A majority of employers that measure the performance of their employee wellness and value-based healthcare programs show a return on investment (ROI), with a significant number showing savings of $3 or more for every dollar spent, according to new research published by the International Foundation of Employee Benefit Plans (IFEBP).
The report "A Closer Look: Wellness ROI" used data from a broader survey conducted by Brookfield, Wis.-based IFEBP – its recently published Wellness and Value-Based Health Care survey – and compares results between organizations that have analyzed the financial impacts of their wellness programs and those that have not.
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In all, the data found that among employers who measure their ROI, 84 percent of them are achieving healthcare savings.
“Without question, employers are beginning to understand the direct connection that wellness initiatives can have on both employee health and healthcare plan cost savings,” said Michael Wilson, IFEBP CEO, in a prepared statement. “While the primary goal is reducing health costs, we’re also seeing other advantages from wellness initiatives, such as higher employee morale, increased productivity and reduced disability.”
But employers who are looking to launch an employee wellness and value-based healthcare program also need to be realistic in terms of how quickly their company can reap these savings. “You won’t necessarily see in the first year whether you are getting any advantages out of a new wellness program. In fact, it may cost you in the first few years ” said Julie Stich, director of research at IFEBP and a co-author of the report.
“The general rule of thumb is it will likely take three to five years to see and measure the results.” While this may be true of broad-based wellness programs focused on the entire employee population, Paul Hackleman, an employee benefits consultant and healthcare and public sector advisor for IFEBP, says it is possible to create targeted value-based programs within an organization that can see more immediate dollar-for-dollar savings.
As an example, Hackleman points to his experience working for San Mateo County, California in the 1990s when he determined that four departments in the organization had a very high incidence of back injuries, which resulted in both higher healthcare costs and lower productivity. Through targeted wellness interventions to better train the county employees in these departments, the county was able to reduce healthcare and disability claims by more than one-third.
“So you can get very demonstrable improvements for some programs in a short amount of time,” Hackleman noted. While only about one-in-five employers with a wellness program who were surveyed had a method for measuring ROI, Stich said there are still plenty of lessons to be learned from the group that are showing measurable ROI.
“One of the things we found to be most important among the groups that were showing positive ROI, that helped them achieve this was communication and education,” Stich said. “We did discover that the more newsletters, or email messages or web information provided by organizations, those were the ones that were seeing better ROI.”
Another big factor leading to successful wellness programs was the provision of incentives for employees to participate. The most common incentive, used by nearly half (49 percent) of the ROI group were health insurance premium reductions. The data also showed a wide gulf between the ROI group and the group that wasn’t measuring ROI in this type of incentive. Among the non-ROI group respondents, only 29.1 percent were offering premium reduction incentives.
“Incentives are quite valuable and they absolutely need to be in the toolbox of employers, because they do work,” said Hackleman. “It doesn’t take a lot of money to incent behavior in very powerful ways.” In the end, both Stich and Hackleman agree that employers need to see wellness and value-based healthcare programs as investments in their operation just like any other and that they should expect to see a return on the money spent.