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Rand Study Provides Pointers on Wellness ROI
Chronic-illness management lowered costs; lifestyle initiatives' returns were smaller

By Stephen Miller, CEBS  1/14/2014
 

Workplace wellness programs can significantly lower health care costs by helping workers to better manage chronic diseases. However, encouraging workers to adopt healthier lifestyles may not noticeably reduce an employer's health costs or lead to lower net savings for otherwise healthy individuals, according to a new Rand Corp. study, which was also the subject of a January 2014 analysis in the journal Health Affairs.

Examining a large employee wellness program offered by PepsiCo, which included separate chronic-disease management and healthy-lifestyle initiatives, researchers found that:

  • Efforts to help employees manage chronic illnesses saved $3.78 in health care costs for every $1 invested in the effort. That's in line with earlier studies that sought to quantify the return on investment (ROI) from wellness programs.

  • Wellness efforts that encourage healthy living did not deliver returns greater than the costs among those not dealing with chronic conditions.

Breaking Down ROI

The study by Rand, a nonprofit research organization, assessed more than seven years of PepsiCo's Healthy Living wellness program. The program has several components, including health-risk assessments, onsite wellness events, lifestyle management, disease management, complex care management and a nurse advice phone line. The study evaluated the experiences of more than 67,000 workers who were eligible for the disease-management or lifestyle-management program.

The study revealed that:

  • PepsiCo's disease-management program reduced costs among participants by $136 per member per month; this savings was driven by a 29 percent drop in hospital admissions.

  • Among those who participated in both the disease-management and lifestyle-management programs, the savings was $160 per month, with a 66 percent drop in hospital admissions.

  • People who participated in the lifestyle-management program reported a small reduction in absenteeism, but there was no significant effect on health care costs.

“The PepsiCo program provides a substantial return for the investment made in helping employees manage chronic illnesses such as diabetes and heart disease,” said Soeren Mattke, the study's senior author and a senior natural scientist at Rand. “But the lifestyle-management component of the program—while delivering benefits—did not provide more savings than it cost to offer.”

The authors noted that with any prevention effort, it is often easier to achieve cost savings for people with higher baseline spending, as was the case with those who participated in the PepsiCo disease-management program.

“While workplace wellness programs have the potential to reduce health risks and cut health care spending, employers and policymakers should not take for granted that the lifestyle-management components of the programs can reduce costs or lead to savings overall,” Mattke said.

Proper targeting may improve lifestyle-management programs’ financial performance; notably, the disease-management participants who also joined the lifestyle-management program experienced significantly higher savings.

Moreover, ROI shouldn't be viewed as the sole measure of a wellness program's success. "One of the best ways to encourage engagement of employees is to make them realize that the employer is interested in and cares about the health and welfare of both the employee and the employee’s family," wrote Hay Group consultants John Hennessy and Larry Hicks in the Journal of Compensation and Benefits. "We believe that employers who support wellness programs can create increased engagement in their workers and this effort has an independent benefit aside from the direct reduction of medical costs."

Programs on the Rise

Workplace health and wellness programs are becoming an increasingly common benefit in the United States. The federal Affordable Care Act has several provisions to promote such efforts as a way to lower health care costs.

A recent study that Rand conducted for the Labor Department found that about half of U.S. employers with at least 50 workers and more than 90 percent of those with more than 50,000 workers offered a wellness program in 2012.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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