Getting Fit with Corporate Wellness Programs

By Brewer, Peter C.; Gallo, Angela et al. | Strategic Finance, May 2010 | Go to article overview

Getting Fit with Corporate Wellness Programs


Brewer, Peter C., Gallo, Angela, Smith, Melanie R., Strategic Finance


IT'S OFFICIAL! The United States has cracked the $10,000 barrier, up from $5,386 in 2002. No, we aren't talking about the average annual pay raise per employee. We're referring to America's average annual healthcare spending per employee, according to the "2010 Health Care Cost Survey" by Towers Watson. Also, the Congressional Budget Office reported that U.S. annual healthcare spending has ballooned to more than $2.2 trillion, or 16% of the gross domestic product (GDP). And the U.S. Department of Health and Human Services reported in "The Power of Prevention: Reducing the Health and Economic Burden of Chronic Disease" that modifiable health-damaging behaviors (such as tobacco use, lack of physical activity, and poor eating habits) account for 33% of all U.S. deaths, or about 800,000 per year. These alarming statistics make it clear that our collective declining physical fitness has created an escalating financial crisis and a diminished quality of life for a growing portion of our population.

At this point, you may be thinking that while this is undoubtedly an important topic, what does it have to do with your organization? What's the business case for corporate wellness? Consider the following three facts. First, in 2007 the U.S. Department of Health and Human Services estimated that for every 100 employees in all organizations (including yours):

* 44 suffer from stress

* 38 are overweight

* 31 use alcohol excessively

* 30 have high cholesterol

* 26 have high blood pressure

* 25 have cardiovascular disease

* 24 do not exercise

* 21 smoke

* 12 are asthmatic

* 6 are diabetic

Second, employees with five or more of these risk factors generate almost three times more health-related costs than employees who possess one to two risk factors (see the report "The Health & Economic Implications of Worksite Wellness Programs" from the American Institute for Preventive Medicine). Third, companies that have implemented high-performing corporate wellness programs have annual healthcare costs that are $1,800 less per employee than organizations without such programs, the Towers Watson report found. In a company that employs 10,000 people, this translates to an annual cost savings of $18 million.

Perhaps now you're beginning to wonder what it would take for your company to become a high-performing corporate wellness organization. Towers Watson boils it down to the five attributes shown in Table 1. The common theme underlying these attributes is that corporate wellness must be a strategic imperative. It isn't a peripheral distraction relegated to the Human Resources department--it's a coherently managed, strategically driven investment in an organization's most valuable asset, its people.

Table 1: Characteristics of High-Performing Corporate Wellness
Organizations

These organizations:

1.     View employee health as a critical component of superior
      business performance.

2.     Commit to building a culture of health in their organizations.

3.     Promote a culture of shared responsibility and accountability.

4.   Build connectivity across all their health-related programs
       and vendors.

5.  Rely on measures to build action plans for performance improvement.

Source: Towers Watson, "2010 Health Care Cost Survey."

Accountants and financial professionals in business are in an excellent position to help their companies move ahead in this area. We'll tell you how in the remainder of the article, which will strengthen your knowledge of corporate wellness programs so that you can assume a leadership role in the implementation of such a program. We'll also explain how to create a performance measurement system that tracks the success of your organization's current or future corporate wellness efforts and describe how to compare the cost savings generated by a corporate wellness program to the costs incurred to administer it using return on investment (ROI) and net present value (NPV) calculations. …

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