Although wellness programs have the potential to bring down healthcare costs, determining whether they actually can do that can be tricky.
Worksite wellness programs were created to keep employees healthy. But how healthy is your company's wellness program?
Sure, participation may be high. Employees may be signing up in droves for aerobics classes and doctor checkups. But as far as your CEO is concerned, the one statistic that means success is the return-on-investment.
As wellness programs have become increasingly popular -- approximately 77 percent of North American companies currently have one in place, according to New York-based Buck Consultants -- one question still looms: Are they paying their way?
More and more companies today are trying to find the answer. In fact, a small industry has developed around wellness measurement. Wellness providers and esteemed university research centers are offering evaluation systems that include sophisticated analyses of claims data.
"[Wellness providers] are finding they have to evaluate to stay in business," says Adam Long, vice president of research and informatics at Onlife Health Inc., a wellness provider in Nashville, Tenn.
Yet progress has been slow. It's costly enough to build and promote a wellness program; hiring a company or university to evaluate its effectiveness can be prohibitively expensive. So perhaps it's not surprising that, as of last year, most companies still did not evaluate their wellness programs, according to a survey from Buck Consultants entitled Working Well: A Global Survey of Health Promotion and Workplace Wellness Strategies.
Although the survey found that 64 percent of 1,103 organizations in more than 45 countries used wellness programs, only 22 percent worldwide used metrics to measure their effectiveness. The number was higher in the United States, where 42 percent measured the effect on their healthcare cost-trend-rate. Of these employers, 43 percent reported a reduction in costs -- typically 2 to 5 percentage points per year.
HR leaders have a wide choice of evaluation systems. Larger companies can usually afford a six-figure review of medical claims and even a sophisticated statistical comparison of savings for participants versus nonparticipants.
But smaller companies (500 employees or less) may not have easy access to employee medical claims. They often go with a wellness program with a built-in measurement tool, or hire a vendor. The more modest evaluations often rely on participation levels, benchmarks of savings and yearly comparisons of assessment surveys.
"Most of what we do are six-figure studies. Most companies can't afford them," says Ron Goetzel, director of the Institute for Health and Productivity Studies at Emory University in Atlanta.
"With large companies, you want to do more rigorous evaluations. With small to medium [companies], the type of studies vendors offer are good enough. I know a lot of companies are measuring their company outcomes," he adds. "Certainly the leading companies, with most success, have measurements built in."
How does a company know it needs an evaluation? Even before the CEO asks about the bottom line, there can be warning signs a program isn't working. The first and most obvious is lack of participation. If employees aren't signing up, the program isn't paying for itself.
"If you're driving participation at the 50- or 60-percent mark, things are working," says Brian Day, director of advanced analytics at Highmark Inc., an insurance provider based in Camp Hill, Pa., which has 67-percent participation in its wellness program. "If participation is around 40 percent, the participants are probably people already interested in their health and you're not reaching [employees at] greater risk."
"The first people who get involved with any wellness program are the 'worried well,' " says Scott Foster, president of Wellco Corp., a Royal Oak, Mich., wellness provider. "It's easy to attract them to a good wellness program. But the ones you want to reach are the 'walking time bombs.' They think they're healthier than they are."
Establishing a Baseline
How do you convince your employees that they need to take care of their health?
As multiple studies have demonstrated, the first and most important step is the voluntary health-risk appraisal. An effective HRA will lure employees into the wellness system by exposing them to their personal health needs.
The HRA creates an individual health-risk profile, so the employee can be guided to the right intervention programs. But it's also a vital evaluation tool: It records the number of participants. It creates a baseline of the employee's health risks. And, when it's given annually or after a set period of time, the comparison can show how effective the intervention was.
Most HRAs include "biometrics," or data such as weight, waist circumference, body mass index, blood pressure and cholesterol levels. Biometrics can be self-reported or come from company-sponsored physicals.
"It's the window into employee health. If you're not offering the HRA, you have no idea how you're doing," says Catherine Fillmore, team leader of the client systems group at the University of Michigan's Health Management Research Center.
The HRA is so crucial to wellness success that most companies offer incentives -- usually cash -- to employees to take the questionnaire and participate in programs.
