The Wellness Investment
Whittling down health benefit costs by investing in employee health and wellness programs is a topic on the minds of executives and benefit managers alike. Though wellness programs are still a relatively new trend, more U.S. companies are offering them to employees every year, and most report good return on the investment.
The proportion of U.S. employers offering health and wellness programs to workers increased to 72% in 2004 from 63% in 2003, according to the American Management Association’s 2004 “Survey of Corporate Health and Wellness” programs (Kelleher, 2005). And the payoff can be well worth the investment, according to the National Business Group on Health, which estimates that companies save $500 for every $100 invested per employee on effective health and wellness initiatives (Sweeney, 2005).
But companies should not expect a significant return on the investment right away. Some companies may actually see a spike in health costs once programs begin because previously undetected health conditions may be identified and require medical attention, thereby driving up early costs. The effectiveness of such programs is not easy to measure, and determining how much savings a company may eventually realize is difficult. “Today there is still no standardized method that’s accepted for measuring the ROI across the health continuum,” says Sue Willette of Mercer Human Resource Consulting.
Most experts estimate that the bulk of savings for companies that launch a health and wellness initiative won’t materialize until some point down the road. In most cases, companies can expect that every $1 invested will result in $3.50 in savings by the third year, chiefly in deflected healthcare costs due to improved employee health status. HR consultant group Watson Wyatt predicts that the ROI will be $1.50 for every dollar spent in the first three years, and Aon Consulting predicts savings of $1 to $2 for every $1 spent between years three and five of a program’s implementation (Mochari, 2005).
But do health and wellness programs have to take a big bite out of corporate budgets in order to be successful? And is a state-of-the-art on-site fitness facility what will appeal to employees most? The answer to both is no. Company-sponsored programs most commonly offered in 2004 included exercise and fitness, smoking cessation, blood pressure management, weight and stress management, and nutritional consulting (Gurchiek, 2005). Most of these services can be offered to employees at relatively low costs to the company. And employers not equipped to offer on-site fitness facilities often opt to reimburse employees the cost of a gym membership at a facility of their choice in the community.
Some of the most successful wellness programs provide incentives such as gifts, electronics, employee parties and even cash awards to employees who adopt healthy lifestyles. Others pay in part for preventive care, circulate internal health and wellness newsletters, offer annual flu shots or pay for or subsidize massage therapy in the workplace (Principal Financial Group, 2005).
Initiatives such as simple walking programs cost companies very little, but the payoffs are big when employees buy in. Competition among teams of walkers – with rewards and bragging rights – is sometimes incentive enough to get employees enthused and moving.
One important factor to consider in assessing wellness program effectiveness and the impact on overall health benefit costs is the effect on employees’ dependents. Employees covered by company-sponsored health insurance are not the only ones driving up costs – spouses and children contribute significantly. “Employees represent only 50% of your healthcare costs,” says Dee Eddington, director of the Health Management Resource Center at the University of Michigan. While dependents may drive up health costs, they do not usually participate in company-sponsored wellness programs (Mochari, 2005).
A 2004 study conducted by Johns Hopkins University indicates that as many as 130 million Americans have some type of chronic health condition, and many of those are manageable and even preventable. Corporate wellness programs may be one health strategy that serves employees and employers alike.
For more information online about workplace wellness programs, and to read the “Employer’s Guide to Health Improvement and Preventive Services,” published by the National Business Group on Health, click here.
Documents used in the preparation of this TrendWatcher include:
Cropper, Carol Marie. “Keeping Your Job When You’re Ill.” BusinessWeek, January 17, 2005, p. 80.
Gurchiek, Kathy. “Guide Offers Tools, Ideas for Preventive Health Services.” HR News [www.shrm.org/hrnews_published/articles/CMS_010949.asp]. January 13, 2005.
Kelleher, Roger. “More Companies Offering Wellness Programs for Employees.” HR Fact Finder, February 2005, p. 2.
Mochari, Ilan. “Belt-tightening.” CFO: Human Capital, February 2005, pp. 10-12.
Principal Financial Group. “From Sickcare to Healthcare: America’s Best Companies Focus on Keeping Employees Healthy.” Press release, January 25, 2005.
Sappenfield, Mark. “ Smoke-free Zones Gain New Territory.” Christian Science Monitor [www.csmonitor.com]. February 8, 2005.
Sweeney, Kevin. “Wellness Programs Must Be Properly Constructed and Marketed for Maximum Return on Investment.” Employee Benefit News, March 2005, p. 46.
