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Leading employers are evaluating their health and wellness programs based on the value they add to business performance, rather than focusing narrowly on the potential medical costs they could save by having healthier employees.
This shift from return on investment to what industry experts call “value of investment” illustrates the growing consensus among employers that, when implemented correctly, wellness programs may not only reduce health costs but also boost worker productivity and engagement, reduce absenteeism and help attract and retain employees.
Value of investment asks, “What does the investment in the workforce — the human capital — generate in terms of improved employee performance, reduced employee absence and greater employee engagement, all of which are ultimately tied to overall business performance?” said Dr. Bruce Sherman, Cleveland-based medical director of population health management with Xerox HR Services.
Though not a widespread concept among employers, forward-thinking companies including American Express Co., Procter & Gamble Co. and General Electric Co. are embracing value of investment to demonstrate the worth of their health and wellness initiatives — especially in the face of critics and reports that claim wellness is a waste of time and money.
Wellness programs can produce health cost savings, experts say, but measuring the savings alone can “limit the understanding of the broader impact that those programs may have,” Dr. Sherman said.
For instance, programs to tackle workers' financial stress “may not have a direct impact on health costs,” but the confidence employees gain from them will help alleviate stress and reduce distractions at work, he said.
The growing focus on value of investment may also be due to the difficulty of calculating the ROI of a comprehensive wellness program, which requires complex data analysis that most employers can't pull off, sources said. Only 46% of employers measure the ROI of their wellness programs, according to a February Willis Towers Watson P.L.C. survey of 487 U.S. employers.
Moreover, said Dr. Sherman, “There are very few conditions in health care where we can actually spend money to save money,” making an ROI even more difficult to come by.
Even so, many executives seem to demand hard numbers before giving the green light to wellness programs.
“Leadership sometimes has to be taught that with health and health care costs, there's not going to be savings in an environment that is indexing at double-digit costs,” said Sandra Morris, former senior manager of U.S. benefits design with Procter & Gamble who is now a consultant at her firm About Quality Benefits Design L.L.C. in Cincinnati. But, “you're going to have the avoidance of costs” related to future diseases when you help employees stay healthy through workplace programs, she said.
Additionally, employees who work for a company that takes the time to put together a holistic wellness program that caters to all workers' needs will likely feel that the company cares about them, which “means a lot to employees, particularly when you are in a competitive hiring environment,” Ms. Morris said. That “employee perception” is something “you can't put in a number.”
“If you ask a CEO, 'Why do you think we should have better workplace programs?' interestingly, the first thing they turn to is not the ROI. It's not the cost of the program. It's the fact that they believe it's an example where a company can show their employees that they truly care about them,” said Derek Yach, New York-based chief health officer with wellness program provider The Vitality Group Inc.
“The standards we often apply to a tiny fraction of the health costs of a company are way beyond what is done on the majority of the costs of the company,” he said.
Though there may be no “single crisp number” to attach to productivity or health cost savings, CEOs know wellness “makes sense in the same way that if you ask any of the companies to give you the ROI on their spending on the Super Bowl … none of them will be able to give you a crisp figure, but they will tell you that it creates the aura and the vision for the overall company,” Mr. Yach said.
Still, in a time when health care costs keep growing — total health benefit cost per employee in 2015 rose 3.8% after a 3.9% increase the year before, according to Mercer L.L.C. — numbers do matter. Company executives want to know that their wellness investment is making a difference, giving credence to ROI, sources said.
“It's actually quite important to look at the value from a financial perspective as well as from other perspectives,” said Ron Goetzel, Bethesda, Maryland-based vice president of consulting and applied research at Truven Health Analytics and director of the Institute for Health and Productivity Studies at the Johns Hopkins University Bloomberg School of Public Health. But if reducing health costs is an employer's only objective, “there are a lot quicker ways to save money,” such as raising health plan deductibles and out-of-pocket costs, he said.
What the employer needs to evaluate is whether the amount of money spent on health and wellness initiatives is enough to affect workforce health, he said, adding that most employers spend too little. A good amount to spend on “prevention and health promotion” is “in the neighborhood of $200 to $500 per employee per year.”
Employers should be asking, “What does it cost to achieve positive health outcomes?” Mr. Goetzel said. “It's a different kind of mathematical equation (than ROI) because it's not cost savings that you are going after, but it's health improvement.”