MEASURING THE ROI OF WORKSITE WELLNESS
Nov 9, 2010
Employers today are demanding a cost-containment solution to health care. Since 1999, increases in employer-sponsored health care costs have far exceeded the rate of overall inflation – up to as much as four times in some years.
In response, many U.S. employers have instituted worksite health management programs designed to encourage employees to live healthier. The end result is reduced health risk factors for employees and a reduction in year-over-year health care spend trending for both employees and their employers.
In a health management study conducted in 2009 with managers of small to medium-sized businesses across the country, the majority of respondents stated their worksite wellness programs had been in place for more than two years – long enough to see return on investment (ROI). However, only 64 percent said they are satisfied with their programs. The survey found that although most respondents understand that the impact of a wellness program should be measured, many key metrics to achieving a good assessment remain unmeasured.
To calculate the ROI of corporate wellness, one must first understand the relationship between health risk factors and health care costs. Risk factors increase the unnecessary and avoidable utilization of medical services that will drive up cost. When organizations understand the correlation between health risk and cost, they can begin to understand how to measure the cost savings from reducing those risks.
Specific Survey Findings
- Sixty-two percent of respondents state their organizations analyze the cost effectiveness, cost savings and return on investment of their corporate wellness programs.
- Employee participation is the most tracked metric, with 89 percent stating it is a very important measure. Respondents also list behavioral changes (84 percent) and employee satisfaction (74 percent) as important measures.
- Although, 87 percent of respondents state their program tracks participation, only 63 percent say their organization regularly monitors employee satisfaction, only 61 percent say organizations assess changes in biometric measures, and 55 percent say their organization assesses and monitors the health status of at-risk employees.
- Few respondents state they are tracking productivity metrics – 34 percent do not measure absenteeism, turnover, morale or productivity at all. Only 29 percent monitor the impact on absenteeism, and a mere 18 percent monitor the impact on employee turnover, morale or productivity.
- Only 55 percent state their current wellness provider has the capability to analyze medical and pharmaceutical claims data; most use this data for cost analysis (95 percent).
Defining Return on Investment
There are two ways to define ROI – reduce the rate of increase in health plan costs and reduce costs in absolute terms.
First, measure monetary savings of medical costs in absolute terms (for instance, a savings of $100 per participant from 2008 to 2009). Companies can calculate ROI if it offsets the rate of increase in health plan costs. If the trend was 10 percent per year, for four years and becomes 5 percent per year after the implementation of a wellness program, the cost savings is generated by slowing the progression of health-related risk.
One problem of traditional approaches for cost containment has been a focus on the cost of services rather than utilization. Companies must try to impact utilization by increasing employees’ awareness of risks and having them take steps to improve their health.
Claims analytics adds an extra dimension to a wellness program and makes it a more predictive process. It shows not only what an individual has spent, but also anticipates an individual’s future spending so appropriate measures can be taken. Preventive care is always less expensive than rehabilitation or a major medical procedure.
Claims analytics is important in evaluating a health management program’s impact. The capability to apply business intelligence to sophisticated financial and clinical metrics help expand the membership base targeted for outreach, thus supporting more in-depth discussions with members about personal health issues.
Even though companies are trying to reduce health care costs, only a slight majority (55 percent) of respondents in the survey said their current wellness provider can analyze medical and pharmaceutical claims data. Most of them indicated they use that data for cost analysis (95 percent), trend analysis (76 percent), utilization analysis (67 percent) and clinical compliance analysis (33 percent).
If an organization is successful in reducing health risk factors, it is best to revisit the claims data to analyze the impact of utilization and monetary savings. Each is a way to measure ROI in a broader sense. However, causality is difficult to measure. The larger the data sample, the stronger the correlation can become.
Behind the Financials
On-the-job performance often takes a back seat when it comes to measuring the ROI of health management since health care cost reduction is the driving force for most corporate wellness programs.
While absenteeism is relatively easy to track, many employers do not measure it because it is difficult to determine the cause and reason. Employee morale, productivity and presenteeism are more challenging to measure. Presenteeism reflects an employee’s productivity when well, compared to when they are in pain, sick or stressed.
Program Participation & ROI
How do most employers measure ROI? The answer is simple: by measuring participation. According to 89 percent of survey respondents, participation tracking is very important. The survey showed measurement is used by 87 percent.
However, only 62 percent of respondents said their organizations analyze the cost effectiveness, cost-savings and return on investment of wellness program initiatives. More specifically, 74 percent said it is important to track employee satisfaction, yet only 63 percent monitor it. The same is true in other areas relative to ROI, including behavioral change and biometrics tracking.
Much like any part of business, result measurements hinge on meaningful data. Consider the following elements to track throughout a health management program to determine year-over-year ROI:
- Participation: The easiest to measure. If employees do not like the offered programs, they will stop participating. Winning them back can be difficult.
- Satisfaction: Another easily measured variable. Take criticism seriously, but not personally. People love to complain. If a company listens carefully, employees will give feedback on program design successes and failures.
- Behavior changes: The Centers for Disease Control determined approximately 75 percent of health care costs and productivity losses are related to lifestyle choices. Changing behavior is critical to reducing health care costs.
