The Real ROI for Employee Wellness Programs
An upbeat, healthy, happy, productive and revenue-generating workforce -- Isn't that what every employer wants? You can't connect smiles on faces to sales, or inches lost to revenue gained, but employers can measure the effectiveness of their employee wellness programs in ROI (return on investment). Most employers recognize that the benefits of employee wellness programs are often intangible.
Still, they need to understand the real ROI before investing in one to justify the expense. Despite strong data supporting the effectiveness of wellness initiatives, a recent survey by Employee Benefits News (EBN) of 245 benefits managers, administrators and human resources professionals, reported that only 44% of respondents are currently running one.
However, more than a third are either considering one or about to ready to launch a program of their own. The investment of time and money necessary to run an effective program is often cited as a factor employers consider before implementing a new initiative. It is therefore important to be able to calculate the total expected ROI.
The ROI related to wellness programs typically includes the overall healthcare cost savings achieved, as well as productivity increases due to a reduction in sick days taken by employees. Calculating the ROI based on the hard savings numbers related to Employee Wellness programs provide most companies with the justification for implementing such programs.
An article published by The Harvard Business Review provided an example of how significant ROI can be attained through employee wellness programs. Doctors Richard Milani and Carl Lavie studied a random sample of 185 workers and their spouses at one employer.
The participants were not heart patients, but they received cardiac rehabilitation and exercise training from a team of experts. Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety and other measures), 57 percent were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs declined by $1,421 per participant, compared with those from the previous year. A control group showed no such improvements.
The bottom line: Every dollar invested in the intervention yielded $6 in healthcare savings.
The RAND Corporation, a nonprofit institution that helps improve policy and decision making through research and analysis, examined 10-year data from a Fortune 100 employer. More specifically, RAND examined two aspects of the employer's wellness program: The lifestyle management component and the disease management component. Interestingly, disease management was responsible for 86 percent of the hard healthcare cost savings, generating $136 in savings per member, per month and a 30 percent reduction in hospital admissions.
The Employee Positivity Factor
The RAND Corporation's analysis estimated an overall ROI of $1.50, or a return of $1.50 for every dollar that the employer invested in the entire wellness program. The return for disease management was $3.80, while the return for the lifestyle management component was just $0.50 for every dollar invested. However, the researchers did not take into account an additional productivity benefit from the lifestyle management component, which is commonly excluded from ROI analyses of wellness programs -- I like to call it, "The Employee Positivity Factor."
When employees aren't feeling well, either physically or emotionally, their productivity declines. Consider the difference between an employee who rolls out of bed and comes to work versus an employee who exercises before coming to work. Exercise produces natural opiates or endorphins, which increase energy, enhance mood and promote over wellness. The result?
The employee who is exercising, and typically healthier as a result, will likely show up to work with more energy and enhanced positivity - The Employee Positivity Factor.
What does The Employee Positivity Factor mean for you as an employer?
It could mean a host of benefits. If the employee interacts with customers, it could translate into a significantly higher customer experience and an increase in sales for your business. When the employee interacts with co-workers, it could mean the generation of new ideas or solutions to business challenges, a more positive working environment, and more value produced by each employee - all of which positively impact to the company's bottom line.
While the concrete savings from reductions in healthcare costs and employee sick leave is a good method for calculating ROI, the additional benefits achieved by improving your employees' health and well-being should not be ignored. The additional contributions made by employees who are "well" and their impact to the company's bottom line could potentially bury the ROI estimated by the hard cost savings.
About Jennifer Schaefer
Jennifer Schaefer is a leading Group Health Insurance and Employee Benefits Specialist with more than 20 years of experience managing client benefit programs. Her clientele consist of businesses that range from 30 to 30,000 employees. With her extensive knowledge of insurance options, Jennifer works diligently to provide her clients cost-effective, customized programs that follow healthcare legislation, state and federal guidelines. Contact Jennifer Schaefer at jschaefer@1847Financial.com or (877) 355-6070.