- In This Issue
Workplace Wellness Programs Reduce Corporate Healthcare Costs
Savvy organizations are getting their employees—and healthcare budgets—back in shape
This article was published in the Q1 2012 issue of Aon One, April 2012.
It's time to file a missing person's report on the world's workforce. A serious case of employee absenteeism (out due to illness) and presenteeism (underperforming due to illness) has come on like a bad flu, and employers around the globe are not only feeling the symptoms, but are getting stuck with the bill—a whopping loss of $2 trillion in economic activity each year, according to the World Health Organization.
Tackling the issue seems deceptively simple. The World Economic Forum wags its finger at some of the common habits of unhealthy people: smoking, inactivity, poor diet, abuse of alcohol, inadequate stress management and lack of health screening. Put the kibosh on those habits and the problem is solved, right?
Enter the employee wellness program, one of the most significant health and fitness trends to sweep the industrialized world. With the United States leading the way in the obesity trend, it's no surprise that it's now a front-runner in promoting health on the job, with as many as 78 percent of larger employers (100 to 2,499 employees) and 28 percent of smaller companies (10 to 99 employees) offering some type of wellness program. Other countries that are on the forefront of this trend: the United Kingdom, Australia, Brazil and Germany.
Using a combination of incentives and disincentives, employers' chief targets are tobacco use and obesity. To encourage workers to kick the habit and shed a few pounds, employers are adopting no-tobacco policies on and off the job, offering cash incentives and gift certificates, reimbursing workers for gym memberships, providing free health coaching, stocking the company fridges with healthier foods and even offering insurance premium discounts to those who meet health standards—and surcharges to those who don't.
But are employee wellness programs delivering a return on investment? Are they helping to improve productivity and contain the growing cost of medical benefits?
A Set of Number Crunches
In trying to measure a wellness program's effectiveness, business leaders might break a sweat while trying to calculate the ROI. First, there isn't a single, universally accepted method for calculating it. "There's always been a big debate about what costs should be factored in," says Stephanie J. Pronk, senior vice president, Clinical and Health Improvement Solutions, Aon Hewitt. "Do you include the costs of incentives? Do you factor in the cost of time an employee has taken away from work to participate in the wellness program?"
Harvard researchers have come up with one possible baseline. A recent Harvard-led meta-analysis, which reviewed 36 studies for analytical rigor, identified an average ROI of USD3.27 for every dollar spent on wellness programs. If employers simply addressed three hazardous health habits—inactivity, chronic stress and alcohol use—over a five-year span, they'd save an average of USD700 per employee per year in healthcare costs and productivity gained, according to the report. "The literature has gotten much stronger over the past 10 years around whether wellness programs work," Pronk says. "As a result, there's now a big resounding 'yes' that there is a return on investment for those who participate."
Carrots and Sticks
But as the dismal success rate of New Year's resolutions proves, bad health habits are hard to break. So in taking the global lead on offering workplace wellness programs, U.S. employers are dangling "carrots" and swinging "sticks" to prod workers to change behavior and better their health—and sometimes inadvertently clashing with new federal laws. Many companies offer cash incentives or insurance-premium reductions to fill out health surveys, and some use that information to offer health advice or direct at-risk employees to disease-management programs.
But you have to be careful, Pronk says. The Genetic Information Nondiscrimination Act, which took effect in 2009, restricts employers' and health insurers' ability to collect and disclose genetic information. That includes not only genetic test results, but family medical history, too. What's more, the Health Insurance Portability and Accountability Act (HIPAA) currently limits the value of incentives that group health plans can offer to 20 percent of the total cost of health insurance (meaning premiums paid by both employer and employee).
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