SAN FRANCISCO — A growing body of evidence suggests that employers' motivations for improving the overall health of their employees should extend far beyond the need to control the inflation of their medical costs.
Poor workforce health management costs employers an estimated $576 billion a year, only 40% of which is attributable to medical costs, according to the San Francisco-based Integrated Benefits Institute. The remaining 60% of those costs represents lost productivity and wage replacement expenses driven by short- and long-term disability and workers compensation claims resulting from untreated or undertreated chronic conditions.
“Employers always bear the financial burden of lost work time, no matter how they finance health care,” IBI President and CEO Thomas Parry said. “Health management interventions, including worksite wellness programs, can reduce medical costs, employee absences and lost productivity, particularly over the long term.” He was speaking at a panel discussion earlier this month at the 2014 IBI Annual Forum in San Francisco
By integrating their employee wellness and absence management programs, employers can more effectively reduce the prevalence of chronic health risks and conditions — including poor weight management and cardiovascular health, tobacco use and lack of exercise — that commonly drive medical and pharmacy benefit costs, as well as use data from health risk assessments and biometric screenings to predict and prevent lost work time due to disability and workers compensation claims, restricted duty accommodations and other impediments to the overall productivity of their workforce, panelists said.
“It's important for employers and their employees to see productivity as a health outcome. In many cases, employees can improve their productivity before or while they're improving their health conditions,” said Gary Fritsch, Pittsburgh-based wellness, absence and productivity analytics product manager at Cigna Corp. “You don't have to wait until they're recovering from something before they can start addressing the impact that their health has on their productivity.”
Employers can also use the demonstrable link between poor employee health and occupational injuries and illnesses to strengthen the financial argument for investment in a cohesive workplace wellness and disability management program, panelists said. When Plano, Texas-based J.C. Penney Co. Inc. undertook a multiyear overhaul of both its employee health benefits and disability management programs, the company included a comprehensive workplace wellness program for which success would be measured not only in the dollars saved on its annual medical costs, but also the savings generated in its workers compensation and disability programs and its overall productivity.
“What we did was sit down with our workplace wellness partners and looked at where we were with some of these key conditions across our population, and figured out how bending the trend on those conditions would impact those costs,” said Matthew Harmon, Penney's benefits delivery and retirement director and the 2013 Business Insurance Benefit Manager of the YearŽ.
Penney's wellness program saved approximately $7 million in productivity costs and $2.8 million in workers comp and disability claim costs, Mr. Harmon said.
“If you can't show results, it's pretty hard to get a program off the ground with your board of directors or senior executives,” Mr. Harmon said. “Nothing speaks louder than actual hard dollars.”
A majority of employers still treat employee health and absence management as separate exercises, panelists at the conference said. According to Aon Hewitt's “2013 Employee Health Benefits Survey,” only 25% of employers polled said they have integrated their employee health management and absence management programs, although 56% said they were considering doing so within the next three to five years.
“The employers that are standing on the sidelines of employee health management and wellness are usually the ones that are focusing heavily on the return on investment,” said Tom Carter, vice present and national practice leader at HealthWorks, the workforce health management consulting arm of Oakland, Calif.-based Kaiser Permanente. “They don't realize that they're already paying for these health risks in significant ways.”