The proportion of U.S. employers offering health and wellness programs to workers increased to 72% in 2004 from 63% in 2003, according to the American Management Association’s 2004 “Survey of Corporate Health and Wellness” programs (Kelleher, 2005). And the payoff can be well worth the investment, according to the National Business Group on Health, which estimates that companies save $500 for every $100 invested per employee on effective health and wellness initiatives (Sweeney, 2005).
But companies should not expect a significant return on the investment right away. Some companies may actually see a spike in health costs once programs begin because previously undetected health conditions may be identified and require medical attention, thereby driving up early costs. The effectiveness of such programs is not easy to measure, and determining how much savings a company may eventually realize is difficult. “Today there is still no standardized method that’s accepted for measuring the ROI across the health continuum,” says Sue Willette of Mercer Human Resource Consulting.
Most experts estimate that the bulk of savings for companies that launch a health and wellness initiative won’t materialize until some point down the road. In most cases, companies can expect that every $1 invested will result in $3.50 in savings by the third year, chiefly in deflected healthcare costs due to improved employee health status. HR consultant group Watson Wyatt predicts that the ROI will be $1.50 for every dollar spent in the first three years, and Aon Consulting predicts savings of $1 to $2 for every $1 spent between years three and five of a program’s implementation (Mochari, 2005).
But do health and wellness programs have to take a big bite out of corporate budgets in order to be successful? And is a state-of-the-art on-site fitness facility what will appeal to employees most? The answer to both is no. Company-sponsored programs most commonly offered in 2004 included exercise and fitness, smoking cessation, blood pressure management, weight and stress management, and nutritional consulting (Gurchiek, 2005). Most of these services can be offered to employees at relatively low costs to the company. And employers not equipped to offer on-site fitness facilities often opt to reimburse employees the cost of a gym membership at a facility of their choice in the community.
Some of the most successful wellness programs provide incentives such as gifts, electronics, employee parties and even cash awards to employees who adopt healthy lifestyles. Others pay in part for preventive care, circulate internal health and wellness newsletters, offer annual flu shots or pay for or subsidize massage therapy in the workplace (Principal Financial Group, 2005).
Initiatives such as simple walking programs cost companies very little, but the payoffs are big when employees buy in. Competition among teams of walkers – with rewards and bragging rights – is sometimes incentive enough to get employees enthused and moving.
One important factor to consider in assessing wellness program effectiveness and the impact on overall health benefit costs is the effect on employees’ dependents. Employees covered by company-sponsored health insurance are not the only ones driving up costs – spouses and children contribute significantly. “Employees represent only 50% of your healthcare costs,” says Dee Eddington, director of the Health Management Resource Center at the University of Michigan. While dependents may drive up health costs, they do not usually participate in company-sponsored wellness programs (Mochari, 2005).
A 2004 study conducted by Johns Hopkins University indicates that as many as 130 million Americans have some type of chronic health condition, and many of those are manageable and even preventable. Corporate wellness programs may be one health strategy that serves employees and employers alike.
For more information online about workplace wellness programs, and to read the “Employer’s Guide to Health Improvement and Preventive Services,” published by the National Business Group on Health, click here.
Documents used in the preparation of this TrendWatcher include:
Cropper, Carol Marie. “Keeping Your Job When You’re Ill.” BusinessWeek, January 17, 2005, p. 80.
Gurchiek, Kathy. “Guide Offers Tools, Ideas for Preventive Health Services.” HR News [www.shrm.org/hrnews_published/articles/CMS_010949.asp]. January 13, 2005.
Kelleher, Roger. “More Companies Offering Wellness Programs for Employees.” HR Fact Finder, February 2005, p. 2.
Mochari, Ilan. “Belt-tightening.” CFO: Human Capital, February 2005, pp. 10-12.
Principal Financial Group. “From Sickcare to Healthcare: America’s Best Companies Focus on Keeping Employees Healthy.” Press release, January 25, 2005.
Sappenfield, Mark. “ Smoke-free Zones Gain New Territory.” Christian Science Monitor [www.csmonitor.com]. February 8, 2005.
Sweeney, Kevin. “Wellness Programs Must Be Properly Constructed and Marketed for Maximum Return on Investment.” Employee Benefit News, March 2005, p. 46.
Lorrie is i4cp's Vice President of Research. A thought leader, speaker, and researcher on the topic of gender equity, Lorrie has decades of experience in human capital research. Lorrie’s work has been featured in the New York Times, the Wall Street Journal, and other renowned publications.