Magazine article Risk Management

A Prescription for Savings: Developing Wellness Programs to Benefit the Bottom Line

Magazine article Risk Management

A Prescription for Savings: Developing Wellness Programs to Benefit the Bottom Line

Article excerpt

It is widely accepted that workplace health and wellness programs can have a range of benefits. Studies have calculated savings, slower growth of health care costs, reduced absences, increased productivity and so on, but a healthy workforce does more than just engender good feelings--it is also a competitive advantage.

The tangible benefits of corporate wellness programs are well understood, but many experts contend that they can also provide a competitive advantage for organizations that implement them. To prove this point, the research team of Dr. Raymond Fabius, a workplace health specialist and vice chairman of HealthNEXT, examined the ties between employee health and corporate earnings. "Superior stock market performance could elevate a discussion about potential advantages of successful employee health programs, from the human resources area to the C-suite," he said. "That might solve a number of U.S. health problems."

Published in the October 2013 Journal of Occupational and Environmental Medicine, the study examined a group of large, publicly-traded businesses that have received the Corporate Health Achievement Award (CHAA) from the American College of Occupational and Environmental Medicine. The researchers used four model scenarios, combining simulations and past market performance for comparison. Each tracked a theoretical $10,000 investment portfolio of nearly 20 employers from 1997 to 2012. For each scenario, CHAA recipients saw higher annualized returns than the S&P 500. In the highest-performing case, CHAA companies' annualized return was 5.23%, compared to -0.06% for the S&P. Even in the lowest-performing example, CHAA companies' annualized return was 6.03%, versus 2.92% for the S&P.

Of course, market performance is determined by many factors other than investment in health programs. But, Fabius said, "our results consistently and significantly suggest that companies focusing on the health and safety of their workforce are yielding greater value for their shareholders."

What Makes a Successful Health Program?

While increased earnings may please stockholders, these financial rewards only accrue when an employer truly invests in health programs. CHAA recipients are evaluated along 17 criteria, including management commitment to specific health goals, improved safety standards, and company-wide efforts to assess health and safety risks. Reviewers' checklists include emergency preparedness plans, hazardous waste disposal and coordination with local police and firefighters.

Major efforts often originate with more deep-pocketed businesses, but any employer can initiate changes to impact employees' health, and they are worth considering. At Johnson & Johnson (a CHAA award winner), annual growth in total medical spending in 2009 was 3.7% lower than other large employers' rates. Annual savings per employee averaged $565. "Our ROI was between $1.88 and $3.92 per dollar spent," said Fik Isaac, the company's vice president for global health services. For every dollar corporations spent on wellness programs, a 2009 Harvard study found medical costs fall about $3.27 and absentee day costs by about $2.73.

The health benefits of a strong program will likely include plans to reduce smoking and obesity, the leading causes of preventable deaths in the United States. Employers can also realize lower replacement costs for absent workers, and gain an advantage in attracting highly-qualified new employees. Further, research suggests that healthier people miss fewer days of work. Doris Konicki, a Chicago-based health and productivity consultant to ACOEM, stresses the value of integrating health promotion and protection activities, because "employers are seeing evidence of significant productivity-cost impacts related to poor health."

Successful investment in employee health and wellness starts at the top, so senior management commitment is essential. …

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