By Alex Gramling
The following article is Part 1 of a two part series on the future of Big Data as it relates to employee benefits.
What exactly is “Big Data” and why is it continually touted as the panacea to pivotal problems of our time? To answer this question, it is important to look past the labeling of Big Data and realize that while the quantity of data generated per capita continues to grow exponentially, it is ultimately the ability to tie together unstructured and previously unused data sources which defines its success. Delving further into the underlying mechanisms of Big Data will show that its value is realized through the use of computational methods which operate on large data sources to recognize patterns, make predictions, and provide recommendations.
Consider for a moment that a recent study from the International Data Corporation found that less than 0.5% of all data created is analyzed. In other words, traditional business intelligence, which relies upon relational databases and structured data, is utilizing less than 1 in 200 data items. Big Data is the solution to this glut of unused information. Through the emerging use of machine learning and other Big Data techniques, analysts are leveraging these untapped data sources to recognize previously hidden patterns and relationships.
Big Data’s predictive capabilities may sound futuristic, but it is important to realize this technology is front and center in an important HR function – talent acquisition. A quick review of the website for HR Open Source will show a variety of case studies by employers who are transforming their talent acquisition methods through Big Data. Big Data’s entrance into the areas of hiring and retention suggests it is only a matter of time before executives request innovative ways to utilize this technology within employee benefits.
In what ways will Big Data shape employee benefits in the near term?
- Recommendation Engines
The latest MetLife U.S. Employee Benefit Trends study found that increased benefit offerings resulted in a 20% increase in likelihood that an employee would recommend an employer as a great place to work. Yet, the study later went on to say that more than 40% of employees were not confident they made the right benefits decision during open enrollment.
How is an HR executive supposed to reconcile these obviously paradoxical facts? Many employers offer decision support tools through their current enrollment software, but the success of these tools, given the results of the MetLife survey, has to be questioned. What if benefits enrollment could see similar results to Netflix, where 75% of its members watch its recommendations? The potential to transform diverse data elements into a personalized recommendation based on successful outcomes from similarly situated individuals is one of the main promises of Big Data.
- Chronic Condition Management
According to a June 2016 Bureau of Labor and Statistics report, employee benefits are averaging $10.70 per hour and represent 31.4% of total employer costs related to their employees. This study shows health insurance outpacing paid leave, retirement benefits, and legally-required benefits such as Social Security and Medicare as the largest contributor to benefits expenses.
What factors are driving this large expenditure? According to publications by the Centers for Disease Control and Prevention (CDC), 86% of the over $3 trillion U.S. healthcare market is attributable to chronic conditions. While this is certainly alarming, there is a silver lining for employers: preventing, or at least ensuring the maintenance of chronic conditions, provides a worthy target for resource deployment.
How can Big Data impact chronic condition management? By connecting data from medical records, wearable devices, test results, and other sources, predictive analytics can create a holistic profile of each patient. The result is a picture which transcends the typical retrospective claims scoring algorithms common today. For example, programs such as IBM Watson are already working to leverage the 80% of health data which exists in unstructured form. Initial data-driven interventions published by IBM demonstrate impressive results within target diabetic populations, including a 207% uptick in office visits by previously non-compliant patients and an average 1.8 point reduction in A1C scores for uncontrolled diabetics.
By ensuring care compliance for members with a chronic condition, and understanding insights which assist healthy employees with maintaining their present status, employers can utilize active risk mitigation in an area where preventing even a single acute event can significantly impact the bottom line.
- Benefits Decision Making
A 2015 study by Unum found that 78% of workers base their job acceptance at least in part on the benefits package offered. As such, it’s no wonder HR professionals continually seek to measure the attractiveness of their benefits package. The problem with traditional benchmarking is that it generally creates a comparison of plan design or cost features, with no consideration for underlying demographics.
This doesn’t have to be the case in a world fueled by Big Data. For instance, services such as Sun Life Financial’s Benefit Profile use Big Data to make recommendations on optimal benefit offerings and enrollment strategies. By using employer-specific census data, the Sun Life model can create correlations to medical incidence rates, relevant insurance solutions, and industry/region specific competitor offerings, further informing benefit decisions through better recommendations.
- Targeted Employee Communication
Facebook, Google and Netflix have made their name by using data to connect people to friends, merchandise, information, and media based on their interests. Imagine being able to connect employees to targeted benefits advice based on their specific characteristics. Once the vision of data-driven messaging to employees reaches fruition, HR professionals will have the power to deliver the right message, at the right time, to the right employees.
Though the advantages of Big Data within employee benefits are readily apparent, this new technology isn’t without risk. Part two of this series will explore the critical side of the Big Data revolution while also addressing ways that HR professionals can prepare themselves for the entrance of Big Data into the employee benefits space.