Do Wellness Programs Save Money?
Have you ever watched a young child pick up a full glass of punch and start walking? The outcome is inevitable…there will be punch on the carpet. How can you know what the outcome will be? How can you know how much money a wellness program will save?
After all, this may be the first time you’ve ever watched this child handle punch and, yet, somehow you know what is going to happen. The outcome is predictable because we’ve all seen the same thing happen in the past.
Based on what we have seen and experienced in the past, we can be fairly confident about what will happen in the near future. Our best predictors of the future come from the past.
Our best predictors of the future come from the past.
It’s true for kids and punch, it’s true for investing in the stock market, and it’s true for predicting how much money a wellness program will save in employee healthcare costs. The best predictor of future healthcare costs is past healthcare costs. Insurance companies call this credibility.
Do Wellness Programs Save Money With Rising Costs of Healthcare?
Credibility is an actuarial term describing the degree of accuracy in forecasting future events based on statistical reporting of past events. Credibility is not the only predictor, but it is the best predictor.
Age, gender, socioeconomic status, race, lifestyle and even location can also predict healthcare costs. The presence of a wellness program can also influence company medical costs.
Each year healthcare costs increase and each year employers struggle to handle the added financial burden. Healthcare cost increases are worse than the cost increases associated with labor, materials, or energy.
According to a recent business roundtable survey, CEO’s rank the cost of health care as one of the biggest threats to company profits.1
Burden of Reducing Healthcare Costs
Yearly increases in employee medical care costs are on the radar screen of every successful workplace. One of the more commonly used solutions has been cost shifting − passing the increases along to employees or customers.
From a company perspective these tactics do reduce the healthcare cost burden for the company, but they do not address the core of the problem: the high demand and high cost of health care.
When we look at the exact reasons why healthcare costs increase, it’s clear that wellness programs can only impact a few of these cost drivers. Worksite wellness programs are effective at reducing the demand for health care which lowers cost and helps employers save money.
Wellness programs make sense and they have been shown to work, yet they are rarely included in any discussions about future healthcare costs.
Wellness programs make sense and they have been shown to work, yet they are rarely included in any discussions about future healthcare costs. This oversight can usually be explained by one reason: a lack of appreciation for the strength of the business case for wellness. The fact is, the return on a wellness program investment is nearly always positive.
And even when an investment of $1 yields a meager return of just $1, that means that the benefit is essentially free! Who wouldn’t provide such a benefit? In fact, this is exactly what a large review of the wellness science, known as the Rand report, demonstrates (see page xxvi).
The Rand Report Shows Wellness Programs Save Money
It is amazing at how original research pieces like the Rand report can get twisted and changed by the blogosphere and the media. Here is the executive summary the executive summary of the Rand report. In just a few paragraphs the authors clearly show that the science is very supportive of wellness programs.
Yet, the critics cry foul. They ignore the 98% of the report that says programs work and they focus on the 2% of results that are not spectacular.
This perspective is truly perplexing. Of course there are wellness vendors out there making unsubstantiated claims and promoting programs that do nothing, just like any business.
However, well organized, comprehensive programs such as this one are very effective. Besides ignoring all of the science behind wellness programs, most critics are long on complaints and short on solutions.
It’s one thing to complain about something, and quite another to actually do something about it. We all welcome criticism if it is accompanied by new ideas, solutions, or new approaches.
Wellness ROI Calculators Forecast How Much Wellness Programs Save
So whether you are unconvinced of the value of wellness programs or you are considering an investment in employee wellness, wouldn’t it be helpful to see how these programs can realistically impact a companies bottom line? If you already have a wellness program, wouldn’t it be nice to know what you can expect to save in future medical costs?
No matter where you are in your thinking with respect to an employee wellness program, perhaps you could use a simple, accurate way to forecast how an employee wellness program can impact employee-related cost trends at your worksite.
There are some forecasting tools on the market that require a team of actuaries and accountants to complete expensive forecasts, while others require most of your employee population to complete a lengthy, expensive Health Risk Appraisal.
WellSteps has created several FREE research-based forecasting tools that we call Return on Investment (ROI) calculators.
These wellness ROI calculators forecast how employee wellness programs can impact:
- future healthcare costs
The ROI calculator for healthcare costs can help you determine whether an investment in a wellness program makes sense for your company.
What You Need To Know About The WellSteps ROI Calculator
Before you use the ROI calculator though, you should know what this tool is not.
First, it is not a crystal ball. There is really no way to predict the future except to forecast from the past. Successful companies will do their best to be prepared for what the future holds.
Second, the ROI calculator may not apply to every company in every situation. The truth is that not all companies are created equal.
