Return-on-Investment of Workplace Health Promotion Programs

Return-on-Investment of Workplace Health Promotion Programs
August 18, 2014 - 1:40 pm, by

Recent healthcare reforms in the U.S. and abroad have emphasized the value of meaningful and effective preventative care and health promotion. Corporations are taking note, and, as a result, there has been a significant rise in the number of corporate wellness programs popping up. Under recent healthcare legislation in the U.S., there are tax incentives and grants available for U.S. companies implementing wellness programs. In addition to the reform-related incentives, there is good evidence which suggests that the programs chip away at corporations’ enormous health care costs, which continue to rise in response to advances in medical technology and the aging workforce.

Wellness programs are defined as organized, employer-sponsored programs designed to support employees as they implement and sustain behavioral changes and modifications that reduce health risks, improve quality of life, and enhance personal effectiveness and productivity. Ultimately, it benefits the employer’s bottom line. According to one study, medical costs fall by about $3.27 for every dollar spent on wellness programs, and absenteeism costs fall by about $2.73 for every dollar spent (Baicker et al. 2010).

Johnson & Johnson (J&J) has been ahead of the curve by executing a successful wellness program for about 20 years (since 1995). Since then, the percentage of J&J employees who smoke has dropped by more than two-thirds and the number who have high blood pressure or who are physically inactive has declined by more than half. There have been significant reductions in rates and levels of obesity, cholesterol, physical inactivity, and poor nutrition. Over the past decade, J&J’s leaders estimate that their wellness programs have cumulatively saved the company at least $250 million on health care costs. In 2009, the average annual per-employee savings were $565, resulting in a return on investment (ROI) in the range of $1.88-$3.92 saved for every dollar spent on the programs (Henke et al. 2011).

In another company, two doctors selected a random sample of 185 workers and their spouses (the participants were not current heart patients). The participants received cardiac rehabilitation and exercise training from an expert team for six months. Out of those deemed “high-risk” (according to body fat, blood pressure, anxiety, and other measures), 57% became “low-risk” by the end of the program. Additionally, medical claim costs had declined by $1,421 per participant, compared with those from the previous year, implying that every dollar invested in the intervention yielded $6 in health care savings—a ROI that should get the attention of any business leader.

Wellness programs not only lead to healthy employees, but more satisfied and loyal employees. A recent study shows that organizations with highly effective wellness programs report significantly lower turnover (Towers Watson and the National Business Group on Health).

Just over half of U.S. companies with more than 50 employees offer workers some sort of wellness program. While most of these companies are certain that their wellness plans “reduced medical costs, absenteeism, and health-related productivity losses,” only about half of the organizations had ever formally evaluated their wellness plans. Some companies would like to start a wellness program, but do not know exactly where to invest their efforts or how to start the program. Moreover, there continues to be a high level of uncertainty over whether workplace health promotion programs actually generate value. At Avalon Health Economics, we have collaborated with companies in the design of programs and have assessed their economic value and return-on-investment.

Cara M. Scheibling

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