Critics Challenge Corporate Wellness Program ROI

Concerns with program cost and effectiveness are on the minds of chief human resource officers

By Bill Leonard Dec 18, 2014

HR professionals view employee wellness programs as an important part of the health benefits mix, but the value these initiatives bring to organizations has come under increased scrutiny. The debate on the financial efficacy of health-promotion efforts intensified during the fall of 2014 when the Equal Employment Opportunity Commission (EEOC) filed a lawsuit claiming that Honeywell International’s wellness program was not voluntary and violated the Americans with Disabilities Act.

In early December, a judge declined to issue a preliminary injunction requested by EEOC attorneys to stop Honeywell from offering its employees cash incentives in 2015 for participating in the corporate wellness program. The case has grabbed the attention of business leaders throughout the country and is causing many employers to reconsider how they administer their wellness offerings.

“Everybody is concerned and watching to see what the outcome will be,” said Gretchen Young, senior vice president for health policy at the ERISA Industry Council in Washington, D.C. “Many employers right now are not making changes to their wellness plans, [but] a lot are considering pulling back on incentives.”

Cost and Efficacy

Concerns with the costs and the effectiveness of wellness programs seem to be on the minds of chief human resource officers (CHROs) as well, according to a recent survey conducted by the Consero Group, a senior-level management consultancy based in Bethesda, Md. During a November 2014 meeting in Washington, D.C., Consero polled 42 CHROs of Fortune 1,000 companies. Nearly half of the CHROs (48 percent) did not believe their organizations’ wellness plans were effective, while 60 percent reported that the programs have not significantly reduced medical costs for their companies.

Even with the modest rise in health care costs over the past several years, sources familiar with the issue believe businesses have reached a tipping point and that the expense of providing medical benefits to workers has become unsustainable. Cost-containment efforts therefore are putting more pressure on wellness programs to deliver on the promise of reducing health care expenses. However, as the CHRO survey and other recent studies have shown, wellness plans may not be producing the return on investment (ROI) that employers expect and need.

In 2013, the Rand Wellness Programs Study surveyed approximately 600,000 employees at seven large U.S. employers and found that wellness programs were having little if any immediate effects on the amount employers spend on health care. As a follow-up, the Rand Corp.’s researchers conducted an in-depth review of PepsiCo’s wellness program and released the results in January 2014. The study revealed that PepsiCo’s wellness plan was made up of two components—disease management and lifestyle management. The Rand researchers found that:

The disease management component, which focused on helping employees who have chronic diseases like diabetes and hypertension, had a very strong ROI, and that PepsiCo realized a savings of $3.78 for every dollar it spent on the disease management program.

The lifestyle management component, on the other hand, did not reduce costs by any significant amount. Lifestyle management programs typically focus on identifying employees with potential health care risks, such as tobacco use, high blood pressure, obesity and diabetes.

Biometric Screenings Criticized

In many corporate wellness programs, employers offer workers financial incentives to get screened for certain health care risks. Many of the screening procedures, such as those that measure body mass index, blood sugar levels and cholesterol, can be expensive, and debate on effectiveness of the tests in reducing costs and changing employee behavior has intensified as health care expenses continue to rise.

“The evidence is pretty conclusive that wellness programs with clinically driven components that rely on biometric screening do not provide the returns and cost reductions that employers have been promised for years,” said Vik Khanna, a health benefits consultant based in St. Louis and co-author of the e-book Surviving Workplace Wellness (THCB Press, 2014). “If you look at the Fortune 1,000 companies that have made biometric and clinical screening a big part of their wellness plans, the numbers simply do not justify the cost. The return on investment for these type programs just isn’t there, and the impact on improving the overall wellness of program participants has been negligible.”

Khanna contends that biometric screenings such as checking cholesterol levels and blood pressure identify health risks and conditions that typically affect older workers. “So, employers end up spending a lot of money on these screens upfront for very little immediate result,” he said. “Most of the issues that these tests screen for are conditions that primarily affect people who are in their 60s or 70s. Therefore, the actual cost impact of these chronic conditions is delayed or won’t be felt at all as workers move on to other jobs.”

The goals of most corporate wellness plans that use clinical screenings are to moderate or change employee behaviors and to help workers develop healthier lifestyles. However, sources familiar with this issue agree that these goals are rarely met.

“If the objective is to change employee behavior, then a biometric screening is a pretty ineffective way to do it,” Khanna said. “All the screening does is identify potential health care risks. And if the goal is to change behavior, then wellness plans must find ways to engage and encourage employees on adopting healthy lifestyles.”

The practice of offering biometric screenings has many defenders, of course. For instance, writing recently on the Health Affairs Blog, Ron Goetzel, director of the Emory University Institute for Health and Productivity Studies, argued that “Biometric screenings are important for collection of baseline health risk data and are often viewed as an added value by employees participating in workplace health promotion programs.”

Taking a Holistic Approach

A growing number of employers are exploring ways to better engage workers and to help them become healthier and more productive. In short, more businesses have begun to focus on a more holistic approach to wellness.

“More and more, we are hearing the term ‘well-being’ instead of wellness,” said LuAnn Heinen, a vice president at the National Business Group on Health and director of the Institute on Innovation in Workforce Well-Being. “Well-being focuses on the mindfulness of what it takes to live a healthy lifestyle, and the mission of well-being programs is to find ways that help stressed, hardworking employees lead happier, healthier and more productive lives.”

As the scope of well-being programs expands beyond health care screenings, employer focus has begun to shift away from “return on investment” and toward “value of investment” (VOI), Heinen said.

“We are definitely hearing the term VOI much more now,” she noted. “While it can examine metrics such as reductions in health care costs, the VOI model also takes into account measurements such as reduced absenteeism, increased productivity, turnover and job satisfaction of employees who participate in the well-being program.”

Promoting Engagement

When employers demonstrate that they truly care for the well-being of their workers, employees tend to respond favorably, according to Heinen and Khanna.

“If done correctly, it is an excellent way to reach out and engage employees,” Khanna said. “Employers must be respectful of their employees and find ways that engage and energize them.”

Often, this can be something fairly simple and cost-effective, such as providing coupons for or discounts on healthy food options like fruits and vegetables at a local grocery store or farmer’s market, Khanna added. Since these types of program offerings can be a hit-or-miss proposition, feedback is crucial to determine what offerings resonate with employees.

“The key is finding what works best and what employees respond to,” Khanna said. “Focusing on lower-cost options that actually build and sustain healthy habits, I believe, is the future of corporate wellness programs. Wellness programs that rely heavily on expensive clinical-based biometric screenings will soon be a thing of the past,” he predicted.

Bill Leonard is a senior writer for SHRM.​


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