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Blog: The Business of Management
 

September 11th, 2009

Do You Really Save Money From Wellness Programs?

We’ve written a lot about wellness initiatives here at Workforce Management—those programs that some companies pay for to help workers get healthier. But the big question always comes down to this: Do they actually help organizations save on their overall health care costs?

Getting a handle on the ROI of any wellness program is always tough, and often the answer comes down to: “Yes, we know it is making our employees healthier, but we can’t really tell you how much we’re saving.”

That’s why I was intrigued by this story in Florida’s St. Petersburg Times about how a lot of businesses in the Tampa Bay area are not only investing in wellness but also have some ROI they can point to as well.

“The Tampa-based Employers Health Coalition,” the newspaper reported, found “that wellness programs saved money and improved productivity by 34 percent, [and] a 2007 American Heart Association survey found that employees in companies that encouraged healthy habits used fewer sick days, had greater job satisfaction and did better work.”

One company, Pepin Distributing Co., opted to cover the $1,800 to $2,000 per person cost of a program that would help encourage weight loss and prevent or reduce complications of obesity such as heart disease and diabetes.

“The plan is considerably more expensive than programs such as Weight Watchers, which some employers offer,” the newspaper noted. “But if Pepin participants gain back the weight within a year after finishing the program, they must reimburse the company in full.”

Here’s the kicker to all of this: “Pepin spends more than $2 million annually on health care for its more than 300 employees. The company expects to see a return of $3 to $4 on every $1 spent on the weight-loss program.”

I was surprised by two things here: the amount of Pepin’s investment ($2 million annually is a LOT of money) and the 3-1 or 4-1 ROI that the company reported. I don’t watch this closely, but I can’t recall seeing a return on investment like that from a wellness program anywhere.

This says to me that positive wellness programs focused on helping workers take better care of themselves can have a positive impact on both the workers and on the organization’s bottom line. And, they make more sense than some of those punitive, punishment-based programs that a few businesses have.

The bottom line, as you know from the highly charged national debate that’s going on right now, is that health care is a huge drain on a company’s bottom line. A smart and well-constructed wellness program, like the one at Tampa’s Pepin Distributing, can be just one more tool that smart-thinking managers can use to get a better handle on health costs while also doing something that will lead to healthier, more fully engaged employees.

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Comments

OR - the ROI is completely baseless!
Anyone can state an ROI, what’s the methodology used to calculate, and are the savings sustainable or are they as Yo-Yo as the typical diet?

CUPA-HR recently posted the following information about investing in preventative and wellness programs on their site:
In response to a congressman’s request, the U.S. Congressional Budget Office (CBO) has released a letter outlining the budgetary effects of expanding governmental support for preventive care and wellness services. According to the letter, although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall. This is not to say that preventive service is a bad investment. As for wellness activities, evidence regarding the effect of wellness services on subsequent spending on health care is limited, and CBO is continuing to evaluate the evidence that does exist.


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