Do Workplace Wellness Programs Really Save Money?

In 2016, employee absenteeism – health-related absences in the workplace – drained the U.S. economy of $2 billion, according to the Centers for Disease Control and Prevention (CDC). This was due to five major health conditions – diabetes, high blood pressure, obesity, physical inactivity, and smoking.

Yearly increase in employee wellness programs is one of the top priorities of every successful workplace. Workplace Wellness is a $6 billion dollar industry in the United States, with an estimated 600 vendors now selling the programs. It is strongly endorsed as a good investment for employers so much so that even the normally skeptical academic world has jumped the bandwagon singing its benefits. For instance, a 2010 report by a Harvard economist stated that employee wellness programs returned three dollars in health care savings and three dollars in reduced absenteeism for every dollar invested.

Most analyses of workplace wellness programs yield the same results: money invested < money saves. But a RAND Wellness Programs Study, which included 600,000 workers at seven employers, tells a different story. This has been further confirmed by a new analysis of 10 years of data on the unsung benefits from a Fortune 100 employer.

Fifty-one percent of employers with 50 with more employees offer one, according to a report by researchers at RAND Corp. While these programs are offered in the workplace to improve the overall health and mental well-being of their workers, it was found that they only have a modest effect.

This employer’s employee wellness program has two major components: a disease management program and a lifestyle management program. The former is designed to help employees who have a chronic health condition such as heart disease, cancer, and stroke. In contrast, lifestyle management focuses on employees with health risks, such as high blood pressure and obesity, and support them in containing those risks and prevent the development of related-chronic conditions. The bottom line is to help employees take better care of their health and happiness – for example, by reminding them to take their medications or bridging the communications gaps in health care, such as missed lab tests, to their GP. (Figure 1)

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Workplace Wellness Programs Study: RAND Corporation

Disease Management Drive ROI from Workplace Wellness Programs

For the most part, the two component programs reduced the employer’s average health care costs by about $30 per member per month (PMPM). At the same time, it was found that disease management was responsible for 87% of those savings. Employees participating in the disease management program generated savings of $136 PMPM, driven largely by a 40% reduction in hospital admissions. Moreover, only 13% of employees participated in the disease management program, compared with 87% for the lifestyle management component. A higher participation in the lifestyle management component contributed slightly to the overall savings. (Figure 2).

workplace wellness program 2

Workplace Wellness Programs Study: RAND Corporation

The Fortune 500 employer’s return-on-investment (ROI) calculations, considering the reductions in health care costs to program costs, including the fees of vendors and the cost of screening employees for health risks, was $1.50 – that is, an ROI of $1.50 for every dollar spent in the program. The returns for individual components, however, differ by and large: $3.80 for disease management but only $0.50 for lifestyle management for every dollar that the employer invested in the program. The only noticeable difference the lifestyle management program brought was significantly reduced absenteeism by more than an hour per employee-year. The savings generated by this benefit aren’t enough to make the program pay off financially. (Figure 3)

workplace wellness program 3

Workplace Wellness Programs Study: RAND Corporation

The report’s conclusions about the fiscal benefits of workplace wellness programs are bleak. In theory, workplace wellness programs should reduce an employer’s medical expenditure as employees become healthier and thereby avoid chronic conditions such as stroke and a heart disease. But the modest savings are not statistically significant.

Even more surprisingly, workplace wellness programs did not catch early warning signs of disease or improve health enough to prevent emergencies.

Are these findings imitable?

There are three takeaways for employers from these findings. One, employers must remain clear about their goals for the workplace wellness programs. The RAND report has only highlighted that lifestyle management can reduce health risks such as obesity, and lack of physical inactivity. It also shows that lifestyle management can reduce absenteeism. If you want to improve employee health or productivity, a lifestyle management program would be more suitable for your needs. For those seeking a healthy ROI on their wellness programs should specifically target workers who have existing chronic diseases.

Two, given the lack of ROI from lifestyle management, employers must strive to reduce cost. Screening employers for health risks and offering health coaching to those with such risks is expensive, however, interventions such as offering healthy food choices and educational campaigns to be fit and physically active, are not. Third, employers must learn how to engage workers and achieve behavior change from the Fortune 500 employer to yield comparable results.

Priyansha Mistry
Currently editor at The HR Digest Magazine. She helps HR professionals identify issues with their talent management and employment law. | Priyansha tweets at @PriyanshaMistry

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