State:
Free Special Resources
Get Your FREE Special Report. Download Any One Of These FREE Special Resources, Instantly!
Featured Special Report
Claim Your Free Cost Per Hire Calculator
This handy calculator lets you plug in your expenses for recruiting, benefits, salaries, and more.

Graphs automatically generate to show you your annual cost per hire and a breakdown of where you are spending the most money.

Download Now!
March 28, 2006
Wellness Programs: Do they Pay a Return on Investment?

By Bob Brady

Do corporate wellness programs pay their way in terms of profit and loss? And, if so, how can we convince corporate management that they do?

For a Limited Time receive a FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with customized information for your industry, location, and job. Get Your Report Now!

This was the question addressed by speakers at the 16th Annual Art and Science of Health Promotion Conference in Las Vegas last week. The answer--once again--is a case of "good news; bad news."

On the positive side, it doesn't take much of an improvement to make wellness initiatives pay off (less than a 1% reduction in risk factors.) On the negative side, even small improvements can be tough to achieve. People with the most severe problems have little interest in lifestyle changes, and even those that do find it very difficult.

In general, employers can earn back the cost of programs over the course of five years if they can reduce risk factors by less than 0.2 percent. This is the conclusion of research delivered by Dr. Ron Goetzel, Cornell University. He cited one company that stands to make three dollars for every dollar spent, which would mean $50 million over five years.

In a study funded by the Centers for Disease Control and Prevention (CDC), a federal agency, Goetzel looked at a wide range of factors, including healthcare costs, age of workforce, and smoking and other lifestyle factors. Then, drawing on data about the effect of these on healthcare costs and productivity, Goetzel created a return-on-investment (ROI) calculator that allowed him to figure out the minimum improvement required to break even on an investment, as well as the projected ROI that a specific set of improvement assumptions would yield.

Looking at a few specific companies, he found that Dow Chemical would have to achieve a 0.17 percent improvement to break even on its investment. On the other hand, a 1 percent improvement would yield a return of three dollars for every dollar spent. (The dollars at stake are huge for the company, which has 26,000 employees. The 1 percent improvement would mean a savings of about $50 million over 5 years. The Dow budget is estimated at about $15 million over the 5 years.

Other companies had different breakevens, which are a factor of their employee demographics and their investments in wellness. Union Pacific's was about 0.49 percent; Motorola's 0.67 percent.

Goetzel said that he has created an interactive, web-based calculator that would allow employers to calculate ROI and predict returns for themselves (as well as allowing us to "game" what different programs would yield.) He has urged CDC to make it available to the public but had no timetable for when this would happen.

How do you get improvements?

A number of the speakers at the conference focused on the nuts and bolts of what employers have to do to improve lifestyles and reduce risk factors. Some of the insights:

  • Aim at the top. Goetzel has a program called "leading by example," in which he goes to the top of the corporate structure and works "C" level people on their personal health and fitness agendas. Another speaker, William Baun, who heads up a large program at the University of Texas Hospital in Houston said he follows the same path. He personally works with the highest level people in the company to figure out what will work for them. He cited one success story involving the CEO of the hospital, who has enthusiastically adopted a practice of "walking meetings," which allows him to exercise as he confers with his staff. The objective is the get high level support and commitment and to effect a change in culture.
  • Take programs to people. Baun has created a number of innovative, low budget practices that take programs directly to people at their jobs. He has a "wellness on wheels," which consists of a cart filled with wellness materials. He goes out to office corridors and puts up a sign, "Wellness Coach on Duty" and provides materials and advice. He says he can reach more people this way than by waiting for them to come to his office. He also holds "ASAP" meetings in the hallways under the slogan, "If you have five to 10 minutes, we will advance your knowledge."
  • Find out what people want and give it to them. Most professionals agree that obesity and substance abuse (including tobacco) are the biggest problems, but employees with these problems might be more concerned with their arthritis or bad backs. By finding out what those issues are and developing programs that focus on solving those problems, wellness programs can gain credibility and begin to solve core problems. In another example, Dr. Michael P. O'Donnell, head of a wellness program at the Cleveland Clinic and editor in chief of the American Journal of Health Promotion, recalled the case of an obese woman who, after years of refusing to do anything, was finally motivated by the fact that she could not play with her grandchildren. An exercise program with that goal was effective after 20 years of failure with other approaches.
  • Budgets are required to solve problems--but not enormous amounts. One member of the audience asked Dr. Goetzel how much employers must spend to have an impact. His response: "If you think you can have an impact for $10 per employee, forget it, but you can get things done for $100 to $250 per employee per year. ( Note: For Dow, with 26,000 employees, that translates to $2.6 to $6.5 million per year--no small amount.)
  • If you leave things alone, they are going to get worse. One depressing fact is that most people gain weight over time, and, increasingly, they are gaining too much weight. So, even if your employee population is reasonably healthy now, it probably won't be in the future--unless we take steps to alter behavior.
  • Family cannot be ignored. Lifestyle is the major problem, and it will be very difficult for employees to change if their families do not. Consider, for example, an employee who wants to quit smoking, but whose spouse has no such desire. Furthermore, company healthcare costs are hugely affected by dependent-care costs.
  • Bribery doesn't really work. Some employers have tried to fashion incentives to get employees to quite smoking, lose weight, etc. The data shows that these have some effect, particularly in terms of getting attention, but their long-term impact is pretty limited. "Intrinsic" rewards, such as improved life experience, are what motivate people to stay committed.

Comment: BLR is in the process of developing a questionnaire to help employers determine what wellness steps will benefit them the most. If you would like a copy of the questionnaire when it is complete, please email us at HRDaily@blr.com.

Featured Free Resource:
Cost Per Hire Calculator
   
   
 
 
Twitter  Facebook  Linked In
Follow Us
CT-WEB01
Copyright © 2016 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on http://Compensation.BLR.com
Document URL: http://compensation.blr.com/Compensation-news/Benefits-Leave/Employee-Wellness/Wellness-Programs-Do-they-Pay-a-Return-on-Investme/