by Stephanie Pittman, PHR
Employers have been hard hit by the soaring costs of providing employees with health care benefits. Recent studies indicate that almost 50% of corporate profits now go for health care costs versus only 7% three decades ago.(1) Employers are actively seeking new ways to reduce health care costs without jeopardizing their ability to attract and retain workers. These factors have prompted many organizations to assume positive positions on the issue of health promotion at the work-site.
Employee wellness programs have long been advocated as a way to decrease healthcare costs, reduce absenteeism, and increase productivity. Wellness programs are defined as programs designed to maintain or improve employee health before problems arise.
From a management perspective, wellness programs have the potential to decrease absenteeism, reduce medical claims costs, and improve employee productivity, recruitment, and retention. Many employers credit the implementation of corporate fitness programs for productivity gains in areas such as reduced errors, improved efficiency and improved decision making.(2) For maximum impact on employee health, a comprehensive wellness program should focus on: 1) increasing awareness of wellness issues (information) 2) supporting health management (personal change) and 3) promoting healthy work climates (organizational support).(3)
A review of corporate wellness programs conducted by Goetzel et al. reported that comprehensive disease management programs yielded the highest return on investment.(4) Their findings suggest the need for health education, early detection, and appropriate interventions and health programs in order to maximize returns from investments in wellness programs.
Companies need to identify at risk employees and provide interventions that encourage life style changes that can reduce their risks. Costly health problems such as cancer, chronic pulmonary disease, cardiovascular diseases and others are related to behaviors and life choices.(5) Changes in behavior have been shown to have a significant effect in reducing the incidence of these diseases.
Many companies now conduct health screenings at the office or plant site, others reimburse employees for the cost of annual checkups and other exams. Companies have found that while early detection may cost $15,000 in surgical costs, the health care costs for acute disease are much higher averaging $40,000 per incidence. Johnson & Johnson reported that it spends $4.5 million each year on its comprehensive preventive health care programs but it estimates that without these programs their medical bills would be at least $13 million higher.
Extensive studies by researchers at the University of Michigan Health Management research center indicate that as employee risks go up or down, the change in costs to a company follow in the same direction.(6) Health risk appraisals are, therefore, an essential component of a successful wellness program. A profile of the current health status of employees allows the company to use resources for targeted programs that will maximize health benefits. Once health risks have been identified, wellness programs can be developed or revised to meet the prevalent needs within the employee population. It is equally important to design programs to prevent low risk employees from adding risk factors over time in order to reap the long -term benefits of a wellness program.
Although improvement in an individual’s ability to perform work is somewhat difficult to quantify, several researchers have studied the impact of exercise on job performance. For example, NASA found that while the productivity of non-exercising office workers decreased 50% during the final two hours of the work day, exercisers worked at full efficiency all day.(7) This amounts to a 12.5% difference in productivity between the two groups.
Several industry studies have demonstrated reductions in absenteeism and disability time as a result of employee wellness programs. The reduction in absenteeism varies but most organizations implementing comprehensive wellness programs have seen improvement in this area. While studies at Dupont and General Mills found 14 – 19% reductions, General Electric reports an astounding 45% decrease in absenteeism.(8) Studies have also shown that wellness programs have a positive impact on recruitment and retention of high achieving employees.
An analysis of research studies evaluating the impact of employee wellness programs conducted by Roy J. Shephard, MD, PhD, DPE revealed the following major findings:
- Gains were larger when incentives were used to encourage participation.
- Medical claims decreased by an average of $100- $400 per year relative to participants in control groups.
- Cardiac risk factors were lowered in wellness program participants.
- The greatest savings should be expected to accrue over time. Employers should expect to see an initial increase in health care claims due to the identification of health problems as a result of health assessments.(9)
Heirich and Associates studied the impact of several programs on cardiac risk. This study found a 35%-45% reduction in overall cardiac risk among participants in physical fitness program participants over a three- year period.(10) Chapman found that those wellness programs that address cardiac risk factors yielded high cost-benefit ratios.(11) The most effective programs reviewed involved access to a fitness facility, outreach, personal counseling, dietary consultation and organizational changes that facilitated work site exercise.
Larry Chapman, MPH conducted a cost- benefit analysis of work-site wellness programs by conducting an objective assessment of 34 of the most valid evaluation results for multi- component wellness programs. The assessment examined various types of programs and whether or not they had a significant impact in altering employee behavior and reducing health care costs to the organization. The analysis revealed strong evidence that programs targeting hypertension control, physical activity, nutrition and tobacco use were effective in altering employee behavior. Programs targeting hypertension control were found to have the greatest impact on health care costs. High-risk intervention and multi component programs were found to alter employee behavior and were associated with reduced health care costs to the organization.
Chapman concludes that employee wellness programs based on sound program design strategies that are effectively implemented, can reduce health risks in most employee populations and result in significant economic benefit to organizations. The research also indicates that magnitude of the results is positively correlated to the extent of the programming.
Erfurt, Foote and Heirich estimated that a comprehensive worksite wellness program costs an employer between $70 and $130 per employee annually (in 1992 dollars).(12) In this estimate the researchers included both direct and indirect costs. Costs vary depending on the size of the organization and the “extent of the facilities and programs offered.”(13) Even the simplest of these programs have demonstrated reduction in health care costs, inpatient stays, and sick leave, with a cost/benefit ratio of 1: 4.73 (Leigh,et al).
