Workplace Wellness Programs: Worth the Costs?

 From gym memberships to smoking cessation programs, employee wellness has grown from a buzzword to a multi-billion dollar industry, with nearly three-quarters of all midsize to large companies offering some type of incentive to employees who want to drop extra weight, quit bad habits and get healthy.

However, according to a recent study published in Health Affairs journal, employee wellness programs just aren’t worth the cost. In fact, the study indicates that while there was a dramatic drop in hospitalizations due to chronic conditions, the increase in outpatient-care costs negated any savings when combined with the cost of managing the wellness program.

The study results raise an important question: are employee wellness programs worth the costs associated with keeping them running? And are employees really getting healthier?

Get Better, Save Money

The benefits are tempting to employees. Sign up for your employer’s wellness program, get your blood pressure and vitals checked, agree to try to live a healthy lifestyle and you’ll save some money on your insurance premiums. You might also get a cheap or free gym membership and other perks like discounts on healthy lunches.

For employers, the benefits of offering wellness services look great on paper too. By encouraging employees to quit smoking or lose weight, and providing tools and support to do so, the costs of providing healthcare should go down, in theory. By some estimates, preventable diseases account for almost 90 percent of all healthcare costs. Proponents of wellness programs argue that they empower employees to take control of their health, and as a result, participants require fewer doctor visits, fewer medications and are less likely to require hospitalization or treatment for a chronic condition like diabetes. In addition, employers that offer wellness programs report reduced absenteeism, increased productivity and a happier, more engaged workforce.

Of course, such programs come at a price. Since 2009, employer spending on wellness programs has almost doubled to $521 per employee, according to a study by Fidelity Investments and the National Business Group on Health. But those in favor of the programs estimate that for every dollar spent on wellness the employer sees nearly $9 in returns, thanks to increased productivity and reduced absenteeism, Still, not everyone is convinced.

Are Wellness Programs Simply Shifting Costs?

These days, everyone is looking for ways to reduce healthcare costs, but new evidence is showing that wellness programs might not be the cure-all some hoped they might be.

For instance, the study of BJC HealthCare in St. Louis indicated that the hospital paid on average $1,650 more in health care costs per employee due to the wellness program. The costs came from several areas, but primarily from the hospital’s subsidization of the health insurance premiums for those who joined the program. In addition, costs increased because employees were utilizing health care services more often, as required by the program and taking more medication.

Another issue employers are watching carefully in regard to wellness programs is changes in the law that will influence how programs are designed and operated. The Healthcare Affordability Act of 2010 prohibits health insurers from charging sick people more than those who are healthy, but when employers base insurance coverage costs on an employee’s health or lifestyle choices, some argue that those who aren’t in optimal health will be penalized.

Despite the costs and risks, many employers remain committed to maintaining wellness programs, primarily because of the measurable benefits in other areas. One consultant points out that well-designed wellness programs — those that require accountability, offer a wide array of incentives and have buy-in from all levels of management — generally see positive returns within three years, and some employers offer the programs simply because they believe it’s the right thing to do, regardless of the costs.

So while studies may indicate that the financial benefits to employee wellness programs may not be as great as once hoped, it appears that the programs are here to stay. Supporters argue that it takes time to see a significant difference in employee health, and that in the long-term, the costs of such programs will be easily justifiable — both in terms of cost savings and a healthier workforce.

 

About the Author: While earning her MBA with a master of public health policy specialization, Susan Paterson conducted extensive research on employee wellness programs. She found that those who required accountability were the most effective, and did pay for themselves within a few years.