According to the 2009 Buck Consultants survey, U.S. companies spent an average of $163 on HRA incentives per employee. Some companies (12 percent) even penalized employees by increasing their healthcare premiums for failure to participate.
Reduced insurance premiums are the most popular wellness incentive among employees of Medical Mutual of Ohio, which insures 94 percent of its own employees and has a wellness program that includes on-site fitness centers and online educational tools. MMO executives credit the incentives, as well as the active engagement of executive management, with the spurt in participation from 43 percent in 2003, the year the program was launched, to 87 percent in 2008.
At Highmark, employees get an annual $350 cash bonus in their paycheck if they complete a five-step commitment to wellness: They sign a pledge to participate, complete the Wellness Profile, schedule preventive exams, participate in health and wellness programs, and utilize the health information tools and resources.
Low Cost = Low Validity?
The gold standard of wellness evaluation is the ROI -- the ratio of dollars saved to dollars spent on wellness. The ROI is calculated by comparing medical and pharmaceutical claims before and after the employee has gone through intervention for his or her risks.
But that's not always possible. Mining medical claims is expensive, and many smaller companies don't have ready access to this data. Instead, they may resort to benchmarking: An organization might evaluate its wellness program by comparing participant data against the best-practice standards in the published literature on corporate wellness programs.
"You might find, in the literature, estimates on claims savings and just apply it, on a per-person basis, to your own population," says Onlife Health's Long. But benchmark studies are far from ideal, he adds. "You're assuming that everything is exactly the same. [Benchmarking studies] are always going to be erroneous. . . . They're low cost, but there's low validity to them."
Even when a company has access to medical-claims data, the evaluation process is complicated, says Steven Aldana, CEO of WellSteps in Mapleton, Utah. WellSteps offers a "turnkey" work-site wellness solution -- the evaluation process is built into the wellness program and uses a combination of HRA and medical-claims data.
Hypothetically, if a company has 1,000 employees, they could easily generate 10,000 claims over the course of a year, Aldana says. However, lots of factors can complicate an evaluation of claims: Every company has "outliers," or individuals who have exceptionally high claims.
The company may have changed insurance carriers during the period evaluated, or it changed benefit plans or deductibles. Even an aging workforce, a large number of young workers or a large proportion of women can skew health claims.
"[Evaluating claims is] not very easy. It's a very sophisticated thing to do," Aldana says.
"We do a high-level analysis ... to show that [cost savings] are not due to a change in benefits, that the only possible reasons could be a change in employee behavior and risk," he says, adding that if company data includes "outliers," the data would be analyzed two ways -- with and without the outlier claim data. "If there is no difference, it doesn't matter... . You do an analysis with and without the outlier [data], and it gives you a picture of the ROI."
Wellco Corp.'s HealthHammer evaluation system also analyzes medical claims -- when the client can make them available, that is. When claims aren't available, HealthHammer will calculate the ROI based on benchmarking, using HRA data and biometric measures.
"If you don't [have access to claims data], you're still on track," with the HRA and biometrics, says Wellco President Scott Foster. HealthHammer was developed, he says, to "fix" other wellness programs that are having trouble boosting participation and proving they save costs.
"HealthHammer measures the top 15 predictors -- such as depression, anxiety, high blood pressure, and abnormal cholesterol and diabetes -- of a company's future health costs," Foster says. It also focuses on eight avoidable health conditions that are targeted by interventions and tracked to document health-cost savings.
Meanwhile, large corporations such as New York-based Pfizer not only have the in-house staff and access to medical claims, but also are able to conduct sophisticated evaluations of those claims thanks to tools such as the Ingenix data warehouse, developed by Eden Prairie, Minn.-based Ingenix.
"We have a data feed of medical claims, pharmaceutical [claims], short- and long-term disability and workers' compensation," says Howard Chester, Pfizer's vice president of occupational health and wellness.
Even analyzing medical claims may not give employers the most accurate picture of cost savings, say experts.
The most valid evaluation is the most scientific: comparing medical claims filed by wellness participants to claims of matched nonparticipants.
It's a top-of-the line, six-figure analysis that's usually done by the largest companies with extensive access to medical data. For example, Highmark Inc. conducted a highly successful four-year study of its employee wellness programs from 2001 to 2005.
