Are Employee Wellness Programs Effective in Reducing Healthcare Costs?

From counting steps and weight loss competitions to health assessments and info sessions, employee wellness programs have been a hot topic in the healthcare industry for some time. According to the Centers for Disease Control and Prevention, about 1 in 2 Employers have some type of wellness program in place.

Are these programs just a trend or an invaluable resource in helping reduce healthcare costs? We explored the effectiveness of wellness programs and reasons why wellness programs fail.

Do Wellness Programs Reduce Healthcare Costs?

The goal of employee wellness programs is threefold: to help employees stay healthier, thus lowering healthcare costs and saving money for the company. So, do employee wellness programs work?

In a 2019 study published in the Journal of the American Medical Association (JAMA), researchers studied the effect of workplace wellness programs at a warehouse retail chain. After 18 months, employees who went through the wellness program were more likely to report that they were exercising (8.3 percent more) and trying to maintain their weight (13.6 percent more) than those who didn’t participate.

However, despite the slight increases in exercise and weight control, body mass index, cholesterol, blood pressure, job performance and health care spending didn’t produce significant outcomes compared with other employees. As a result, the study concluded that employee wellness programs do not provide a short-term solution for Employers seeking to reduce healthcare costs.

Additional Perspectives

While the results from the aforementioned study failed to show a correlation between wellness programs and reduced healthcare spending, it’s important to note that it focused on health screenings and wellness activities, rather than on targeted strategies for workers with costly chronic conditions. A 2014 study by Rand Corporation founded that targeted disease management interventions did, in fact, reduce healthcare claims for those with chronic conditions, while broader wellness initiatives, like the ones reported in JAMA, failed to reduce health claims.

Additionally, a Harvard study found that, on average, for every dollar spent on employee wellness, healthcare costs decreased by $3.27. Along a similar thread, another report by the International Foundation of Employee Benefit Plans found that U.S. Employers saved between $1 to $3 in overall healthcare costs for every dollar spent on a wellness program. These three studies all indicate a positive return on investment from employee wellness programs.”

Why Wellness Programs Fail

Implementing the right employee wellness program is crucial to reducing health risks, lowering claims and even building higher employee engagement. Wellness programs often fail when Employers ignore high risk individuals or invest wellness dollars in the wrong places.

Consider the Pareto principle, also known as the 80/20 rule. According to Karelia Health, 80 percent of employees drive 20 percent of an Employer’s healthcare costs. This means that the majority of individuals within an organization are already healthy and likely want to continue to stay healthy. So, investing in gym memberships, step count competitions and other population health management initiatives simply won’t pay dividends.

On the other hand, chronic diseases lead to larger claims, such as pharmacy and hospital bills. While weight management is great, working to prevent chronic illnesses like heart disease, stroke and Type II Diabetes by lowering cholesterol, blood pressure and blood glucose can be more effective in providing a positive ROI.

Help Employers Make Informed Benefits Decisions

As a health insurance Broker, it’s important to help your clients make informed benefits decisions. In doing so, it’s crucial to assess the health of employees and communicate the possible benefits and shortcomings of wellness programs with your clients.

For example, while a low-risk Employer with a generally healthy workforce may not see significant savings, a high-risk client that employs workers with chronic conditions may experience a greater benefit with a targeted program. This insight will be imperative in helping decide whether investing in a wellness program should be a part of an Employer’s health plan.

In seeking to help Employers make better decisions, leveraging technology like FormFire’s online insurance platform can help. FormFire’s all-in-one digital platform can quickly help assess Group risk, while providing Employers a side-by-side comparison of different health plans. Contact FormFire today to learn more or request a free demo.

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