Lanier Upshaw

 Employee wellness programs are designed to improve the physical and mental well-being of its labor force while also helping individual employees overcome specific health-related issues. Many companies choose to offer incentives to encourage employees to take advantage of these programs.

But with the rising costs of health insurance many companies are frantically searching for ways to cut costs. Many companies who currently have wellness programs are asking the question, “Are wellness programs really worth it?” Yes, we all know it’s important but the question remains, “Is it worth it?” In other words does it save the company money or not?

That’s what we want to focus on in today’s post. We know being healthy is important but as a business owner you cannot afford to bankrupt your company by launching a health crusade. But if a properly devised wellness program can cut costs then, and only then, is it a win-win.

 The Evidence

 Before we move on let’s consider the evidence:

• According to the National Safety Council, nearly one million workers a day are absent due to stress, costing American companies nearly $300 billion a year in loss of productivity and the cost of temporary help [source: Risk & Insurance]

• The use of tobacco, alcohol and other drugs costs American companies approximately $100 billion annually [source: The Wellness Councils of America].

• The AAOHN survey questioned 500 workers nationwide about their perceptions of wellness programs. More than three-quarters of all participants indicated wellness programs are a good way to improve their overall health, and nearly 60% consider these offerings an incentive to remain with their current business.

If companies are losing $300 billion a year because of stress and $100 billion a year due to tobacco, alcohol and drug use then it’s safe to conclude we have a problem. This is not only a health problem it’s also a threat to the financial well-being of your company. And this is why companies place such high value on wellness programs.

In fact, more than 80% of American businesses with 50 employees or more have some sort of wellness program [source: The Wellness Councils of America]. So chances are if you’re reading this you have a wellness program. If you don’t, we strongly encourage you to consider starting one. Not because it’s “important” but because in the long run it can save you money.

What’s the ROI for Wellness Programs?

The more appropriate question is, “What’s the ROI for my company’s wellness program?” This is because no two companies are alike.

We can look at IBM who spent $1.3 billion on health care for its employees, dependents and retirees in 2008 and who continues to invest in wellness (even though it cut expenses in other ways, including layoffs).

Although it can be difficult to determine an exact return on investment, IBM worked with the Health Management Research Center at the University of Michigan to try to assess the program’s returns. According to Joyce Young, IBM’s director of well-being, results showed it saved around $80 million in reduced health claims.

While you may not be spending $1.3 billion on your health care cost we’re willing to bet it’s still a large portion of your company’s expenses. In 2008, the median health care cost per employee was $7,173 according to a survey by human resources consultants Watson Wyatt and employer coalition National Business Group on Health. And we all know the cost has only gone up since then.

So an average company with only 7 employees would spend $50,211 a year on health care related expenses. If that company saved roughly 16% like IBM did, they would see a $8,033 annual savings.

Do You Think It’s Worth It?

So to answer the original question, “Do we think wellness programs are worth it?” Well, it depends. A properly devised wellness program (with incentives) where the long-term results are monitored is worth it. But simply posting pictures of vegetables in the lunch room and sending out email blast reminders to “be healthy” is not. A wellness program is something you need to setup correctly in order to avoid creating a financial black hole called “Health and Wellness.”

For it to work it must be practical, employees must engage (hence the incentives) in it and the cost vs. savings must be monitored. If you want to read a couple real life success stories about wellness programs our next blog post will cover that.