Investing in Employee Wellness - How You Can Achieve a 17:1 ROI
Determining the return on investment (ROI) of a wellness program can be difficult. Looking beyond the immediate healthcare costs and utilization will help any organization understand the broader value of its investment. Although solid projections can be put in place and targeted, ROI for first-year wellness programs figures are estimations, predictive statements and risk-mitigated costs.
Highly impactful wellness efforts will provide positive ROI, sometimes within the first year, but more significantly in years after. So why are employers pressured to not only implement a wellness program, but quantify the investments they make as savings? A large part is simply the word "wellness."
Today, wellness is trendy, somewhat like the green movement of the 1990s. Employers know they need to provide wellness to their populations, but most don't know what that looks like. The days of gym memberships, generic lunch-and-learns and "quick-fix" weight-loss contests are gone.
Gift cards and other incentives, when used the right way, can still motivate employees, but what's really the driver for behavior change? It's not a $25 Amazon gift card or a $15-a-month gym membership. Enter the Patient Protection and Affordable Care Act (ACA). Since 2008, ACA has allowed employers one very special benefit that most don't even know exist, which is not surprising.
If lawmakers are uncertain of these regulations, employers should be confused as well, not to mention worried about compliance and what "full effect" means for them. There are countless statistics showing the pain healthcare today is causing, and unknown increases make sustainability and growth a real problem for Main Street.
The trend doesn't look promising. So rather than emphasizing statistics demonstrating the problem, let's look at a solution. ACA allows employers to screen for five different health markers, attributing points and goals associated with each. This is called a Goal-Based Health Incentive Plan, which puts both employer and employee in an advantageous position to be consumers of their own healthcare. So what are these five risk makers?
- Presence of cotinine (Tobacco/Nicotine)
- Blood pressure
- BMI (Body Mass Index)
- LDL cholesterol (the bad kind)
Metrics are the key; the more assessment and tracking, the better. An innovative wellness program will screen a wide variety of factors, not just those five. This ensures that each employee knows exactly where they stand in relation to their health and wellness so they're able to formulate a plan designed specifically to their needs and goals.
Employers beware, however. Because of HIPAA rules and regulations, an employer cannot institute and manage a Goal-Based Health Incentive Plan; a third party must manage this. Employers who target that small percentage of the population accounting for higher healthcare costs -- through tracking the five main risk markers -- are in violation of HIPAA and subject to fines and criminal penalties.
There's another potential pitfall; prematurely instituting any type of wellness program. Without clear objectives in mind or key fundamentals in place, ensuring successful outcomes are that much more difficult. Not to mention, time, energy, money and other valuable resources that are wasted.
In addition, companies that "false start" often have lackluster program support and engagement. If that's the case, employers will have an exponentially harder time turning things around to ensure successful outcomes.
So, Where to Start?
Conceptualize a program with these four objectives in mind:
- Employee Prosperity. Ensure employee needs, goals and privacy always comes Employees are the driving force behind a successful program; likewise, they also have the ability to kill one.
- Clarification of Healthcare Reform. In this evolving ACA world, employers should know the challenge and turn to those who will keep a program current.
- Decrease Healthcare Premiums and Related Expenditures. Employees underestimate their employers share by more than half. This equates to disconnect and failure to see a need for action. Allowing employees to be consumers in their own healthcare helps employers regain control of unmanageable costs.
- Promoting Sustainability and Growth. Organization not sustainable within a competitive benefits package will lose the ability to attract and retain quality employees. Unsustainability affects salary, bonuses, growth, even jobs.
Once objectives are set, fundamentals must be firmly in place, serving as the building blocks of a wellness program. Like with objectives, if they're not securely in place, successful outcomes will be harder to achieve. Begin a program after these four fundamentals are in place:
- Wellness Ideology and Long-Term Behavior Change. Today's wellness programs are not about a "quick fix," they're a long-term solution. Employees must institute multiple facets of wellness in their individual programs to address all their healthcare needs. This is not just about fitness or nutrition; it's about medical theory, therapy, stress management and personal coaching.
