Wellness ROI: A Big Business
Wellness ROI: A Big Business
An increasing number of employers understand the advantages of wellness programs (especially the consequences of not having one) and are doing what it takes to implement one 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, fewer workers’ comp claims, fewer disabilities, and, most of all, lower overall dollars spent on healthcare. Not to mention the fact 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. 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 them 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 as1 :
- 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 the policy paper “Workplace Health Promotion”, commissioned by Partnership for Prevention in December 2008, over a three-year period most corporate wellness programs produce an ROI ranging for about $1.40 – $4.70 for every $1 invested. Overall, 83 percent of employers who incorporate wellness programs experience returns on their investment.2
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.
Source: 2004 T.E. Brennan Organization, as published
For nine reputable companies, this chart 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 and 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 them to improve participation and motivate people to make healthy choices because they have skin in the game. The added dimension of incorporating medical and prescription drug claims data and using analytics to make the process more predictive poses an increased savings opportunity. Research shows 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 entirely dependent on establishing and tracking appropriate measurements. To evaluate the effectiveness of the program, you will need to establish measureable baseline factors (biometrics, participation, satisfaction, behavior changes, turnover, morale, absenteeism and productivity, to name a few) with outcomes measured at regularly scheduled intervals. Be sure to standardize your ROI calculation methodology across all wellness components (e.g., you will need to adjust for participation in a fitness program that produces a ROI of 3:1 and participation in an 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 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!
About The Author
Archana Kansagra, Consultant with Spring Consulting Group, LLC, has over ten years experience in health and welfare plan strategy, design, pricing, and program implementation and administration. She is a certified health coach and licensed as a Health, Accident, and Life broker. She is currently working towards AHIP and wellness designations.