Wellness Programs: Are They Worth It?

By Gary Wobb on December 31, 2012

Wellness programs aim to improve the health of your employees and their families while reducing your health-related costs as an employer. You’ve probably heard or read studies about the benefits of wellness programs: how they’re linked to less absenteeism, greater productivity, and a reduction of long-term health care costs.

But are they really worth it?

With the rising costs of health insurance many companies are desperately searching for ways to cut costs. Many business owners and CEOs who currently have wellness programs are asking the question, “Are wellness programs really still worth it?”

Of course the health of your employees is important but ultimately you must do the math and find out if a wellness program will save the company money or not.

As a business owner you cannot afford to launch a health crusade at the expense of your company. But if and when a properly devised wellness program can truly cut costs then, and only then, is it a win-win for you and the employees.

The Evidence

Before we proceed let’s consider the facts:

• The Integrated Benefits Institute, which represents major U.S. employers and business coalitions, says poor health costs the U.S. economy $576 billion annually.

• The use of tobacco, alcohol and other drugs costs U.S. companies approximately $100 billion annually [source: The Wellness Councils of America].

• According to a Duke University Medical Center study, obese workers file twice as many workers’ compensation claims, were absent from work 13 more days from a work-related injury and had seven times higher medical costs for claims than the average non-obese employee.

So there we have it, the evidence is overwhelming. We have a serious problem! And this is not only a threat to you employees’ health; it’s also a threat to the financial well-being of your company. And this is one of the main reasons to consider launching a wellness program if you haven’t done so already.

The evidence is so convincing that over 80% of U.S. businesses with 50 employees or more have some sort of wellness program [source: The Wellness Councils of America]. If you don’t (or do) and you’re still wondering, “Yes, I agree there’s a problem but is a wellness program right for my company?” then read on.

 

What’s the ROI?

First let me remind you that no two companies are the same.

Consider IBM who spent $1.3 billion on health care for its employees, dependents and retirees in 2008 and who continues to invest in wellness (even though it cut expenses in other ways, including layoffs). Health Management Research Center at the University of Michigan attempted to calculate the ROI for IBM’s wellness programs. According to Joyce Young, IBM’s Director of Well-Being, IBM saved about $80 million in reduced health claims.

Now, while you’re probably not spending $1.3 billion on your health care cost, odds are it’s still a large portion of your company’s total expenses. The median health care cost in 2008 per employee was $7,173, according to a survey by human resources consultants Watson Wyatt and employer coalition National Business Group on Health. And we know medical costs have only increased since.

Therefore, an average company with only five employees would spend $35,865 annually on health care related expenses. If that company saved roughly 16% like IBM did, they would see a $5,738 savings. Is a $5,738 savings worth it (plus increased employee productivity)?

 

Do You Think It’s Worth It?

Remember, as an employer, you bear many direct (such as medical claims) and indirect costs (such as lowered productivity and absenteeism) of your employees’ poor health. But with a properly designed wellness program you can reduce many of these costs by providing early behavioral and/or clinical interventions for your employees such as:

  • health screenings and immunizations
  • smoking cessation programs
  • weight loss programs
  • physical activity initiatives
  • gym reimbursement programs

There are two primary benefits for the programs and initiatives mentioned:

Increased productivity: It’s no secret that healthy employees are much more likely to be performing at optimal levels than unhealthy employees.

Reduced healthcare costs: Again this is not rocket science but employees with poor health use more healthcare resources and generate more claim costs than healthy employees.

 

Keep It Simple

Starting a wellness program doesn’t have to be complicated. Instead of trying to do everything at once consider implementing two or three key programs/initiatives that will interest most of your employees and where you can get the most “bang for your buck.” And remember, for your wellness program to succeed it must be practical, employees must engage in it (hence the incentives) and the cost vs. savings must be monitored.

Do you have any questions or comments about wellness programs? Feel free to leave a comment below.

 

If you have any questions or comments please leave your reply below.

2 Responses to “Wellness Programs: Are They Worth It?”
  1. puta says:

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