With losing weight and becoming more fit being common New Year’s resolutions, I thought everyone might like some food for thought on Wellness Programs, particularly what is working and what is not.
While dramatic changes in wellness initiatives have been occurring for more than a decade, savvy employers continue to experiment with new models in the quest for lowering health care and Workers’ Compensation costs, reducing absenteeism and improving productivity. Now, as the Affordable Care Act (ACA) is being implemented, there is even more interest in determining if such programs achieve the intended effect of healthier employees and lower healthcare costs.
Some studies have lauded the effectiveness of workplace wellness programs; yet, others have cast doubt on cost savings and the sustainability of the efforts. A recent highly publicized study by the Rand Corporation evaluated the cost impact of the lifestyle and disease management components of PepsiCo’s wellness program, Healthy Living. The disease management program focuses on helping workers manage chronic conditions, such as diabetes, heart disease and asthma while the lifestyle program encourages workers to live healthier through activities focusing on weight loss, smoking cessation, stress management, nutrition and fitness.
Providing an in-depth assessment of the experiences of over 67,000 workers during a more than seven-year period, the study offers insight into the cost effectiveness of the two aspects of the program. Almost all of the cost reductions came from the disease management component, saving $3.78 in health care costs for every $1 invested in the effort.
On the other hand, the lifestyle management component did not deliver returns that were much higher than the costs, only returning 48 cents for every dollar invested, mostly in modest reductions of absenteeism, not in reduced health costs. However, the employees who participated in both the disease management and lifestyle management components of the program generated the best results – an average reduction in annual health care costs of $1,920 per employee, primarily due to a 66% reduction in hospital admissions. This suggests that better targeting can improve the results of lifestyle management programs.
While the skeptics are quick to argue that the study proves wellness programs fall far short of their promise, in many ways, the results are not surprising. The disease management participants have high medical costs, including prescriptions, physician visits, and hospitalizations; thus, it is easier to realize savings when such costs can be managed. Conversely, it’s hard to cut costs for healthy employees who do not have high medical expenses and it’s impossible to measure how much future care is reduced or eliminated because of the program.
While the researchers conclude “�employers and policymakers should not take for granted that the lifestyle management components of the programs can reduce costs or lead to savings overall,” they note that reducing health care costs is just one of several motives for implementing workplace wellness programs. Other goals include improving the overall health of the workforce, attracting and retaining talent and reducing absenteeism and presenteeism.
The research highlights the importance of aligning the design of wellness programs with a company’s primary goals. If the goal is strictly cost control, it makes sense to focus on interventions for high-risk employees, whereas if the objective is to improve workforce health, investment in evidence-based lifestyle management may be warranted. There is a significant cost-saving opportunity in moving high-risk employees into a low-risk category, and there is value in keeping low-risk employees in the low-risk category.
The ACA has sparked new debate on the use of incentives by increasing the percentage of insurance costs from 20% to 30% (50% for smoking cessation) that employers can reward workers who participate in wellness programs and penalize those who refuse. Wellness programs fall into two categories under the Affordable Care Act: participatory and health-contingent.
Participatory programs are offered to all employees, regardless of their health status, and may provide rewards to those who take advantage of them. Health-contingent wellness programs are those that require employees to achieve certain goals to receive rewards, such things as weight loss, diabetes control, lowering blood pressure or smoking cessation.
Paying workers to reach specific health goals has been controversial, raising objections of discrimination, privacy violation and unfair treatment. There are stringent requirements applicable to health-contingent plan incentives under the ADA. A 2013 RAND report to Congress on workplace wellness programs found that fewer than 10% of companies with employee wellness programs use results-based financial incentives. Even among the ones who do, the size of the incentives doesn’t come close to the federal limit of 30 percent of the total premium cost.
When proposed without proper planning and involvement of employees such measures can create a public backlash, as Pennsylvania State University learned last summer. The school proposed that nonunion employees go to their doctors, complete biometric screening measures, and fill out a lengthy online health risk survey. Those who did not comply would be penalized with a $100-a-month deduction from their paychecks. The university shelved the plan following protest from professors who complained that it violated their privacy.
While incentives may help employees get off to a good start in making changes, sustaining them is more challenging and incentives can be expensive. According to a study by Towers Watson, the average U.S. employer currently spends approximately $440 per employee per year for workplace wellness and health management programs, with the lion’s share – an average of $327 per employee – going to financial incentives. To assess the value, requires a hard look at the company’s wellness goals, budget and projected outcomes.
Wellness programs are an investment and it’s an investment that takes time. Employers should identify what needs to be changed and develop programs that are creative, targeted and fit their culture and organizational needs.
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Author | Speaker | Certified Risk Manager | Certified Work Comp Advisor