The right corporate wellness strategies can help you shave hundreds of thousands of dollars off your health costs and insurance premiums. Employers aren’t the only ones who benefit; your employees also stand to gain from cost savings arising from incentives like premium reductions.
So how much cost savings do organisations actually achieve? What programs should you focus on? And when it comes to incentives and penalties, should you pick the carrot or the stick? We explore these questions, and more below:
Dollars and cents: What are the cost savings actually achieved by companies?
It’s difficult to pinpoint the exact cost savings in insurance premiums that organisations have garnered as few findings that focus on the ROI of incentives have been published.
The total cost savings — from insurance premiums to pharmacy costs and medical claims — vary widely across organisations. Companies like CP Advanced Solutions have reported savings of more than $250,000 over a five-year period from reductions in health expenditures and premiums. At Anderson Cancer Center, the total cost savings over a duration of six years totalled $1.5 million, while Johnson & Johnson estimates that the total savings from its wellness programs over a decade — from 2002 to 2008 — amounts to a whopping $250 million.
Lifestyle management VS. disease management: Which should you focus on?
Corporate wellness strategies generally include two components: lifestyle management programs and disease management programs.
Lifestyle management wellness programs — like providing on-site fitness classes, mindfulness programs or calorie-counted staff canteens — are effective in reducing absenteeism, improving employee health and boosting productivity levels.
If your goals are to reduce health claims and achieve a healthy ROI on your corporate wellness strategy, you’ll need to also zoom in on the second component: disease management programs. Such programs are created with the goal of helping employees with chronic diseases take better care of themselves, through means like providing them with personalised reminders about medications or medical appointments.
What’s the ROI on disease management programs?
In a recent study, “Do Workplace Wellness Programs Save Employers Money?”, researchers examined data collected from a Fortune 100 corporate wellness program collected over 10 years. The findings revealed that disease management programs accounted for a substantial portion of the total healthcare cost savings generated, yielding savings of about $136 per participant each month and lowering hospital admissions by 30 percent.
Let’s take a closer look at the figures: a program that prevents 25 emergency visits will produce savings of $50,000, while pre-empting four inpatient admissions will amount to savings of $100,000. Cost savings like these are achievable for a companies with about 2,000 employees.
Typically, employees with chronic illness amount for at least 50 percent of an organisation’s claims expense. In other words, by targeting your wellness programs towards helping these employees, you stand to bring about significant reductions in your claims costs.
But is disease management the best measure with the biggest ROI wins?
While disease management helps employers score a quick win with substantial cost savings, a measure that achieves long-term benefits and greater ROI is a successful preventative education program.
These programs act in two ways: by stopping individuals from developing chronic illnesses in the first instance, and secondly helps to prevent the deterioration of existing health conditions. Workshops about fostering healthy habits, regular health screenings and initiatives to help employees manage complex or long-term conditions are some of the measures included in these programs — all of which contribute to your employees’ wellness and corporate ROI in the long run.
Employees enjoy cost savings too
Employers aren’t the only ones enjoying cost savings on insurance premiums. Employees stand to gain too, from premium reductions offered by employers as an incentive for participating in corporate wellness initiatives to tangible rewards and recognition along the way.
Subsidies for employee health premiums differ across companies. Multinationals like ConAgra offer a premium reduction of $750 for singles, and $1,500 for families for employees who have met the organisation’s health goals: achieving acceptable ranges or significant improvements across factors like the body mass index (BMI), blood pressure, blood glucose, cholesterol and smoking. Additional incentives of $900 and $1,800 are given to singles and families respectively for completing health screenings.
At Hewlett-Packard, employees are rewarded with a $300 credit towards their insurance premiums for participating in health assessments, while Johnson & Johnson hands out $500 dollar credits towards the annual premiums of employees who have completed a health assessment.
Should employers use a carrot or stick? Approaches vary widely
But it’s not just all about dishing out incentives. Some companies are opting to wave the stick rather than dangle the carrot. This shift in mindset is clearly outlined by Rich Siegenthaler II, president and CEO of Integrated Wellness Solutions in Wooster: “We’re moving from an era of entitlement to an era of accountability” — with expenses being passed on to employees who aren’t willing to participate in wellness measures implemented by their employers.
One example is Honeywell International. The organisation hands out penalties to employees who do not undergo medical screenings offered by the company. These individuals pay an additional $500 for their annual premiums, and forgo a yearly company contribution of between $250 to $1,500.
Some strike a balancing act
Other organisations, like the state government of Alabama are finding the middle ground between the two approaches. Employees who meet standards for blood pressure, cholesterol, glucose and BMI, or show that they are taking steps towards maintaining a healthy lifestyle are given a wellness premium discount, while those who opt out of health risk assessments are not entitled to discounts. An additional penalty — a monthly premium — is also imposed on tobacco users.
To sum it up…
- For short-term gains, zoom in on disease management programs. For long-term benefits and greater ROI, adopt preventative education programs.
What are your corporate wellness objectives? If your goals are to reduce your health claims and attain a healthy ROI on your wellness programs, you’ll need to focus on disease management programs when designing wellness strategy. These programs, targeted at chronically ill and at-risk employees, are instrumental in bringing about sizable reductions in your organisation’s claims expense.
But long-term benefits are realised through preventative education measures, by stopping individuals from developing chronic illnesses and preventing the worsening of complex health conditions.
- Incentives VS. Penalties: Carrot, stick or both?
Employees stand to gain from cost savings — in the form of premium reductions — for participating in corporate wellness activities.
But doling out incentives may not be the approach that works best for your company, so you may want to consider striking a balancing act between the both approaches.
- Obtaining objective metrics and data is key
And keep in mind that all programs require objective metrics and data. For accurate wellness ROI calculation, you’ll need to monitor your data closely and obtain data points, so that this information can be utilised with internal HR metrics that your organisation is currently using. The total costs of staff turnover, absenteeism and talent acquisition costs are examples of HR metrics that you should be looking at.
wellteq is a health tech programs for employee engagement and HR data analytics. Through the use of technology, they are re-connecting people with health and organisations with stronger productivity and creating benefit for both employers and employees in the process.