A version of this article appeared in the December 2010 issue of Harvard Business Review.
Since 1995, the percentage of Johnson & Johnson employees who smoke has dropped by more than two-thirds. The number who have high blood pressure or who are physically inactive also has declined—by more than half. That’s great, obviously, but should it matter to managers? Well, it turns out that a comprehensive, strategically designed investment in employees’ social, mental, and physical health pays off. J&J’s leaders estimate that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent.
Wellness programs have often been viewed as a nice extra, not a strategic imperative. Newer evidence tells a different story. With tax incentives and grants available under recent federal health care legislation, U.S. companies can use wellness programs to chip away at their enormous health care costs, which are only rising with an aging workforce.
Government incentives or not, healthy employees cost you less. Doctors Richard Milani and Carl Lavie demonstrated that point by studying, at a single employer, a random sample of 185 workers and their spouses. The participants were not heart patients, but they received cardiac rehabilitation and exercise training from an expert team. Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety, and other measures), 57% were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs had declined by $1,421 per participant, compared with those from the previous year. A control group showed no such improvements. The bottom line: Every dollar invested in the intervention yielded $6 in health care savings.
We’ve found similar results in our own experience. In 2001 MD Anderson Cancer Center created a workers’ compensation and injury care unit within its employee health and well-being department, staffed by a physician and a nurse case manager. Within six years, lost work days declined by 80% and modified-duty days by 64%. Cost savings, calculated by multiplying the reduction in lost work days by average pay rates, totaled $1.5 million; workers’ comp insurance premiums declined by 50%.
It’s easy to find employees who don’t participate in wellness programs. Some cite lack of time, little perceived benefit, or just a distaste for exercise. Others don’t know about available services or blame unsupportive managers. A few think their health is none of the company’s business or mistrust management’s motives. As with any worthwhile initiative, creating a culture of health takes passionate, persistent, and persuasive leadership.The C-suite.
It’s not unusual for firms to enter the wellness space with a big splash that subsides to a ripple. As management priorities shift, the opportunity to integrate a culture of health can pass. Ideally, a wellness program should be a natural extension of a firm’s identity and aspirations. But many executives forget that the cultural shift takes time.
It’s not unusual for a company to think about employee health narrowly. Exercise is exercise, right? But employees’ wellness needs vary tremendously. Wellness isn’t just about physical fitness. Depression and stress, in particular, have proved to be major sources of lost productivity. Wellness program administrators need to think beyond diet and exercise. Biltmore, for example, offers a nondenominational chaplain service—on call 24 hours—to assist employees and immediate family members with divorce, serious illness, death and grief recovery, child rearing, and the care of aging parents. The services are confidential, free, and voluntary. The chaplains meet their clients at sites ranging from the family residence to a funeral home to Starbucks.
Pillar 4: Accessibility
Our sample companies make low- or no-cost services a priority, and they know that convenience matters. On the SAS main campus, 70% of employees use the recreation center at least twice a week. Director Jack Poll’s explanation: “Our high participation rates are because, when we opened, we thought of all the reasons people wouldn’t use the facility and we worked to eliminate every one of them.” The center is open before and after work and on weekends, and the staff develops a variety of fresh, engaging programs.
Pillar 5: Partnerships
Internal partnerships help wellness programs gain credibility. At Biltmore, for example, wellness professionals partner with the company’s finance division to vet the cost-effectiveness of various programs. External partnerships with specialized vendors enable wellness staffs to benefit from vendor competencies and infrastructure without extra internal investment. Lowe’s has contracted with a partner to drive custom-built laboratory buses to stores, distribution centers, and corporate offices so that employees can conveniently receive biometric health screenings and complete their HRAs in private kiosks.
Pillar 6: Communications
Wellness communications must overcome individual apathy, the sensitivity of personal health issues, and the geographic, demographic, and cultural heterogeneity of employees. The range and complexity of wellness services also can pose challenges.
The Fruits of Workplace Wellness
Although some health risk factors, such as heredity, cannot be modified, focused education and personal discipline can change others such as smoking, physical inactivity, weight gain, and alcohol use—and, by extension, hypertension, high cholesterol, and even depression. The results are worth the effort.
H-E-B’s internal analyses show that annual health care claims are about $1,500 higher among nonparticipants in its workplace wellness program than among participants with a high-risk health status. The company estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.
H-E-B estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.
For every dollar SAS spent to operate its on-site health care center in 2009, it generated $1.41 in health plan savings, for a total of $6.6 million in 2009 alone. SAS’s team-based delivery of health care is less expensive than external care. Not included in the $6.6 million figure is the benefit of employees missing an estimated average of two fewer hours per visit by receiving on-campus care. As one manager noted, “I used to have to take a half-day leave for an appointment. Now I’m in and out without missing a beat.”
Illness-related absenteeism is an obvious factor in productivity. Less obvious but probably more significant is presenteeism—when people come to work but underperform because of illness or stress. Research consistently shows that the costs to employers from health-related lost productivity dwarf those of health insurance.
A 2009 study by Dr. Ronald Loeppke and colleagues of absenteeism and presenteeism among 50,000 workers at 10 employers showed that lost productivity costs are 2.3 times higher than medical and pharmacy costs. In a seminal Dow Chemical study from 2002, of the average annual health costs for a Dow employee an estimated $6,721 were attributable to presenteeism, $2,278 to direct health care, and $661 to absenteeism. A variety of studies confirm the health conditions that contribute most to lost productivity: depression, anxiety, migraines, respiratory illnesses, arthritis, diabetes, and back and neck pain. Employees with multiple chronic health conditions are especially vulnerable to productivity loss.
Most analyses of workplace wellness programs focus on hard-dollar returns: money invested versus money saved. Often overlooked is the potential to strengthen an organization’s culture and to build employee pride, trust, and commitment. The inherent nature of workplace wellness—a partnership between employee and employer—requires trust. Because personal health is such an intimate issue, investment in wellness can, when executed appropriately, create deep bonds.
Health care is a monumental issue for employers, and too much is at stake to be reactive. It’s time for companies to play offense rather than defense. A verifiable payback isn’t certain, and the journey can be arduous. But what is the alternative?
Dokfit 