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Meet the Wellness Programs That Save Companies Money

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Workplace wellness is under scrutiny by skeptics who argue that the return on investment (ROI) in wellness programs does not justify their costs. What’s the truth here? Can wellness programs help employers reduce out-of-control health care costs? The answer, most emphatically, is yes. But we must first go beyond unduly narrow interpretations of ROI (i.e., “claims ROI”), to understand how properly designed wellness programs can help employers lower health care costs while providing other types of cost savings and competitive advantages.

The current ROI debate has focused on whether one type of wellness program, lifestyle management (diet, exercise, and lifestyle changes), can reduce health care claims and lead to lower costs. Here, I agree with critics that lifestyle-focused programs do not significantly lower claims costs.

But, the real question is not whether wellness programs deliver returns. Rather, it’s what type of wellness program can reduce claims and thereby lower insurance premiums. The answer is not lifestyle programs; it’s programs that prevent at-risk employees from becoming ill and help chronically ill employees stabilize their conditions.

A recent Rand study, Do Workplace Wellness Programs Save Employers Money?, examined 10 years of data from a Fortune 100 employer’s wellness program. When compared against the lifestyle-management component, disease management delivered 86% of the hard health care cost savings, generating $136 in savings per member, per month and a 30% reduction in hospital admissions.

At-risk employees suffer from factors like overweight, blood pressure, diabetes, and depression, which can lead to costly (and avoidable) health claims. At-risk people should be identified through personal health assessments and biometric testing, and encouraged — not coerced — to participate in personalized care-management programs to minimize their chances of becoming chronically ill.

While keeping at-risk employees healthy is critical, the shorter-term workplace-wellness ROI lies with the chronically ill, who suffer from costly conditions like advanced diabetes, heart conditions, and cancer. In a typical population, they consume at least 50% of a company’s claims expense, and focusing on them can make or break your claims ROI.

Enrolling the chronically ill in disease-management programs that ensure they get appropriate care has the most potential to reduce insurance premiums. For example, a program that preempts 25 unnecessary emergency department visits can easily save $50,000, while preventing four inpatient stays can save at least $100,000. Savings like these are not unrealistic for a 2,000-employee company.

Employee buy-in is key. But employers must first realize that they cannot make employees live healthier lifestyles. Incentives have a place, but they can’t single handedly drive long-term lifestyle change. And thinly veiled penalties hurt morale when viewed as a stealth form of shifting more costs onto employees and do not contribute to a supportive workplace environment, much less long-term wellness.

For all of this to work, employees must trust the program and the employer’s motives, which requires visible CEO leadership. Transparency is key, and employers should open the books, showing employees the true cost of health care coverage borne by the employer, how those numbers have changed, and the projected trajectory in the future if something doesn’t shift.

And while concrete health costs are important measures of ROI, we must not overlook the many benefits of fostering greater workforce health and well-being that can actually exceed claims ROIs.

According to a 2012 Gallup State of the American Workplace study, employees with high overall “well-being” have 41% lower health-related costs compared with employees who are struggling and 62% lower costs compared with employees who are suffering.” Another study by Willis, Towers, Perrin supports this finding that more employers enjoy major financial returns and competitive advantages through higher employee engagement, productivity workplace morale.

As these studies show, the current ROI debate misses the bigger picture. Any CFO knows that businesses invest in many things to improve workplace environments without justifying these costs with an ROI study. Thus, when workplace wellness is viewed holistically without ignoring or undervaluing the total return on wellness beyond reduced claim expenses, companies can expect reduced absenteeism and presenteeism, greater employee engagement and productivity, less unscheduled paid time off, fewer workers’ comp claims, greater employee retention, increased employee satisfaction and morale, and demonstrable competitive advantage.

Given the absence of other alternatives, it’s time to correct course and double down on workplace wellness. When done right, workplace wellness offers both near- and long-term financial and competitive returns and provides an alternative to the toxic, zero-sum game of reducing health coverage and increasing employee insurance costs. This is an opportunity that cannot be missed.

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