programs should also encourage employees to use new technology to track and improve their health. For example, using smartphones to monitor vital signs and physical activity in real time.
  • We believe companies should position employee health programs correctly within a healthy, effective organizational culture. Senior managers should take time to reinforce the importance of employee health with consistent policies, communications, and engagement at every level of the firm. Companies should monitor and hold managers accountable for sub-standard employee health outcomes.
  • When making the case for investment in employee health, companies should also look at the possible correlation between best-in-class programs and financial performance (although it is important to note that there is not necessarily a direct cause and effect between the two). Companies may use this information to highlight the benefits to shareholders, and shareholders can also use it to help persuade firms to change.

There are a number of common measures that corporations would be advised to take globally in order to optimize their employees' health.

*This content has been approved as marketing material. The content on this page is not subject to the legal provisions governing the independence of financial research. It is therefore possible that the recommended solutions do not fully reflect the views of UBS Chief Investment Office WM.

For more detail, download the full report