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q&a

(The Health Care Blog)

February 20, 2014

Quick Takes: Do Workplace Wellness Programs Make Business Sense?

The press and trade publications strongly endorse workplace wellness programs as a good investment for employers. Soeren Mattke, a physician and RAND senior scientist, explains why his work tells a different story.

Why are workplace wellness programs so popular?

Because employers think the programs make business sense. They are supposed to improve employees' health, increase their productivity, help control their chronic conditions, and reduce their risk of developing a chronic disease in the longer term. Employers believe that the dollars they spend on these programs will come back to them in avoided health care costs. For example, a recently published review suggested that employers gained three dollars in health care savings for every dollar spent on a workplace wellness program.

What does a typical workplace wellness program look like?

They usually have two components: lifestyle management and disease management. Lifestyle management focuses on employees with health risks such as smoking or obesity. The goal is to help employees reduce those risks, thus steering clear of serious disease down the line. In contrast, disease management is intended to support employees who already have a chronic disease by helping them take better care of themselves, e.g., reminding them to take their medications.

So are the programs living up to their press?

Perhaps in part. We recently published a study that included almost 600,000 employees at seven firms. We found that lifestyle management reduced health risk, like smoking and obesity, but no evidence that it lowered employers' health care spending. Our new analysis extends that finding. Looking at 10 years worth of data from a Fortune 100 employer, we found that its program generated a reduction of about $30 per member, per month in health care costs. But disease management was responsible for 87 percent of the savings.

How does this disparity translate into return on employer's investment?

The return on investment is strikingly different. For the disease management component, the employer earned a $3.80 return for every dollar invested in the program. For lifestyle management, the return was only $.25 for every dollar invested.

Why does disease management have such a disproportionate effect?

Because successful disease management can help avoid health care costs in the near term — e.g., keep people out of the hospital. And only employees who already have a chronic disease participate in the disease management component. In contrast, lifestyle management may improve overall employee health, but not all employees who have a health risk, such as obesity, will develop a serious disease, such as heart failure. In addition, it takes a long time for costly diseases to develop. But an employer has to cover the cost for every program participant, today, and all employees can participate in the lifestyle management component. Put another way, for a program to be a good investment for an employer, the risk of a costly disease has to be high in relation to the cost of the program.

What does all this mean for employers?

I think they should take away two important lessons. First, they need to be clear about the goals of their program. If they want to improve overall employee health and reduce absenteeism, then lifestyle management may be an appropriate choice. But if the goal is to get a good return on dollars invested in the program, employers should target employees who already have a chronic disease and help them control it. Second, given the lack of financial return on the lifestyle component, employers should watch program costs carefully and look for low-cost options, such as leveraging community resources, and offering employees healthy food choices.

Mary E. Vaiana