The Real ROI for Employee Wellness Programs
Greater employee productivity could far outpace health care savings
About three-quarters of HR professionals said their organizations offered some type of a wellness program last year, according to a survey by the Society for Human Resource Management. And more than two-thirds of respondents from organizations that offered wellness initiatives indicated these efforts were “somewhat effective” or “very effective” in reducing the costs of health care.
The return on investment (ROI) related to employee wellness programs typically includes the overall health care cost-savings achieved, as well as productivity increases due to a reduction in sick days taken by employees. Calculating the ROI based on the hard savings numbers provides most companies with the justification for implementing such programs.
An article in the Harvard Business Review demonstrated how ROI can be attained through employee wellness programs. Focusing on one employer, doctors Richard Milani and Carl Lavie studied a random sample of 185 workers and their spouses. The participants were not heart patients, but they received cardiac rehabilitation and exercise training from a team of experts.
Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety level and other measures), 57 percent were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs declined by $1,421 per participant, compared with those from the previous year. A control group showed no such improvements.
The bottom line: Every dollar invested in the intervention yielded $6 in health care savings.
The Rand Corp., a nonprofit research institute, examined 10-year data from a Fortune 100 employer. More specifically, the Rand Wellness Programs Study examined two aspects of the employer’s wellness program: the lifestyle management component and the disease management component.
Interestingly, disease management was responsible for 86 percent of the hard health care cost- savings, generating $136 in savings per member, per month, and a 30 percent reduction in hospital admissions.
The Employee Positivity Factor
The Rand Corp.’s analysis estimated an overall ROI of $1.50, or a return of $1.50 for every dollar that the employer invested in the entire wellness program. The return for disease management was $3.80, while the return for the lifestyle management component was just $0.50 for every dollar invested. However, the researchers did not take into account an additional productivity benefit from the lifestyle management component, which is commonly excluded from ROI analyses of wellness programs—it could be called “the Employee Positivity Factor.”
When employees aren’t feeling well, either physically or emotionally, their productivity declines. Consider the difference between an employee who rolls out of bed and drags in to work versus an employee who exercises before coming to work. Exercise produces natural opiates or endorphins, which increase energy, enhance mood and promote overall wellness. The result? The employee who is exercising, and typically healthier as a result, will likely show up to work with more energy and enhanced positivity.
The Employee Positivity Factor could mean a host of benefits. If the employee interacts with customers, it could translate into a significantly higher customer experience and an increase in sales. When the employee interacts with co-workers, it could mean the generation of new ideas or solutions to business challenges, a more positive working environment, and more value produced by each employee—all of which positively affect the company’s bottom line.
While the concrete savings from reductions in health care costs and employee sick leave is a good method for calculating ROI, the additional benefits achieved by improving employees’ health and well-being should not be ignored. The additional contributions made by employees who are “well” could potentially bury the ROI estimated by the hard cost-savings.
Jennifer Schaefer is a leading group health insurance and employee benefits specialist with more than 20 years of experience managing client benefit programs. © 2015 Jennifer Schaefer. All rights reserved. Republished with permission.
Related SHRM Articles:
Employers See Wellness Link to Productivity, Performance, SHRM Online Benefits, February 2015
Critics Challenge Corporate Wellness Program ROI, SHRM Online Benefits, December 2014
Evaluating Worksite Wellness: Practical Applications for Employers, SHRM Foundation, December 2014
CEOs Share Insights for Wellness Success, SHRM Online Benefits, September 2014
Shared values: The Next Step in Wellness, SHRM Online Benefits, September 2014
Helping Employees Stay Healthy Is a Good Investment, SHRM Online Benefits, February 2014
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