We have done our best to consider a variety of possible differences between companies as we have constructed the calculator. What it will do is produce conservatively accurate forecasts given the data you enter.
How the Wellness ROI Calculator Works
So here is how to use it. You will need just three pieces of information:
- Your company’s total healthcare costs over the past 12 months.
- The total number of benefited employees.
- The percentage change in healthcare costs each year for the past 5 years.
It would good, but not necessary, if you knew the percentage of your employee population who were smokers and who were obese. Once you have entered this information, you will get several graphs.
First, you will see the “Projected Costs.” This is what will happen to healthcare costs over the next several years if you do nothing. This forecast is based on the notion that healthcare cost increases will continue as they have.
Of course, it is possible that the rate of increase may slow or accelerate. We just don’t know what direction costs will head, so we have assumed that things will continue as they have in the past. Remember, absenteeism and lost productivity are not included in these projections, so the total cost of doing nothing is probably even bigger than you think.
Savings From Implementing Wellness Programs
Second, because we have a very good idea of the independent costs of smoking2 and obesity3, the ROI calculator can project about how much you would save if you decreased the percentage of employees who smoke and the percentage of employees who are obese.
Third, the ROI calculator will project what you would save with a comprehensive wellness program versus the cost of doing nothing.
To create this calculator we completed an exhaustive search for reputable, published journal articles dealing with the economic returns of wellness programs. We included 25 studies and grouped each according to the intensity of the intervention that was administered. We listed the references for these studies at the end of this article.4-28
To project the cost savings of reducing cigarette smoking or obesity, we assumed — unless you entered these figures — that the rates of smoking and obesity in your company were roughly the same as the national averages (22% and 33% respectively).
We based our estimates on two very large studies. These references are also included at the end of this blog.
Over 5,000 U.S. companies use the Wellness ROI calculators each month. This tool helps move wellness programs from a fun employee perk to a core business strategy, which is something every successful company should consider if they are to stay competitive.
You can continue to bear the burden of ever increasing healthcare costs or you can start to get proactive about using a comprehensive wellness program to help your employees have optimal health and stay out of the healthcare system
You can continue to bear the burden of ever increasing healthcare costs or you can start to get proactive about using a comprehensive wellness program to help your employees have optimal health and stay out of the healthcare system.
Your Next Steps
ROI calculators are great, and can show exciting figures to save money both for your company and your employees’ health. However, the numbers don’t matter if there is no program implemented to create the changes.
That’s why here at WellStep our desire to help see your return on investment become reality, and the health of everyone involved in your wellness programs to flourish. Discover exactly how by enjoying a free demo from one of our WellSteps guides. You can sign up for a free demo right here and we’ll get you taken care of.
Frequently Asked Questions
Are wellness programs cost effective?
Yes, it’s been shown with various research, case studies, and documented results not only within WellSteps’ programs, but many wellness program providers everywhere. Although we cannot speak specifically for other wellness companies, we have reference in this article all public sources of data showing just how cost effective with dramatic savings implementing a wellness program in your company can be.
For further publications, research, and actual numbers based on WellSteps clients over the years, you can visit our Research Page and learn more. We’ve shown effectiveness at reducing health care costs, as well as much more, with many small and mid-size companies across the country.
What are the benefits of a wellness program?
Worksites are doing more to prevent, arrest, and even reverse chronic diseases than any other group. Among the benefits seen from those efforts, just a few documented results are:
- improvement of employee’s healthy behaviors
- reduction of elevated health risks
- reducing health care costs
- greatly improving employee productivity
- decrease in employee absenteeism
- improve employee recruitment and retention
- building and sustaining employee morale
And these are just a few of the benefits we see across the board with the companies we work with here at WellSteps. You can read more on these 7 benefits alone and the statistical results supporting those benefits right here.
What are the cons of a wellness program?
There certainly are wrong ways to implement any program, especially a wellness program. Putting a committee together to try and come up with costly results without fully understanding what is needed for the program to be effective can leave a sour opinion about said programs.
Over the years we have discovered exactly what makes wellness programs NOT work effectively too. That’s why we encourage you to consult with a reputable wellness consulting company, like WellSteps, to discover how to make the best of your wellness program. Please reach out so that your experience of implementing a wellness program is positive with benefits achieved.
- Business Roundtable Uncertainty’s Impact on health-care’s success stories. Accessed 8/14/2019.
- Fellows JL, Troclair A, Adams EK. Annual smoking-attributable mortality, years of potential life lost, and economic costs—United States, 1995–1999. MMWR Morb Mortal Wkly Rep 2002;51:300–3.
- Finkelstein E, Fiebelkorn IC, Wang G. The Costs of Obesity Among Full-time Employees. Am J Health Promot. 2005;20(1):45-51.
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