- Examining Benefits Package. There are many options to help employers design a competitive benefits package that also helps track ROI from a wellness program. Make a broker an integral part of the wellness team.
- Investing in the Future. Soft-dollar ROI can be demonstrated within three months, and hard-dollar return in as little as 18 months. A successful program will project and demonstrate long-term positive return through five years and beyond. However, such a reward requires an investment in both the organization's and the employee's future.
- Champion of the Cause. A passionate leader who inspires employee change while impacting the organization's bottom line drives a successful wellness program. Without a champion's full support, a wellness program will not be successful.
Are these eight fundamentals all that's needed for success? The answer is a resounding YES! And here's proof. A respectable, sixth-generation company in Columbus, Ohio, strategized a Goal-Based Health Incentive Program. Although employers have discretion in defining goals under the five risk categories, they chose a set of more lax goals.
This allowed progressive goals to be put in place the subsequent years, lending to the ideology of continual improvement and engagement. After 19 months in the program, the following are some key health risk takeaways:
- 100 percent participation from eligible employees (43 total) during both beginning and end-of-year health screenings
- 76.7 percent of the population underwent wellness coaching and continued to engage to some degree throughout the year
- 55.8 percent decreased in risk categories
- Cotinine (Tobacco/Nicotine usage) reduced by 50 percent
- BMI reduced by 7 percent
- Net loss of 0 pounds and 247.2 inches
- Blood pressure reduced by 90.9 percent
- LDL cholesterol reduced by 66.6 percent
- Glucose reduced by 0 percent
At the start of the program, the 2013 screening produced seven classified diabetics or readings above 125. Although there was no reduction in glucose risk, the program mitigated six of those diabetic risks, leaving only one participant classified as diabetic. "Urgent" and "threatened" situations are factors defined, managed and tracked for multiple reasons.
Participants that fall under one of these categories are top priority in making sure they receive the proper type of medical and supplemental care. These types of situations are also some of the most important measurements when forecasting premium rate change and soft-to-hard dollar ROI. They're defined as an individual with excessively or unusually high numbers in blood pressure, LDL (and total) cholesterol and glucose.
- 75 percent of "urgent situations" were mitigated
- 100 percent of "threatened situations" were mitigated
Note that the one remaining participant under the "urgent situation" was under "threatened" at the start of the program. The participant is now under continual medical care by a team of physicians and professionals to manage a disease that was diagnosed as part of this program; a disease that previously went unnoticed by the PCP for nearly 12 years.
What Would this Cost? What About that Return?
The company in question incorporated a self-funded healthcare benefit plan. Although goal-based wellness programs make the most sense with a self-insured model (or hybrid), they can also be implemented on fully insured plans, particularly with the intention of maximizing the health of the population to maintain a competitive benefits package.
Regardless of the benefit plan, current trends demonstrate that employers should be spending at least 10 percent of their total healthcare costs on preventative measures, such as a successfully managed program evidenced here. This organization was approached with this statistic in mind. After 19 months on the program, the following are some key financial takeaways:
- 2-Year Total Goal-Based Health Incentive Wellness Program Investment: $77,110 -- 5.5 percent of healthcare costs, coming in at 4.5 percent under budget
- 2-Year Estimated Hard-Dollar Savings and Claims Renewal Savings (19 months on program) -- $372,093 -- ROI: 4.8:1
- Combined 2-Year Estimated Return (after 19 months) -- $1,314,089 -- ROI: 17:1
Wellness is something an organization needs to have in place, but then again, that was already known. Companies that already have a wellness program in place must wonder if it is working. How do they know? Employees are an organization's most important asset, so invest in them and not just a program.
Smart employers have always done everything they can to manage risk, the only thing left is to manage behavior. According to the 2013 "State of the American Workplace" report from Gallup, 20 percent of employees are actively disengaged, while another 50 percent are not engaged. Why not do something radical inspire employees and start saving lives!
About the Author
Erin Morrow is president of Wellness Innovations, a risk management solutions firm, tying health incentive wellness to benefit packages.