The study involved matching the medical claims of 1,900 participants to those of nonparticipating employees. Matches were as close as feasible: For example, a 50-year-old woman would be matched with another woman the same age with the same degree of cardiovascular or other health risk.
Partway through the study, researchers hit a snag. Highmark's wellness programs had grown so popular that they couldn't find enough nonparticipants. So they went outside the company and matched claims filed by Highmark insurance clients who worked in similar industries.
The results, published in 2008 in the Journal of Occupational Environmental Medicine, were savings of $1,335,524 over four years against expenses of $808,403, for an ROI of $1.65 for every dollar spent. Annual health costs were $176 lower per year for wellness participants than for non-participants; inpatient expenses were $182 less per person, per year.
"The best way to evaluate any program is if you can use matched cohorts over time," says Day, Highmark's analytics director, adding that the study was conducted without the help of an outside vendor because "we have the expertise -- our intervention evaluation is almost on an academic scale."
"We felt we had made a very substantial investment [in wellness programs], and it was warranted," he adds.
The "Dirty Word"
The rule of thumb when it comes to wellness ROI is 3-to-1, or a savings of $3 for every $1 spent.
That's the average in the wellness literature as cited by experts. For example, in an article published last February in the journal Health Affairs, researchers at Harvard University found that the average ROI in over 15 studies of employee wellness programs was $3.37 saved for every dollar spent.
However, experts agree that figure is highly questionable. Some vendors and companies guarantee far higher results, while some analysts prefer to lowball the ROI.
"People ask me what to expect. I'm more conservative: 1.5- to 2-to-1 over three years," says Goetzel. "ROI is a dirty word. ... it's very tricky. People are used to seeing it in the financial world, and it migrated over into healthcare. Financial executives always want the bottom line, the dollars and cents of what they're doing."
There is another, less-subjective way to measure the effectiveness of wellness programs, says the University of Michigan's Fillmore. That is the "bend in the trend" or "zero trend." Zero trend is a methodology that aims to decrease the angle of rising health costs each year until, ideally, it is flat.
"People want the ROI. The difficulty with the ROI is you have to pick and choose the right [expenses]," says Fillmore. "For example, do you put in administrative costs? ROI is subjective because companies prefer to choose the costs [analyzed]. Our methodology [at the university's HMRC] is to look at the trend [in health costs]."
"[We start] prior to doing any intervention, even the HRA, because the HRA modifies behavior -- you already see a hit to trend," she says. "We take the cost trend [a company] had prior to doing anything and look at the trend afterwards, based on claims. Imagine a line trend at a 45-degree slope, [which is] the cost increase over the last three years. If you do nothing, the trend will continue at a 45-degree angle, year after year."
An absolute flat zero trend is not feasible, simply because of cost-of-living increases, which is why analysts more likely will look for a "bend in the trend," Fillmore says. "But you can come close," she adds.
"Oh, yeah, companies can bend the trend if they offer wellness programs and the right incentives. You see the trend line show maybe a 5-percent increase. That is a very successful program."
Paula Sauer, vice president of care management at Medical Mutual of Ohio, says her company has seen healthcare costs decrease in terms of medical claims. MMO is one of 25 companies whose half-million dollar wellness programs are evaluated by the University of Michigan's HMRC.
"We're into the middle single digits," says Sauer. "The trend has come down every year."
Companies can measure the cost savings of their wellness programs. They can even measure productivity. But, experts say, wellness programs also produce another intangible, incalculable result: They create a culture of wellness that permeates the work environment as more employees take charge of their health.
"We have countless anecdotal stories of employees who were moved by other employees doing the five [wellness] steps," says Day. "People who wouldn't necessarily go to the doctor saw others doing it. They went to the doctor and found a condition. If they hadn't participated, they might not be here."
"That's what the culture of wellness is," he adds.
Not all results are that dramatic. But wellness programs -- especially when they're visibly endorsed by company leaders -- can demonstrate that a company cares about the well-being of its employees.
"[It] takes three to five years to show a return-on-investment of 2 to 1 or 3 to 1. How do you measure good will, retention of employees or morale?" says Sauer. "If I feel better, and more productive, how do you measure it? There are other reasons for wellness programs. People get hung up on just financials. They have to justify the budget for wellness. It's shortsighted."