Ideally, the key objective of corporate wellness programs is to improve employee health and wellness, which in turn, reflects in better employee productivity, engagement, reduced healthcare costs, and overall better ROI.
A BGH employer survey predicted a probable 5.3% increase in employee healthcare costs in 2021. And so, many corporate wellness programs are focusing on healthcare costs as one of their KPIs.
There have been plenty of studies that prove the positive impact of employee wellness programs on healthcare costs. Contradicting these studies, there have been equally strong debates on their effectiveness.
Three studies from well-known organizations – CDC, RAND, and HBR – prove the effectiveness of employee wellness programs on reducing healthcare costs and enhancing ROI.
CDC Study – Unhealthy Lifestyle Habits and Healthcare Costs
A 2016 study by the Centers for Disease Control and Prevention (CDC) reported the association of physical inactivity with rising healthcare costs in the United States. According to the study, almost $5,813 was spent annually on healthcare costs of individuals who did not exercise regularly, while $5,076 was spent annually for those who got weekly adequate physical activity between 0 – 150 minutes. Only $4,500 was spent per year on healthcare costs for those who got more than 150 minutes per week of exercise. In short, $1,313 more were spent on an average for individuals who led a sedentary lifestyle compared to the ones who had a more active life.
As per the CDC reports, 11.1% of the US healthcare costs were incurred due to inadequate physical activity. In 2018, it was attributed that $333 billion was spent on healthcare costs due to inactivity. Many other studies on the same line proved that changing lifestyle habits could save $730 billion in healthcare costs, and most of them were directly or indirectly related to physical activity.
Although the CDC study did not directly prove how the corporate wellness programs can reduce healthcare costs, it does show the impact of unhealthy lifestyle behaviors on the rising healthcare costs. And corporate wellness programs play a major role in helping employees adopt healthier lifestyle habits reducing the chances of chronic health conditions, thus reflecting in lower healthcare costs.
RAND Study – Managing Chronic Health Diseases and Healthcare Costs
A 2014 RAND study about workplace wellness programs saving employers wellness dollars had skeptics debating over the failures of wellness programs to bring in the desired ROI. According to the study, most of the healthcare cost savings came from disease management programs. While lifestyle management programs included promoting regular physical activity, healthy eating, and overcoming addictions, disease management programs addressed serious issues like heart diseases, diabetes, Emphysema, etc. Although most wellness dollars were spent on lifestyle management programs, they were certain to alleviate the possible long-term health risks. On the other hand, disease management programs were quite expensive in the short-term, but they addressed immediate health concerns.
The study showed that though a majority of the employees participated in the lifestyle management programs, the major healthcare costs savings of almost 87% came from the disease management programs, i.e., $136 per employee per month was saved owing to the investment in disease management programs. Both the programs together reduced an average of $30 per employee per month of healthcare costs.
According to the RAND study reports, employers must first understand their workplace wellness and employee health goals. If they are looking for long-term improvement in employee health, productivity, and workplace culture, they can implement suitable lifestyle management programs. On the other hand, if they are looking to reduce healthcare costs quickly, they can invest in disease management systems.
HBR Study – Impact Of Health Coaching On Healthcare Costs
According to a 2018 HBR Harvard Business Review study, the conflicting outcomes of the corporate wellness program benefits were not because of the program’s inefficiency, but due to the inability to evaluate their outcomes with the right metrics.
For example, when a person loses weight, they become happier, confident, active, and productive, which means one measurable wellness parameter could impact other non-measurable factors too. Sadly, most wellness programs analyze specific outcomes and skip out on the broader view of the outcomes.
HBR studied the impact of one-on-one health coaching on overall employee wellness. It found that the wellness programs that supported the health coaching programs showed better employee holistic wellness, and it saved $195 per participant in healthcare costs. No wonder, offering health coaching through corporate wellness programs matters more now in 2021.
Corporate wellness programs have become a business priority for many companies, and the principal objective is to improve employee wellness to reduce healthcare costs, boost productivity, and enhance workplace culture, all of which reflect in business growth. Despite the debates and doubts, there is enough evidence to prove that investing in employee wellness programs can bring financial benefits and also give a competitive edge in the market.
While the key lies in designing the right corporate wellness programs, it is also vital to measure the outcomes using the right evaluation metrics to know the overall effectiveness of the program.