Nine-Year Study Documents Benefits of Wellness Program

By Kathy Gurchiek Sep 15, 2010
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A Midwestern utility company’s wellness program realized a net savings of $4.8 million in employee health and lost work time costs over nine years, according to a study by University of Michigan researchers.

The study was conducted from January 1999 through December 2007 with 2,753 full-time employees of We Energies in Milwaukee, Wis., who were covered by the company’s medical benefits.

The study, which measured participation— not changes in health status—found a “consistent and reliable” return on investment, according to professors Louis Yen, Alyssa B. Schultz and Dee W. Eddington, all at the Health Management Research Center. Cindy Schaefer of We Energies in Milwaukee and Susan Bloomberg of Take Care Health Systems in Pennsylvania assisted with research.

“The benefits and cost ratio continued to increase over time,” said Eddington, the director of the university’s research program.

Calculating ROI

We Energies spent $7.3 million on its program over the nine years of the study, and participation saved the company $12.1 million. The program realized a “statistically significant annual savings of $180 per participant per year,” according to the study.

The ROI was calculated by comparing program participants with nonparticipants during four periods—1999 through 2002; 2001 through 2003; 2004 through 2005, and 2006 through 2007.

This approach is more likely to result in less variance in data, Eddington explained. It’s also more likely to result in more continuous data, since work or home circumstances may cause people to miss completing health risk appraisals or participating in other programs in any one year, he added.

Researchers factored in medical and pharmacy costs, time off, and workers’ compensation, which was limited to claimants’ wage replacement costs.

The study took into account all bottom-line costs associated with implementing the wellness program, including indirect costs such as program recruitment and menu changes to reflect healthier food choices. Researchers excluded from their calculations any employee whose annual medical claims costs were $100,000 or more during the study period.

Rewarding Participation

We Energies conducts its Lifestyle Rewards program every fall as part of employee medical benefit selection. The program consists of an annual enrollment—mandatory for earning any of the monetary incentives; an annual health risk appraisal; periodic biometric evaluation; various educational and interventional program modules; and monthly cash rewards paid out the year following participation in the program.

The program had about a 40 percent participation rate among the company’s employees during the study. Participants typically were ages 35 to 55, 60 percent were male, and participants included people in physical jobs.

Getting laborers into the wellness program can be challenging, Eddington noted.

“They’re pretty macho,” he said, likening We Energy employees to auto workers. “There’s an advantage to being heavy and there’s an advantage to working through injuries” in their environment.

Employees at satellite offices can participate at their locations, removing travel to the corporate office as a barrier. Health-related activities that can earn participants extra cash are selected and approved by a committee of stakeholders that includes union leaders, and Eddington credited the union and management for working together to encourage participation.

The program does not include incentives such as on-site clinics, a gym or subsidized gym membership. Instead, it relies on monetary rewards. An employee could receive a maximum reward of $300 annually by achieving the following:

  • $50 for completing the health assessment; this includes a self-reported assessment and clinic-measured biometric data.
  • $150 for achieving a minimum of one health-related goal that changes annually. This could be attending educational workshops, receiving health coaching or completing multiweek lifestyle behavior programs.
  • $100 for meeting four of six behavioral goals, such as achieving ideal body mass index, having no safety-related incidents, using in-network providers and living tobacco free.

The monetary incentives act as a carrot for getting people to change their behavior. However, “you can buy participation but you can’t buy engagement,” Eddington noted

Regardless, “our experience is that just getting involved is a good predictor of changes in costs,” he said. “Sometimes it is a better predictor than change in risk factors. Health status is much more than just risk factors.”

Still, there has to be enough participants to affect ROI results, according to the study. A participation rate of 20 percent or less would have minimal affect, the researchers point out in their paper.

It’s going to take new strategies to garner a 90 percent participation rate at We Energies, Eddington said.

‘They Lose Courage’

Consistency and a long-term outlook toward wellness programs are key to achieving ROI in a wellness program, Schultz said.

The rising cost of health care is an issue for many companies, “so they’ll throw something at it for a couple of years … and then they abandon the program” when the organization has to make budget cuts, she noted.

Additionally, employers get impatient because realizing health care savings takes longer than they expect, Eddington observed.

“They lose courage. They don’t have the courage to maintain the program for a long period of time. The way most programs are structured, it’s going to take three to five years [to realize a savings],” he said.

“We’ve just been blaming the people—‘they’re too fat, they don’t exercise, they drink too much.’ Oftentimes the workplace is leading to some of that stress as well,” he noted.

The way employers structure wellness programs traditionally hampers their success, he added, pointing out that silos often exist within wellness programs. A company will offer a Weight Watchers program, for example, that operates independently of its exercise program.

He recommends making sure that vendors are partners.

“Partners come in and [customize] to your needs. Get all the partners in the room together and say ‘this is what we want to do.’ [HR has] got to be a little tougher with these vendors,” he said, by becoming more involved and holding vendors accountable instead of merely checking off a box that the vendor has been hired.

Kathy Gurchiek is associate editor for HR News. She can be reached at kathy.gurchiek@shrm.org.

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