Amid the complexities of health care reform and rising health care costs, wellness has become an increasingly hot topic among employers seeking ways to combat escalating costs. Both U.S. political parties want more effective strategies to manage health expenses and help ensure more affordable care.
The cost of providing health care benefits has risen consistently every year since 1965, and per capita national health expenditures have increased 30 percent between 1990 and 2010, according to the U.S. Department of Commerce.
Further, data from the Kaiser Family Foundation, the Health Research and Educational Trust and the Bureau of Labor Statistics shows the cost of health insurance premiums has outpaced inflation in recent years.
The majority of HR and benefits decision-makers cite controlling the cost of health care as either a medium or high priority — 91 percent in mid-sized companies and 90 percent in large companies — according to the ADP HR/Benefits Pulse Survey on Wellness by the ADP Research Institute and detailed in a white paper, “Why You Should Care About Wellness Programs,” published in April 2012.
Regardless of a company’s size and number of employees, controlling rising health care costs is a critical business imperative for many organizations. Employers already attempt to control health care costs in a variety of ways to help protect their bottom lines and enable growth.
According to the ADP Research Institute survey, two strategies include eliminating expensive plan designs in favor of less costly options and shifting more costs to employees.
The survey also found that 46 percent of HR and benefits decision-makers in mid-sized companies and 48 percent in large companies indicated the increased cost of providing employer-sponsored health benefits has reduced the number of plan options they make available to employees.
Further, the survey revealed more companies are shifting costs to employees, with only 17 percent of mid-sized companies and 15 percent of large companies paying the total cost of employee health insurance.
While these strategies can help reduce the burden of health expenses for employers, they also can be harmful to employees. The ADP Research Institute found 35 percent of HR and benefits decision-makers in mid-sized companies and 51 percent in large companies indicated that shifting the increased cost of health care benefits to employees has had a negative impact on morale and job satisfaction.
From a talent perspective, this can reduce employee productivity. It also can compromise an employer’s ability to retain highly skilled workers.
Wellness: A Compelling Alternative
To help rein in increasing health care benefits expenses and promote a happy workforce, a growing number of companies view preventive strategies such as employee wellness programs as a way to achieve both of these goals. According to the ADP survey, 44 percent of mid-sized and 79 percent of large companies indicated they now offer wellness programs.
Specifically, employers are betting that improved employee health achieved through wellness program activities will reduce health costs and foster greater employee engagement by sending a message that they care about their workers’ well-being and are establishing programs that help bring employees together to achieve a common good.
In an August 2012 survey by the National Business Group on Health, 61 percent of U.S. firms said wellness initiatives are among the three most effective tactics to keep a lid on health care costs. Further, for every dollar invested in wellness, employers average a savings of $5.81, according to the American Journal of Health Promotion’s analysis of 56 published studies on work site health promotion programs.
The analysis attributed this savings to improved health and medical claims based on a 27 percent reduction in sick leave, a 26 percent reduction in health costs and a 32 percent decrease in workers’ compensation and disability claims.
While employers’ reasons for offering wellness programs can vary, ADP research showed employers are most interested in improving employee health and controlling health care costs. A third or more of respondents cited interest in attracting and retaining employees, and maintaining or increasing their benefits offerings.
With regard to the types of wellness programs offered, the majority of companies surveyed provide voluntary or incentive-based wellness programs. However, 15 percent of mid-sized and 12 percent of large companies make participation in their wellness programs mandatory.
The research also found somewhat higher engagement rates for mid-sized companies, with an average of 51 percent of employees in mid-sized companies compared to 39 percent of those in large companies who participated in employer-sponsored wellness programs.
The most common components included in wellness programs include employee assistance programs, health promotion materials, health/biometric screening and smoking cessation programs.
Measuring the ROI on Wellness
While calculating the return on investment is key to assess a wellness program’s value and effectiveness, the majority of companies surveyed — 61 percent of mid-sized and 60 percent of large — have yet to measure the investment return on their wellness initiatives.
But some early adopters already have proof that their bet on wellness programs is paying off. Global eye care provider Alcon, a division of Novartis, measures a range of wellness program metrics. The company offers employees a customized health enhancement plan that addresses specific health characteristics and risk factors, then verifies and rewards positive change with incentives.
The percentage of Alcon employees participating in verified fitness activities increased three years in a row, reaching nearly 50 percent in 2010. Since adoption of its wellness program, Alcon’s employees moved into lower risk levels for a multitude of conditions. For example, more than half of the employees who were high risk in 2008 for high cholesterol or high blood pressure moved to moderate or low risk in 2010.
Healthier employees translated directly to a healthier bottom line. In 2010, the company saved $1.5 million in medical and pharmacy claims, which it attributes partly to employee participation in its incentive-based wellness program.
Looking Ahead to a Healthier Workforce
Wellness programs offer a compelling value proposition if they are successful in reducing health care costs and improving employee productivity and job satisfaction by fostering a more engaging culture of health and wellness.
Wellness programs may not be the best strategy to help solve employers’ need to control rising health expenses and maintain employee morale, but based on ADP Research Institute findings, companies that use wellness programs to help address these challenges reap lower health-related costs.
These early successes should help drive greater adoption of wellness programs within companies of all sizes as employers and employees continue to seek new ways to mitigate rising health expenses.
This is especially true among mid-sized businesses, which lag behind their larger peers in offering wellness programs, according to the ADP research, but face similar challenges in providing affordable health benefits for their employees.
The key challenges related to wellness programs include expanding access and employee participation in employer-sponsored programs while improving employers’ ability to measure program ROI.
Talent managers can take multiple steps to help drive employees’ participation in their organization’s wellness program. For example, engaging wellness programs often include interactive websites that feature a range of educational resources and tools such as online health risk assessments, personalized wellness plans and resources that integrate with mobile applications and social networking sites.
This gives employees more flexibility in when, where and how they access wellness resources and complete recommended activities to achieve their personal wellness goals. Offering financial incentives, such as enabling employees to earn points toward lowering their monthly health plan contributions as they achieve wellness goals, is another effective strategy talent managers can use to help increase participation.
To more easily measure wellness ROI as well as the effectiveness of specific program components, talent managers can use analytics and information dashboards to uncover program trends, performance against key program metrics and insights to help them adjust program design and boost performance.
Further, integrating all human capital management areas, from talent management and payroll to benefits administration, is another practice talent managers can adopt to help them measure the return on their wellness investment. All-in-one human capital management systems increase visibility into performance and help talent managers improve workforce productivity and engagement.
The ultimate outcome of these efforts is a positive impact on employee health and well-being. And because healthier employees are often more satisfied and productive, betting on wellness programs can drive business growth and improve companies’ overall performance.
Jessica Saperstein is division vice president of strategy and business development at ADP. She can be reached at email@example.com.