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More Than Money?

New reports highlight the need for HR leaders to shift their thinking on how to gauge return on investment for wellness programs.

Wednesday, April 30, 2014
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Nearly half of employers with a wellness program reported a measurable improvement in medical costs or risks, according to a new Willis Health and Productivity Survey, which included 900 participants.

Of the 49 percent who said their companies are seeing measurable results, 17 percent said costs have gone down, the survey shows. The other 32 percent reported an improvement in health risks -- tracked through tools such as claims data, health-risk assessments or biometric screening -- so "measurable" does not necessarily mean an immediate bottom-line change, says Dr. Ronald S. Leopold, Willis practice leader in health outcomes.

"I do think -- whereas there is a lively debate on ROI as defined by a reduction in medical costs and 17 percent said they have already seen that -- the other piece that transcends overall costs, and the overall thrust of the study, is that employers are stepping back and saying there is more return than we can measure through just reduction in claims costs.

"Some say we need to redefine it and call it VOI, value on investment. It gets to the idea that there is a business value to a healthier working population. In many ways, it can be measured, but it is not restricted to a reduction in medical costs."

More employers are seeing the value in healthy lifestyles, Leopold says, pointing out that 61 percent of participants identified employees' health habits as the No. 1 challenge in controlling healthcare costs.

"Healthcare reform has taken up so much of employers' time the last couple of years, but healthcare cost increases are slowing down," he says. "They are already shifting the cost and risk to employees and families, and employers are starting to realize it is not an exclusive battle against cost."

Other reports, such as a January 2014 Rand report, also raise the question of return on investment -- how much and how quickly -- wellness programs offer, says Lenny Sanicola, WorldatWork's senior practice leader of professional development.

"There is much controversy around whether wellness programs deliver a return on investment to organizations," he says. "However, there is research on both sides and there are also many types of metrics that may point to success or failure of wellness initiatives. Most research and media attention seem to focus on the reduction in future company medical spending as the sole metric for success. Based on that, there are studies that report a measurable improvement in the firm’s medical costs and/or an improved risk profile among its workforce."

For example, in another 2012 Rand report, the research corroborates that participation in a wellness program for more than five years is associated with lower healthcare costs and decreasing healthcare use. In a 2010 report published in Harvard Business Review, Johnson & Johnson company leaders estimated that wellness programs cumulatively saved the company $250 million on healthcare costs since 2000 and, from 2002 to 2008, the return was $2.71 for every dollar spent.

Meta-studies, Sanicola says, indicate that effective approaches to wellness programs and their ROI can lead a 6 to 1 return, according to an article from Sibson Consulting. According to a study by Towers Watson and the NBGH, organizations with highly effective wellness programs reported significantly lower voluntary attrition than those whose programs were less effective.

Aside from metrics, Sanicola says more companies are seeing the value of helping employees make better health choices. According to WorldatWork’s 2012 “Total Rewards and Employee Well-Being” survey, 85 percent of employers now offer wellness programs to improve employee health.

"I believe that most organizations, whether they have been able to prove a 'hard-dollar return' with their wellness programs or not, primarily believe that establishing an organizational 'culture of health' is the right thing to do, and it helps to create a healthy work environment that offers a positive return in decreased absenteeism rates and disability claims, increased employee engagement, decreased presenteeism -- all factors leading to increased workplace productivity," he says.

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Midsize employers seem to be the quickest to boost wellness program offerings, according to a 2013 United Benefit Advisors Health Plan Survey, which showed that middle market employers with 100 to199 employees increased their wellness offerings by approximately 12.5 percent in 2013 -- double that of any other employer size subset. Of the nearly 11,000 employers surveyed, 19.2 percent offer some sort of wellness program. Health risk assessments remain the most popular offering, and the coaching and online wellness portals saw the biggest increase.

Middle-market employers likely are feeling financial strains from healthcare changes, says Lisa Weston, director of employee wellness promotion for The bagnall company, a United Benefit Advisors Partner Firm.

"Given this, these employers are trying to find a way to keep the health of their employees from negatively impacting the bottom line while trying to ensure long-term organizational sustainability," she says. "In the past, employers may have considered implementation of a wellness program a luxury. However, middle market employers are now realizing the value wellness can bring to the organization as a solution to the problem of poor employee health."

Though questions on ROI remain, more companies are looking beyond a hard return, says LuAnn Heinen, vice president at the National Business Group on Health.

"The field is moving beyond ROI (where all benefits are described in monetary terms) to VOI, where benefits beyond medical cost savings are evaluated," she says. "The Willis study found that measurement of productivity is lagging, but this is where we expect companies will focus going forward."

Encouraging healthy habits will remain a priority for employers, she says.

"I see continued short-term emphasis on cost control, with an eye toward helping employees manage health risks including obesity, diabetes and lack of physical activity or excessive sitting."

 

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