- Biometrics: Blood pressure, body weight and cholesterol are great evaluation targets and easy to track over time if employees remain engaged and data is collected annually.
- Productivity: Employee lifestyles affect how productive they are. Lifestyle also impacts the level of service a company provides to its customers. Absenteeism measures can be valuable factors for determining the impact and ROI of a wellness program, in addition to measuring health care expenditures.
- Medical claims: At least 25 to 40 percent of all health plan claims are avoidable through prevention, early detection and the reduction of modifiable health risk factors. Some studies indicate this number can be as high as 50 to 70 percent. By analyzing an organization’s potentially modifiable health care costs, a wellness provider can significantly advance organizational goals.
Best Practices to Achieve ROI
Companies that are able to demonstrate ROI for corporate wellness initiatives typically share five common elements: a comprehensive program, effective incentives, biometrics, multiple program modalities and communication programs. The following are best practices to strengthen wellness program performance and ultimately strengthen ROI:
1. Design a comprehensive program to apply to all employees. Include both healthy and at-risk employees for program initiatives, as well as health assessments and screenings. All individuals should feel included and need opportunities to participate even if the focus is mainly on high-risk employees.
2. Integrate incentives into plan design. The best programs have engaged and supportive management who tailor incentives to their unique employee population.
Most often, the biggest flaw in a corporate wellness program revolves around its incentive design. Companies must decide to support initiatives like premium discounts, cash, prizes, and/or paid time off. Premium credits tend to drive the highest levels of participation because employees tend to be more motivated and accountable for their personal “self care.”
3. Validate efforts with biometric screenings. Health risk assessments, which are usually self reported and cannot be validated, are only one part of the process for tracking employee health. It is imperative to conduct biometric screenings to reveal current, validated health information. A biometric screening includes three components: blood work, blood pressure and body mass index.
4. Offer multiple program modalities. Some corporate wellness programs are only online and completely self directed. The best programs offer several options since one method will not work for the employee population.
Employees need the option to communicate by phone, via secure message or at on-site events. A targeted personal outreach program allows high-risk individuals to be engaged more often. Frequent, engaging and knowledgeable communication with employees is essential to a successful program.
5. Engage employees with effective health awareness programs. The best wellness communications strategy is engaging but not threatening. Efforts should be ongoing throughout the year and branded as well as customized to the company and its activities.
While it is relatively easy to have high participation in the beginning, companies should be creative with communication, marketing and incentives to keep employees active as the program continues. A program that is branded to its company creates a ‘cultural health identity.’ The most successful worksite wellness programs are fun and interesting, and keep employees involved for the long term, while lowering health risks.
Additional Tips for Worksite Wellness
Data for Effectively Measuring Wellness Program ROI
To accurately determine ROI, a wellness program must track lifestyle and biometric factors, including:
Worksite Wellness Incentives
Properly aligned incentives will increase participation in a compelling health management program and impact ROI. Approximately 89 percent of corporate wellness programs offer incentives, including:
- Merchandise and gift cards (53 percent)
- Promotional items, for example t-shirts, stress balls, water bottles (44 percent)
- Pre-tax cash in HSA or FSA account (32 percent)
- Health plan premium discount or credit (32 percent)
- Mandatory HRA to participate in benefit plan (15 percent)
Additional Background Information\
The survey, “Trends in Measuring the ROI of Corporate Wellness,” was conducted by Viverae in 2009 and sent via email to nearly 21,000 professionals. Due to the large number of respondents who participated in this survey, Viverae is 95 percent confident that the responses of the population to the survey questions would be +/- 5 percent from the figures stated herein. All respondents answered the questionnaire via an online survey tool and were assured of their confidentiality. Responses will be used only in this aggregate analysis.
Nearly one-third of respondents (32 percent) were senior management – C-level, vice president or director. Another 40 percent were manager level. Most represented small to medium-size businesses, with 43 percent from organizations with 501 to 5,000 employees; 31 percent from companies with 51 to 500 employees; 21 percent from organizations with more than 5,000 employees; and 5 percent from organizations with 50 or fewer employees. All (100 percent) said their companies had a current wellness program in place.
About of Author:
President and Chief Executive Officer
Health care advocate Michael Nadeau founded Viverae (viv-AIR-ā) in 2003, in response to excessive utilization of health care plans and a generally unhealthy U.S. workforce. Today, Viverae is a national provider of comprehensive health management solutions that help corporations reduce health care costs through improved employee health.
Leveraging the workplace environment, Viverae helps employers and their employees control health care costs by identifying, addressing and reducing health risks before they turn into significant medical expenses. Headquartered in Dallas, Viverae serves companies nationwide of all sizes and across all industries, including manufacturing, professional services and transportation.
Nadeau has more than 15 years of outsourcing and human resources experience. Prior to Viverae, Nadeau worked in the software development, IT consulting and health care industries. There, he recognized the need for accountability in the workplace to keep employees healthier and reduce corporate spending on health care.
Nadeau has been recognized for his entrepreneurial spirit as a winner of the Ernst & Young Entrepreneur Of The Year® 2009 award in the “emerging sector” category for Southwest Area North region. Under his leadership, Viverae has been named one of the “Best Places to Work” by the Dallas Business Journal and as one of the fastest growing companies in 2009 as part of the Inc. 5000.