wellness roiAn increasing number of employers understand the advantages of wellness programs, especially the consequences of not having one and are therefore doing what it takes to implement them in their company. In fact, health cost guru Dr. Dee Edington notes, “our system now does not incentivize anyone to get preventive care except for the employer.” The employer is the only one who benefits from healthy people.” There is no doubt that employers benefit with fewer absences from work, reduced presenteeism, less workers’ comp claims, fewer disabilities, and most of all lower overall dollars spent on healthcare. Not to mention that a culture of wellness breeds positive lifestyle changes that not only affect and benefit the individual, but also the entire population.

Let’s face it – the sick cost money and the more complex your illness is, the more expensive it is to treat it. Considering the advantages a wellness program has to offer, employers should be doing something. However, there is always a BUT! The million dollar question is “how much am I going to save?” That’s where many employers are skeptical.

On the contrary, research clearly demonstrates that by supporting wellness efforts within the company and integrating it with the other programs they run, employers are realizing a significant return on investment (ROI). Investing in prevention and wellness has measurable, direct and indirect returns on investments, such as:

  • 26.5% lower health costs
  • 25.3% fewer sick days
  • 40.7% reduction in workers’ comp costs
  • 24.2% lower disability management costs

Thus, with a nominal initial investment, the cumulative effect can be as much as a 5.8X ROI, that typically starts to materialize after two years. In fact, according to a policy paper “Workplace Health Promotion” commissioned by Partnership for Prevention, December 2008, most comprehensive corporate wellness programs, over a three-year period produce an ROI ranging for about $1.40 – $4.70 for every $1 invested.

Overall, eighty-three percent of employers who incorporate wellness programs experience returns on their investment.

wellness roi

For nine reputable companies, the chart above demonstrates the ROI they achieved in their lifestyle programs. On the low end, Unum Life experienced a $1.81 return per dollar invested in wellness, compared to Coors on the high end at a $6.15 return. On average, a $4.14 return per dollar invested is significant savings that should not be ignored.

Of course, the level of savings achieved is directly correlated to the robustness of the wellness program being implemented. A comprehensive wellness program integrates all components and wraps incentives around it to improve participation and motivate people to make healthy choices because they have skin in the game.

An added dimension to wellness programs that incorporate medical and prescription drug claims data and use the analytics to make it a more predictive process, pose an increased savings opportunity. Research supports that at least 25-40% of all health claims are avoidable through prevention, early detection, and the reduction of modifiable risk factors.

Determining the ROI your wellness program is generating is 100% dependent on establishing and tracking appropriate measurements. To evaluate the effectiveness of the program, you will need to establish measurable baseline factors – biometrics, participation, satisfaction, behavior changes, turnover, morale, absenteeism, and productivity (to name a few)- with outcomes measured at regularly scheduled intervals of time. Be sure to standardize your ROI calculation methodology across all wellness components. For example, you will need to adjust for participation in a fitness program that produces a ROI of 3:1 and participation in an Employee Assistance Program (EAP) that produces 2:1, thus, what would be the total ROI for both components, the sum, average, or some other relationship? There is no right answer, and that’s why calculating welness ROI is big business. Well thought out wellness programs will lend themselves to savings, so let the data empower you and the numbers direct you and your program!

Sources:

  • 1. Proof Positive: An Analysis of the Cost-Effectiveness of Worksite Wellness, Sixth Edition, 2007
  • 2. Employee Health & Productivity Management Programs: The Use of Incentives, ERISA Industry Committee (ERIC), the National Association of Manufacturers (NAM) and IncentOne Inc.

via flickrImage credit: Anne Hornyak

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Karen English

Karen English

Karen Trumbull English, CPCU, ARM, ACI, AU is a Partner with Spring Consulting Group, LLC, formerly Watson Wyatt Insurance & Financial Services, Inc. She has twenty years of experience that spans across both health & welfare and property & casualty arenas, and routinely works with her clients on program strategy, product development, process improvement and market research initiatives. She leads the firms’ health and productivity approach and is actively involved in voluntary and other emerging benefits. Prior to joining Spring Consulting Group and Watson Wyatt, Karen led the regional risk & insurance practice for a small consulting firm, held the role of Assistant Risk Manager for one of the nation’s largest banks (U.S. Bank), and was a casualty broker for two of the world’s largest insurance brokers (Marsh and Aon). Karen has her BBA in Risk Management and Human Resources from University of Wisconsin-Madison, and her MBA in Finance from University of Minnesota – Carlson School of Management. She has also earned the designations of CPCU, ARM, ACI, and AU and is a licensed insurance broker.