Can Employee Wellness Programs Cure What Ails Us?

Can Employee Wellness Programs Cure What Ails Us?

August 5, 2014

By Charlla Feller-Davis
For years we’ve been hearing the same beleaguered declaration: The cost of healthcare is going up. It’s an understatement that doesn’t come close to reflecting the magnitude of how much costs are climbing. Experts report costs have increased 274 times since 1950. No other sector of U.S. goods or services has experienced such an unbridled uptick. Today, healthcare costs are growing at a much faster rate than inflation, the economy and wages.

In a world of hard choices, medical costs are a source of stress and worry for nearly everyone. It has left government officials, insurance providers, corporate executives, small-business leaders, consumers and the medical community scrambling to find solutions. Sadly, there doesn’t seem to be a magic bullet to cure what ails us, and employers have been left to shoulder enormous responsibility—and financial costs.

Trying to provide employees with the health insurance benefits they have come to expect and rely upon while complying with all the requirements of the Affordable Care Act is no simple feat. With combined healthcare spending totaling $2.5 trillion — a little more than 17% of our nation’s gross domestic product — it’s not surprising that many companies have implemented employee wellness programs in an effort to contain costs.

Investing in Employee Wellness

A survey by Fidelity Investments and the National Business Group on Health reveals that corporate employers plan to spend an average of $594 per employee on wellness-based incentives in 2014 — a 15% increase from the 2013 average of $521 per employee.

The survey also found that most companies view wellness programs as “an essential part of their benefits program” — with 95% of companies saying they plan to offer some kind of health improvement program for their employees.

“While more employers are on board with employee wellness programs and spending more per employee, many are also upping their requirements and expectations for tangible results,” says Lesa Blakey, vice president of human resources and accounting at Inspirus. ”It’s understandable considering the very real cost associated with preventable health conditions such as heart disease, high blood pressure, diabetes, smoking and obesity have on employer healthcare costs.”

Obesity alone increases employer-sponsored health insurance $92 billion each year, along with an additional $4 billion related to absenteeism. To stem the tide, employers have introduced wellness incentive programs they hope can help their employees be healthier and more productive.

Employers Expect More From Employees

In the beginning, many of these programs were educational and aimed at improving awareness about personal lifestyle choices and risk factors. Employees were required to do everything from watch information modules and complete questionnaires about their family medical history, diet and fitness routines to taking biometric screenings for cholesterol, blood pressure and other factors. Participation depended on the incentives. A cool $100 per person netted about 75% participation (according to Lockton Benefit Group). But participation dropped off significantly to about 30% to 50% when rewards were smaller.

Companies using this approach also found that telling people about their health risks and giving them advice didn’t necessarily lead to action. And without some kind of sticky results, an employee wellness program won’t deliver the necessary return on investment.

“Now more employers are upping the ante and becoming much more strategic — some might even say more clinical — in their approach to wellness programs,” Blakey says. “There is a growing evolution from wellness incentive programs that reward employees simply for participating, to programs that tie rewards to specific health status standards."

The Go-to Five

Today, there are basically five types of incentive programs companies are gravitating toward. Here’s an overview of each.

Action-based Incentives

Employees are required to undergo a risk assessment. Based on the outcomes of their assessment, they are then required to take specific action to improve their health in order to earn rewards — and sometimes avoid penalties. For example, an employee whose body mass index is 25 might be asked to participate in a weight-management program.

  • Typical Annual Value: Rewards of around $75 are given for completion of a health assessment; $200 to $350 for action taken based on an assessment.
  • Pros: Employees are motivated to take steps to change their unhealthy behaviors.
  • Cons: Incentives don’t encourage healthy behavior beyond the completion of the required programs.

Everything-but-the-kitchen-sink Incentives

Companies offer incentives for a variety of activities and tasks — everything from walking a certain number of minutes per week and “Can the Soda” challenges to bike rides and self-defense classes. The more complex and health-focused the activity, the bigger the reward.

  • Typical Annual Value: Generally $25 to $125 per task
  • Pros: Employees like the freedom to choose their health activities.
  • Cons: Too many options can overwhelm employees, and companies can waste money on programs that don’t effectively address workers’ biggest health problems.

Progress-based Incentives

Companies reward employees for taking steps to hit healthy benchmarks for cholesterol, blood pressure and weight.

  • Typical Annual Value: $100 for reaching a healthy weight
  • Pros: Employees are financially motivated to improve their health rather than penalized for not being perfect.
  • Cons: Rewarding employees for simply showing up to a wellness program doesn’t mean they will actually get healthier.

Outcome-based Incentives

Companies tie incentives and penalties to specific health metrics. Workers pay more of their health insurance costs until they hit ideal cholesterol, blood pressure and body mass index levels. According to a survey by Fidelity and National Business Group on Health, 41% of employers use this model. While most don't penalize employees for not achieving results, they do reward those who do with lower insurance premiums, cash or deposits into their health savings accounts or flexible savings account.

  • Typical Annual Value: $100 for achieving a healthy weight; $125 for hitting other biometric targets; $200 for kicking the tobacco habit.
  • Pros: Experts say this incentive model is effective when it comes to getting people to actively improve their health. Participants in a recent Mayo Clinic study lost nine pounds on average when they received $20 per month for meeting weight-loss goals or had to pay $20 when they didn’t. Participants who didn’t receive incentives lost only two pounds on average.
  • Cons: Critics say the model can be discriminatory and may actually decrease access to healthcare. Because employers are legally required to offer workers who don’t hit targets other ways to earn incentives, employees might never reach their health goals.

Targeted Incentives

With this type of program, companies crunch their employees’ health risks, claims and other data (or have the insurer or an analytics company do it) in order to offer personalized wellness programs and incentives.

  • Typical Annual Value: $100 to $125 for targeted programs
  • Pros: Personalizing wellness programs boosts participation among employees who will benefit the most.
  • Cons: Some employees feel personalized interventions are intrusive and compromise their privacy.

Companies Get Big Returns on Investment

Regardless of the types of incentive programs they choose, companies leveraging workplace wellness programs normally see a 300% or greater return on their investment. Within the scope of the bigger picture — namely skyrocketing medical costs — strategic incentive wellness programs that have been in place for several years are definitely moving the needle. Big time. For every dollar spent on wellness programs, medical costs fall roughly $3.27. Absenteeism costs fall, too, by about $2.73 for every dollar spent.

Some companies are enjoying an even greater return. This is good news to every chief financial officer and human resources vice president in the nation. Although corporate America can’t control what care providers and insurance companies charge, it is proving there is a lot it can do to combat the rising costs of medical care through strategic incentive wellness programs. And that is very healthy indeed.

Melissa Gatchel-North is a national Emmy-nominated and award-winning writer who has profiled some of the nation’s most interesting companies and their maverick founders—including FUBU, Hard Candy Cosmetics, Human Genome Sciences and many others.