What’s the Hard Return on Employee Wellness Programs?

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Since 1995, the percentage of Johnson & Johnson employees who smoke has dropped by more than two-thirds. The number who have high blood pressure or who are physically inactive also has declined—by more than half. That’s great, obviously, but should it matter to managers? Well, it turns out that a comprehensive, strategically designed investment in employees’ social, mental, and physical health pays off. J&J’s leaders estimate that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent.

Wellness programs have often been viewed as a nice extra, not a strategic imperative. Newer evidence tells a different story.

Government incentives or not, healthy employees cost you less. Doctors Richard Milani and Carl Lavie demonstrated that point by studying, at a single employer, a random sample of 185 workers and their spouses. The participants were not heart patients, but they received cardiac rehabilitation and exercise training from an expert team. Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety, and other measures), 57% were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs had 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 health care savings.

57% of people with high health risk reached low-risk status by completing a worksite cardiac rehabilitation and exercise program.

We’ve found similar results in our own experience. In 2001 MD Anderson Cancer Center created a workers’ compensation and injury care unit within its employee health and well-being department, staffed by a physician and a nurse case manager. Within six years, lost work days declined by 80% and modified-duty days by 64%. Cost savings, calculated by multiplying the reduction in lost work days by average pay rates, totaled $1.5 million; workers’ comp insurance premiums declined by 50%.

4% is the voluntary turnover rate at SAS Institute, thanks in part to a highly effective employee wellness program.

What’s more, healthy employees stay with your company. A study by Towers Watson and the National Business Group on Health shows that organizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9% vs. 15%). At the software firm SAS Institute, voluntary turnover is just 4%, thanks in part to such a program; at the Biltmore tourism enterprise, the rate was 9% in 2009, down from 19% in 2005. According to Vicki Banks, Biltmore’s director of benefits and compensation, “Employees who participate in our wellness programs do not leave.” Nelnet, an education finance firm, asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program.

Nelnet asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program.

The Fruits of Workplace Wellness

Although some health risk factors, such as heredity, cannot be modified, focused education and personal discipline can change others such as smoking, physical inactivity, weight gain, and alcohol use—and, by extension, hypertension, high cholesterol, and even depression. The results are worth the effort.

Lower costs.

H-E-B’s internal analyses show that annual health care claims are about $1,500 higher among nonparticipants in its workplace wellness program than among participants with a high-risk health status. The company estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.

H-E-B estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.

For every dollar SAS spent to operate its on-site health care center in 2009, it generated $1.41 in health plan savings, for a total of $6.6 million in 2009 alone. SAS’s team-based delivery of health care is less expensive than external care. Not included in the $6.6 million figure is the benefit of employees missing an estimated average of two fewer hours per visit by receiving on-campus care. As one manager noted, “I used to have to take a half-day leave for an appointment. Now I’m in and out without missing a beat.”

Greater productivity.

Illness-related absenteeism is an obvious factor in productivity. Less obvious but probably more significant is presenteeism—when people come to work but underperform because of illness or stress. Research consistently shows that the costs to employers from health-related lost productivity dwarf those of health insurance.

A 2009 study by Dr. Ronald Loeppke and colleagues of absenteeism and presenteeism among 50,000 workers at 10 employers showed that lost productivity costs are 2.3 times higher than medical and pharmacy costs. In a seminal Dow Chemical study from 2002, of the average annual health costs for a Dow employee an estimated $6,721 were attributable to presenteeism, $2,278 to direct health care, and $661 to absenteeism. A variety of studies confirm the health conditions that contribute most to lost productivity: depression, anxiety, migraines, respiratory illnesses, arthritis, diabetes, and back and neck pain. Employees with multiple chronic health conditions are especially vulnerable to productivity loss.

Higher morale.

Most analyses of workplace wellness programs focus on hard-dollar returns: money invested versus money saved. Often overlooked is the potential to strengthen an organization’s culture and to build employee pride, trust, and commitment. The inherent nature of workplace wellness—a partnership between employee and employer—requires trust. Because personal health is such an intimate issue, investment in wellness can, when executed appropriately, create deep bonds.

Health care is a monumental issue for employers, and too much is at stake to be reactive. It’s time for companies to play offense rather than defense. A verifiable payback isn’t certain, and the journey can be arduous. But what is the alternative?

source - HBR - https://hbr.org/2010/12/whats-the-hard-return-on-employee-wellness-programs