Do Wellness Programs Save Employers Money?

According to a recent survey from Fidelity Investments, employers spent $693 per employee on wellness programs in 2015, a 61 percent increase over the past five years. About 80 percent of employers offer such programs, and larger companies spend even more. For example, companies with 20,000 or more employees spent $878 per employee in 2015. That’s about $17 million each year.

Expenditures of that size naturally raise questions among CEOs, board members, and stockholders—are wellness programs a sound investment? Do they, in fact, drive down healthcare costs and, if so, by how much?

Wellness Programs Save $6 for Each $1 Spent

A Harvard study concluded that each dollar spent on wellness programs saves employers about $3 in healthcare costs and another $3 in reduced absenteeism. What that study didn’t consider was whether some wellness programs work better than others— in other words, the dollars targeted at incentivizing lifestyle changes and those aimed at the chronically ill were of equal value.

Chronic Illness Programs vs. Lifestyle Management Programs

To learn which wellness programs are the most effective, Rand conducted a much more comprehensive study of more than 67,000 Pepsi employees. Rand examined the relative impact of two wellness program components—lifestyle management (including health-risk assessments, fitness, and diet) and disease management (for employees with chronic illnesses).

Rand found that while dollars targeted to chronic illness saved $3.78 for every dollar spent (primarily through a decrease in hospital admissions), those spent on lifestyle management resulted in savings equal to the amount invested. Only 13 percent of Pepsi employees participated in the company’s disease management program, but they accounted for 87 percent of total savings.

What’re Common Wellness Programs Offered by Employers?

Forbes recently listed the most (and the least) offered types of programs offered by employers.

Of the most common:

• Flu vaccinations
• Gym memberships
• CPR/First Aid training
• Smoking cessation programs

Of the least common:

• Nap rooms
• Meditation or other forms of stress reduction
• Fitness equipment reimbursements
• Offsite fitness reimbursements
• Massage therapy

Conclusion

The Rand study has gained traction since its publication in 2014. A 2016 article in Harvard Business Review (HBR), Meet the Wellness Programs That Save Companies Money, agrees that disease management is more effective than lifestyle management in driving down healthcare costs, pointing out that “a program that preempts 25 unnecessary emergency department visits can easily save $50,000, while preventing four inpatient stays can save at least $100,000.”

Employers currently investing heavily in lifestyle management programs should consider transferring those resources to disease management programs which demonstrably will save more money.

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