We have written a lot about generating a return on wellness programs. It is an important topic for employers because many are literally banking on health promotion, wellness and prevention programs to help bend the healthcare cost curve.
CFOs who are skeptical about the value of wellness programs should advocate for a closer look at the numbers and results from these programs. Just beware that getting that ROI number won’t necessarily be easy or quick.
Determining wellness ROI “is not an easy process,” says Julie Stich, director of research at the International Foundation of Employee Benefit Plans (IFEBP) in Brookfield, Wis. “ROI can be difficult to measure since health improvement may be influenced by a combination of factors and because it can take anywhere from three to five years to see cost-saving results.” However, with concrete financial information on the effectiveness and impact of these programs, CFOs can help their companies make informed decisions about investments in these programs backed up by hard numbers.
A new study by the IFEBP adds to the existing research showing positive ROI for wellness programs. But more than that, the study looks at what needs to be present to make it more likely for employers to realize ROI from wellness.
Let’s look at the numbers. Although only 19% of the employers studied have analyzed the financial impact of their wellness programs, those that have are seeing healthcare costs decline by $1.00 to $3.00 for every dollar spent on wellness. Moreover, these employers are seeing improvements in higher employee morale, increased productivity and reduced instances of employee disability.
But not all employers are achieving positive ROI from wellness initiatives. So what differentiates employers that are achieving a return on their wellness investment from employers that are not? Looking at the differences between employers that have achieved ROI from wellness and those that have not, the study points to two factors: 1) the use of incentives for participation and results; and 2) strong communication to support these wellness programs.
Incentives. Incentives are a key driver of wellness program participation and financial returns. Although many companies offer a range of incentives, like gift cards and non-cash awards, prizes and raffles, reductions in insurance premiums is the incentive that makes the most difference when it comes to ROI, according to the IFEBP study. Nearly half of the employers that achieved ROI from wellness offer insurance premium reductions to employees who successfully complete a wellness program, compared to 29% of the employers that did not achieve wellness ROI. Moreover, the ROI employers offer these incentives for specific actions, such as undergoing health screenings, health risk assessments and using a healthcare coach or advocate. In particular, the study found that participation increased dramatically when the employer tied incentives to completing health screenings and health risk assessments.
Communication. Effective wellness communication is another key to stronger ROI, the study found. Organizations getting ROI from wellness are more likely to provide employees with a wealth of wellness information and electronic communications, such as web links, social networks, and wellness seminars and speakers.
Finally, three-quarters of the employers with measurable wellness ROI are more likely to run these programs as part of a broader value-based healthcare strategy. For example, in these organizations, wellness programs may be offered in conjunction with health screenings, stress management programs, health risk assessments, and fitness and nutrition programs. Only 45% of the organizations that have not realized or measured their wellness ROI have such a strategy.