Wellness offers more to both a company and its employees than simple cost reductions and better return on investment. Jake Flaitz, director of benefits for Paychex Inc., describes his company's efforts to improve the wellness of its workforce and enhance both their work environment and the company's bottom line.

In recent years, employers have increasingly turned their attention to improving the overall health status of their employees as one strategy to stem escalating health care costs.

The goal of this strategy has, typically, been to positively impact the direct spend incurred by both the company and employees by reducing the demand for health care services. The ability of wellness programs and initiatives to impact the direct spend, including calculating the return on investment, has been widely studied.

In addition to trying to identify the wellness programs' impact on direct expenditures, many employers also have tried to understand what impact health improvement can have on indirect medical costs such as absenteeism and presenteeism. In broad terms, this impact on productivity also has been the subject of studies, with many concluding that the ROI is equal to or greater than the return generated on the direct medical spend.

Less discussed and studied has been the impact that wellness programs can have on employee morale. The key question here is not just whether employee wellness can positively affect employee morale, but whether a company's investment in employee health can actually enhance employee engagement.

Of course, determining how to measure the value of investing in employee health is an individual company decision based in part on the organization's culture. In this article, I would like to share how we've approached evaluating the impact that our investment in employee well-being has had at Paychex Inc.

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From a pragmatic viewpoint, we do not believe that there is any single measure that is an absolute indicator of success. As a result, we have looked at a number of different metrics to see if commonality in direction exists. At a high level, this means that we are trying to understand the impact we are having on health risks, our financial spend, and the commitment that employees feel to the organization.

In 2007 we announced that we would be taking a significant evolutionary step in the Paychex wellness program by integrating it with our medical benefit offerings. We historically made on-site biometric screenings available to employees at no cost to them, financially incented the use of a health risk assessment (HRA), and had instituted a premium differential for non-tobacco users. We saw moderate success with this approach: Approximately 40% of our employees participated in the annual biometric screening, and 20% completed an HRA.

However, we made the determination that in order to continue to offer a rich medical benefit that our employees valued highly, we would have to take our wellness program (and our employees' health) to the next level. In 2008, the Paychex Active Health initiative began. Employees were given the choice to actively become engaged in either managing their health or their health care costs. In order to keep the medical option that they were in (at the time either a $100 individual deductible plan or a $150 individual plan with 10% coinsurance with a $500 out-of-pocket maximum), employees had to have a biometric screen at least once every two years, complete an HRA annually, and either be tobacco-free or participate in a structured tobacco cessation program.

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These three activities were called the Active Health Requirements. Completing them not only provided access to the best medical coverage, it also made employees eligible to participate in the Active Health Reward program in which they could earn between $100 and $300 by participating in various healthy activities and behaviors. Employees who chose not to complete the Active Health Requirements were only able to enroll in a medical coverage option with both higher cost-sharing ($300 deductible and 10% coinsurance) and higher premium contributions.

The participation metrics exceeded our goals. In the first year, 92% of employees enrolled in a Paychex medical plan completed the Active Health Requirements, and in subsequent years the participation remained above 92%. In addition to measuring participation, we are also interested in understanding if we are reducing health risk factors. Our ability to measure this has been complicated by the fact that we have used three different HRAs from three different vendors in five years. We also have analyzed aggregate data generated by the biometric screens.

From a measurement standpoint we have seen stabilization in risk factors (blood pressure, BMI, glucose) within our employee population. As University of Michigan health and lifestyles research scientist Dee Edington has said, sometimes you do better by not doing worse. We've taken a cautious approach to measuring the impact on our direct medical spend, waiting for four years in order to avoid the chance of prematurely declaring victory. With the assistance of the benefit actuarial firm that we use, Harbridge Consulting Group L.L.C., a financial evaluation was conducted this year, and it is readily apparent that we have been able to flatten our medical trend and have achieved a 4.5:1 return on investment.

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Measuring the financial impact of our Active Health initiative on our non-direct medical spend has proven to be more challenging. For example, during the course of any given year there are numerous actions that we take as an organization to improve productivity. We've concluded, at this time, that it is not possible to isolate the specific impact that health status has — independent of other activities — on enhancing employee productivity. Instead we have taken a more pragmatic approach to this evaluation. One of our overarching objectives is to have healthy employees productively at work. Employees who are not healthy are often not at work, and when they are at work we believe that the quality and quantity of their work is compromised relative to their healthy colleagues.

In addition to reducing the company's and our employees' direct medical spend and positively impacting productivity, another equally important reason why we have made improving the health status and the overall well-being of our employees a strategic priority is because we believe that it can make Paychex an even greater place to work. In a recent employee engagement survey, we asked employees if “our Active Health employee wellness initiative strengthened their commitment to Paychex.” We were pleased to learn that nearly 60% of our employees agreed that it did.

In fact, many of our wellness activities take place at the worksite or involve social components that get people working together in a way that enhances camaraderie. For example, wellness champions at each of our 100-plus locations nationwide often organize team-based fitness events such as charity races and lunchtime walking groups. And activities like our eight-week healthy eating and activity challenge have teams of employees working together to log their intake of healthy foods and their physical activity as they compete against other teams. While difficult to quantifiably measure, we believe that our wellness program has enhanced the work-life experience of our employees, making Paychex a better place to work.

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Measuring the total return that wellness programs generate is a complicated and challenging endeavor. It is, however, an important challenge to meet. There is a lot at stake: the significant financial commitment that companies are making and the evidence and confidence that the investment is making a difference. It is interesting to note that much less attention has been given to an area where the spend is considerably more — the ROI derived from the various procedures, tests, and treatments that we cover in our medical and pharmacy benefit plans. From a plan sponsor perspective, the ROI that is important here is the improvement in employees' (and their dependents') health status. Perhaps it's time that we start to evaluate that ROI.

At Paychex, we believe that our investment in our health and wellness program positively impacts our employees. It has produced a positive financial ROI on our direct medical spend, it contributes to productivity improvements, it enhances employee engagement and contributes to making Paychex a great place to work.

Jake Flaitz is director of benefits for Rochester, N.Y.-based Paychex Inc. He can be reached at 585-383-3105, jflaitz@paychex.com.