The economic benefit of wellness programs can be enhanced by such factors as the enthusiastic support of senior management, counseling and follow-up measures, the existence of a menu of program options, and clear incentives for healthy lifestyle changes. Essential factors for success include the appropriateness of the design for the targeted population, adequate funding and competent implementation. Barring unforeseen external events, employers can expect a cost-benefit result of 1:2.0 to 1:6.7 or higher.(14)
Programs that have shown the greatest return on investment have included these major components and programs:
- Assessment Activities that are used to determine employee health. Results are used to identify health risks and provide insight to employers as to what the most pressing issues are in their organization.
- Health Screenings for early detection and treatment of health problems.
- Communication materials such as newsletters, paycheck stuffers, posters and bulletin board notices must be distributed on an ongoing consistent basis to provide accurate wellness updates. This is especially important for multi-employer organizations who may find it difficult to reach employees working at different work-sites.
- Self-help materials should be readily available.
- Include “self- care” programs geared towards teaching employees to become wiser consumers of their health care benefits. Some examples of self-care programs include; self-care workshops, nurse advice lines, self-care software, educational and promotional materials. “Studies show that about 75% of people who receive a self-care guide will use it at least one time within six months.” Of all the items included in implementing a wellness program the inclusion of self-care appears to provide the most consistent return on investment.
- The use of incentives to reward people for healthy behavior has been shown to be tremendously effective. Motivation is the key to success.
- Involve the employee’s family. “Employees account for only about 30% of health care cost, while dependents account for the remaining 70%.”(15) In spite of this fact, only 30% of programs reviewed offered participation to spouses and dependents.
- It is important to identify hazardous working conditions and make changes before a program is implemented.
- On- going evaluation is critical to the long -term success of a wellness program.
Programs do not necessarily need to be as extensive as those of the large corporations in order to have an impact on employee health and health care expenditures. Smaller organizations can make inexpensive changes in the work environment. Companies might consider the following:
- Offer healthy foods in the cafeteria and/ or vending machines.
- Invite the Red Cross, American Heart Association, American Cancer Society and other organizations to conduct educational workshops at your facility.
- Offer flextime for employees that want to exercise at lunch- time.
- Provide showers and a locker room at the work-site.
- Provide information to employees by distributing free brochures and wellness newsletters.
- Add bike racks to the parking area.
- Provide free health screenings.
- Encourage employees to register for free electronic health newsletters.
- Provide partially reimbursed memberships to off site health facilities.
Becoming proactive in your employees health makes good business sense. Promoting wellness programs can have a substantial impact on profitability by reducing health care costs, increasing productivity, decreasing absenteeism and by providing a positive, healthy work environment. Wellness programs may be one of the few employee benefits that pays money back to the organization.
(1) McDougall, Diane. “Feeling Stressed?”, CMA Management. Vol. 73, No.9 (pg 14) November,1999.
(2) “Economic Benefits of Employee Wellness Programs”, HRresources.com
(3) “The EAW Wellness Model”, Northern Arizona University, Office of Employee Assistance and Wellness, Flagstaff, AZ, 86011. www.nau.edu.org
(4) Goetzel,RZ, et al. , “What is ROI? A Systematic Review of Return on Investment Studies of Corporate Health and Productivity Management Initiatives.” AWHP’S Worksite Health. Volume 6, 1999.
(5) Glik, Deborah C.;Kronenfeld, Jennie J. & Jackson, Kirby. “Predictors of Wellness: Role Performance Behaviors”, American Journal of Health Behavior, Volume 20, 1996.
(6) “The Ultimate 20th Century Cost Benefit Analysis and Report”, University of Michigan Health Management Research Center, March 2000.
(7) Fielding, J.E., “Getting Smarter and Maybe Wiser”, American Journal of Health Promotion, Volume 11, 1996.
(8) IRSA, Association of Quality Clubs, “The Economic Benefits of Employee Fitness”, 1992,www.fitresource.com
(9) Shephard, R.J., ” A Critical Analysis of Work-site Fitness Programs and their Postulated Economic Effect”, Medicine and Science Sports and Exercise. October 1991.
(10) Heirich, MA, Foote A, Erfurt JC, et al.: Work-site Physical fitness programs: comparing the impact of program designs on cardiovascular risks. Journal of Occupational Medicine, 1993.
(11) Chapman, L., Proof Positive: Analysis of the Cost Effectiveness of Wellness, 3rd Edition. Seattle: Summex Corporation, 1996.
(12) Erfurt, J.C., Foote, A., Heirich, M.A., ” The cost effectiveness of worksite wellness programs for hypertension control, weight loss, smoking cessation and exercise”, Personnel Psychology, Volume 45, 1992.
(13) Erfurt, J.C., Foote, A., Heirich, M.A., ” The cost effectiveness of worksite wellness programs for hypertension control, weight loss, smoking cessation and exercise”, Personnel Psychology, Volume 45, 1992.
(14) Chapman, L., Proof Positive: Analysis of the Cost Effectiveness of Wellness, 3rd Edition. Seattle: Summex Corporation, 1996.
(15) Powell, Don R. “Characteristics of Successful Wellness Programs”. Employee Benefits Journal, (pp 15-21) September, 1999.