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Do Workplace Wellness Programs Save Money? We Find Out.

Healthcare costs are a major expenditure for most business owners. Healthcare is an essential and a necessary investment for both employers and employees.

A lackadaisical workforce can be detrimental to productivity. So, are wellness programs a sound investment? Do they drive down a company’s health investment costs or not?

 Let us find out.

A study conducted by Harvard in 2015 found for every dollar spent on wellness programs, the employer saves $3 in healthcare costs and another $3 in absenteeism. This is a 6-to-1 return on investment. 

The return on investment from the wellness programs saw Medical claim costs decline by $1,421 per participant, compared to the previous year. 

But what the study did not differentiate was what worked better – lifestyle changes wellness programs, or the money spent on chronically ill employees.

Another study conducted by Rand for Pepsi with more than 67,000 employees as subjects looked into what was more effective: a wellness program based on lifestyle management, including fitness and diet, or one that concentrated on disease management.

The Rand study found that chronic illness management saved $3.78 for every dollar spent (primarily through a decrease in hospital admissions); those spent on lifestyle management resulted in savings equal to the amount invested. The wellness program generated $136 in savings per member, per month, and a 30 percent reduction in hospital admissions. Another interesting finding was that only 13 percent of Pepsi employees participated in disease management programs, but they helped save the company 87 percent of the healthcare costs.

An International Foundation of Employee Benefit Plans report showed that most North American employers saved $1 to $3 in their overall health care costs for every dollar spent on an employee wellness program. The savings were made from reduced compensation claims and improved retention, less attrition and increased productivity.

workplace wellness programs

Before moving further, let us take a peep into what constitutes wellness programs in companies and corporates.

Organizations offer wellness programs to improve health and fitness and control chronic diseases among employees. They provide financial incentives or other resources to stay healthy. This is above the resources offered by insurance companies. Some of the main offerings of wellness programs include company-sponsored exercise and gym memberships, substance abuse counseling and cessation programs, CPR/First Aid training, stress and meditation sessions, message therapies, reimbursement programs, and more.

Companies can additionally offer in-house workout spaces, walking paths on the campus, or something similar to encourage physical activity. Some corporations may even offer financial incentives, such as lower health insurance premiums or gift cards for meeting fitness goals. 

Google provides employees massage therapy and a massage program with more than 30 therapists throughout the United States. This is, of course, in addition to on-site gyms and free workout classes.

The state of Wisconsin has something called Well Wisconsin initiative, which started in 2018. State employees, including employees of the University of Wisconsin System, the UW Healthcare, and their families, can earn $150 per adult for fulfilling three wellness activities: a health assessment survey, a physical check-up or health screening, and participation in one or more wellness activities.

Cost of Corporate wellness programs

Companies spend anywhere from $150 to $1,200 per employee on wellness programs, depending on the size of the company and the number of individuals employed. But companies need to remember that the Internal Revenue Service counts any employer-provided cash rewards for gym membership or well-being therapies as taxable income since they are not considered medical care.

Wellness programs aim to improve productivity, decrease sick days, lower insurance expenses, reduce turnover, and lower workers’ compensation claims. 

The improved sense of well-being helps individuals and the company benefit financially with increased engagement, lesser days off, and improved productivity.

Employees also benefit through lower health insurance premiums and decreased out-of-pocket medical expenditures. 

A more comprehensive look at the ROI for employee wellness programs shows that there is an impact on culture, engagement and productivity.

Engagement

The benefits include savings from decreases in health care costs and employee sick leave. But the more indirect benefits are that an improved lifestyle leads to a generally healthier relationship with both work and after office hours. There is more overall engagement with life, and there is general well-being.

These factors are largely thought to be indirect ROI components and often harder to calculate/crunch numbers for. The long-term ROI in an employee wellness program is tenfold. 

Productivity

Success does not come overnight. But if companies invest in configurable, results-driven employee wellness programs that match a company’s culture, goals and needs, and devote time to communicating clearly and regularly about the program, companies will see tangible results. Less absenteeism, a healthier workforce and lesser time away from tasks mean more work getting done. 

Another tangible benefit of increased engagement and productivity is that employees see immediate results and are more invested in the company. That means they will not be looking out for work and the attrition levels will be naturally low. 

A Towers Watson and the National Business Group on Health study found that companies with highly effective wellness programs had a significantly lower turnover rate (9%)than companies without (15%). 

The workforce remains motivated, the company culture also sees improvement, which is reflected in employee and customer satisfaction and an improved brand image.

How effective are wellness programs?

The number of research and studies undertaken to prove the effectiveness of wellness programs stand testament to their benefits. But companies need to work out what gives the maximum benefits. The Rand and the Harvard studies that have gained much traction among the corporates have shown that disease management is more effective than lifestyle management in driving down healthcare costs. “A program that preempts 25 unnecessary emergency department visits can easily save $50,000, while preventing four inpatient stays can save at least $100,000, “ points out the Harvard study.

Employers investing heavily in lifestyle management programs should consider transferring some of their resources to disease management programs that the studies have demonstrated save more money.

The studies are a good incentive for companies to turn in this direction. Corporates generally take the easier route of lifestyle management rather than working towards disease management, which requires more care and human investment in man hours.

“The lifestyle-management component of the program —while delivering benefits —did not provide more savings than it cost to offer,” said Soeren Mattke, the Rand senior scientist who led the study. “While workplace wellness programs have the potential to reduce health risks and cut health care spending in the long run, employers and policymakers shouldn’t take for granted that the lifestyle-management components of the programs can reduce costs or lead to savings overall,” Mattke added.

Companies “need to be clear about their goals for the wellness program,” the study concludes. “… [I]f an employer wants to improve employee health or productivity, an evidence-based lifestyle management program can achieve this goal,” while also boosting workplace morale, other studies have shown. “But employers who are seeking a healthy ROI on their programs should target employees who already have chronic diseases,” the study leader said.

How to initiate a wellness program?

Companies looking to start a wellness program can take inputs from their employees on the perks they find most beneficial. 

A startup and a younger company might prefer wellness programs geared towards lifestyle management such as subsidized gym memberships, etc, the more established corporations may prefer health screenings, regular checkups or mental health benefits.

Corporate wellness programs can offer their employees huge benefits in finding a work-life balance. Ultimately, serious investment in such programs is about understanding the employees’ expectations and aligning them with company goals and bottom-line improvement. The return on investment in health care savings and lower attrition can be remarkable if this is done right.

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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