The Business Case for Wellness
For years, some employers have effectively utilized workplace health promotion and disease prevention as a critical strategy to improve the bottom line. Fundamentally, health promotion and disease prevention interventions, such as screenings, health education and awareness, supportive work environments, and on-site fitness centers, aim to reduce behavioral risk factors in order to improve employee health, thereby resulting in lower healthcare costs. 1, 2, 3
In Maine, 24% of adults smoke cigarettes, 59% are overweight or obese, and 26% do not participate in any leisure-time physical activity, yet the majority of employers do not offer health promotion and disease prevention programs to support employee health.4 One explanation for this is that Maine is a state of small businesses – roughly 93% of worksites employ fewer than 20 people. Small-sized employers regularly cite a lack of time, money, and expertise as key reasons for not having health promotion and disease prevention interventions. As a result, a general perception is that large employers can offer these interventions, but smaller employers cannot.
Some small to medium-sized worksites point to a lack of reward as a key reason why employee health is not addressed. For most small employers, health insurance premiums are based on the overall healthcare utilization by all small businesses (so-called “community rating”) not on the actual healthcare claims experience of their own employees. This “community rating” means that employers’ premiums are not directly affected by their ability to impact employee health. An employer could implement an excellent program, reduce health risks, and even healthcare utilization, yet premiums would likely continue to rise if other employers of the same size did not undertake similar actions. The lack of a relationship between employee health and insurance premiums deters many small employers from investing time and money in health promotion and disease prevention.
In contrast, larger employers who are self-insured or whose premium increases are tied directly to prior utilization have an excellent incentive to address employee health and achieve positive bottom-line results. Self-insured worksites take on the risk associated with providing health benefits directly to employees. If healthcare utilization is high, employer profits will be negatively affected. Because of the potential risks and rewards, self-insured worksites typically have a broad range of health promotion and disease prevention interventions in place to encourage and reward good employee health practices.
Despite the challenges outlined above, there are several important reasons why Maine employers, regardless of size or industry, should address employee health. First, reducing healthcare costs is not the only means by which improved employee health contributes to company performance. A healthier workforce can also generate significant gains in individual productivity, improved quality of products or services, and decreased absenteeism. A study of nearly 375,000 employees found that productivity losses associated with absenteeism accounted for 34% of all health and productivity-related expenditures for both mental and physical health conditions.5 Benefits from increased productivity have a direct and immediate impact on organizational performance. Thus, employers must understand that the benefits of healthy employees extend beyond controlling healthcare costs.
Improving employee health generates other benefits as well. For example, successful employee health initiatives with documented results can provide leverage for negotiating with insurers and workers compensation carriers. Also, employers with health promotion and disease prevention experience will have more information on which to make decisions on purchasing healthcare benefits or considering self-insurance. Finally, company image can be improved by developing a reputation as an employer that cares about its employees and the community in which it does business.
Based on more than 120 research studies, the National Business Group on Health reported that, within five years of program implementation, overall benefit-to-cost ratios (return on investment) of:
• $3.48 in reduced health care costs per dollar invested in wellness programs
• $5.82 in lower absenteeism per dollar invested
Getting started with health promotion and disease prevention doesn’t have to be expensive, time-consuming, or require a special degree. There are a number of strategies employers can use to support employee health, including modifications to the work environment to encourage healthy behaviors, development of policies that build health into the work culture, initiatives to raise awareness, education on a variety of health topics, and enhancement of preventive care benefits. There are a considerable number of effective strategies that are low or no-cost, require little personnel time to start up and maintain, and can be coordinated by existing staff.
1. Aldana S. Financial impact of worksite health promotion and methodological quality of the evidence. Art Health Promotion. 1998;2(1):1-8.
2. Pelletier KR. A review and analysis of the health and cost-effectiveness outcome studies of comprehensive health promotion and disease prevention programs at the worksite. Am J Health Promot. 1996;10(5):380-388.
3. National Diabetes Education Program: Joint Project of the National Institutes of Health and Centers for Disease Control and Prevention. Making a Difference: The Business Community Takes on Diabetes. September 1999.
4. Maine Department of Human Services, Bureau of Health. Behavioral Risk Factor Surveillance System, 2002.
5. Goetzel RZ, Hawkins K, Ozminkowski RJ, Wang S. The Health and Productivity Cost Burden of the “Top 10” Physical and Mental Health Conditions Affecting Six Large U.S. Employers in 1999. J Occup Environ Med. 2003;45(1):5-14.