How are you measuring your wellness program’s ROI?

Regardless of the services or products you offer, healthcare costs take a big bite out of your revenue stream, and you need a cost-containment solution to mitigate or control those costs. Since 1999, increases in employer-sponsored healthcare costs have far exceeded the rate of overall inflation; up to as much as four times in some years. In response, many U.S. employers have instituted worksite wellness programs designed to encourage employees to live healthier. The end result is reduced health risk factors for employees and a reduction in year-over-year healthcare spending trends for both employees and their employers.

In a health management study conducted in 2009 with managers of small- to medium-sized businesses across the country,* the majority of respondents stated their worksite wellness programs had been in place for more than two years, long enough to see return on investment (ROI). However, while the survey found that most respondents understand that the impact of a wellness program should be measured, many key metrics to achieving a good assessment remain unmeasured.

To calculate the ROI of employer wellness efforts, you have to understand the relationship between health risk factors and healthcare costs. Risk factors increase the unnecessary and avoidable utilization of medical services that will drive up cost. When organizations understand the correlation between health risk and cost, they can begin to understand how to measure the cost savings from reducing those risks.

Defining Return on Investment

There are two ways to define ROI; reduce the rate of increase in health plan costs and reduce costs in absolute terms. You can measure monetary savings of medical costs in absolute terms (for instance, a savings of $100 per participant from 2010 to 2011). Companies can calculate ROI if it offsets the rate of increase in health plan costs. If the trend was 10 percent per year for four years and becomes 7 percent per year after the implementation of a wellness program, you know it’s working.

Sixty-two percent of survey respondents state their organizations analyze the cost effectiveness, cost savings, and return on investment of their wellness programs. Employee participation is the most tracked metric, with 89 percent stating it is a very important measure. Respondents also list behavioral changes (84 percent) and employee satisfaction (74 percent) as important measures. Of related interest, although 87 percent of respondents state their program tracks participation, only 63 percent say their organization regularly monitors employee satisfaction; 61 percent say organizations assess changes in biometric measures; and 55 percent say their organization assesses and monitors the health status of at-risk employees.

Also of great significance, few respondents are tracking productivity metrics; only 29 percent monitor the impact on absenteeism, and a mere 18 percent monitor the impact on employee turnover, morale or productivity. And barely half of the employers surveyed said they or their current wellness provider have the capability to analyze medical and pharmaceutical claims data, critical components for effective cost analysis.

Behind the Financials

On-the-job performance often takes a back seat when it comes to measuring the ROI of health management, since healthcare cost reduction is the driving force for most wellness programs. While absenteeism is relatively easy to track, many employers do not measure it because it is difficult to determine the cause and reason. Employee morale, productivity and presenteeism are more challenging to measure. Presenteeism reflects an employee’s productivity when well, compared to when they are in pain, sick or stressed.

Participation tracking is very important, as is talking with your employees about their personal goals, their efforts to achieve those goals, and the support they get or feel they’re getting from their workplaces. Companies that are able to demonstrate ROI for wellness initiatives typically share five common elements:

  • A comprehensive program
  • Effective incentives
  • Biometrics
  • Multiple program modalities; and
  • Communication programs.

Initiating best practices

The following are best practices to strengthen wellness program performance and ultimately strengthen ROI:

  1. Design a comprehensive program to apply to all employees. Include both healthy and at-risk employees for program initiatives, as well as health assessments and screenings.
  2. Integrate incentives into plan design. The best programs have engaged and supportive managers who tailor incentives to their unique employee population. Successful wellness efforts include initiatives like premium discounts, cash, prizes, and/or paid time off.
  3. Validate efforts with biometric screenings. Health risk assessments are only one part of the process for tracking employee health. A biometric screening includes three components: blood work, blood pressure and body mass index.
  4. Offer multiple program modalities. Some wellness programs are completely self-directed. The best programs offer several options since one method will not work for the employee population. If employees do not like the offered programs, they will stop participating.
  5.  Engage employees with effective health-awareness programs. The best wellness communication strategy is engaging but not threatening. Efforts should be ongoing throughout the year and customized to your company and its activities. The most successful worksite wellness programs are fun and interesting, and keep employees involved for the long term, while lowering health risks.

The Centers for Disease Control has determined that approximately 75 percent of healthcare costs and productivity losses are related to lifestyle choices. Changing behavior is critical to reducing health care costs, so the more employers support and participate in their employee wellness efforts, the greater the ROI. And remember: When it comes to measurement, take criticism seriously, but not personally. People love to complain. If a company listens carefully, employees will give feedback on program design successes and failures. 

To reap the benefits of a wellness program at your company, join CBIA Healthy Connections at your company’s next renewal. It’s free as part of your participation in CBIA Health Connections!

*The survey, “Trends in Measuring the ROI of Corporate Wellness,” was conducted in 2009 and sent via email to nearly 21,000 professionals. Nearly one-third of respondents (32 percent) were senior management, C-level, vice president, or director. Another 40 percent were manager level. Most represented small to medium-size businesses, and all worked for companies with a current wellness program in place.