According to PriceWaterhouseCoopers, nearly 9 in 10 large companies will offer employee wellness programs in 2017. With data from thousands of such programs in the workplace to draw from, executives might rightly ask, “What return on investment can I expect?” The good news is that wellness programs can and do generate a positive ROI. The bad news is results may vary.
Calculating Wellness Program ROI
As with health and fitness itself, the success of a wellness program often follows this maxim: The more you put into it, the more you’ll get out of it.
Some companies may only offer health risk assessments and biometric screenings. Others may provide gym or yoga classes daily. The first will cost less to implement, but personnel may fail to be motivated to change behaviors. Thus, employers may see very little ROI. Fitness or nutrition classes may be more costly, but ongoing participation may be better, resulting in improved employee health and lower health care costs.
Given the variety of wellness programs offered, it’s difficult to cite a definitive ROI figure that employers can expect. But a number of studies indicate a range of positive returns.
• A critical 2010 meta-analysis on costs and savings of workplace wellness programs revealed an ROI of $3.27 for medical cost savings, and $2.73 for absenteeism reduction.
• A similar evaluation in 2012 of 62 studies found average reductions in sick leave, health plan costs, and workers’ compensation and disability insurance costs of around 25 percent for companies that had wellness programs.
• A 2013 study by RAND Corporation cited positive ROI for wellness initiatives, with the major impact coming from disease management programs.
- $3.80 ROI from disease management programs
- $0.50 ROI from lifestyle management programs
- $1.50 ROI from both programs together
(This research reflects an average of wellness programs be they ineffective, moderately successful, or very effective. The ROI of effective wellness programs could be significantly higher.)
• A 2014 Harvard Business Review study researched over 20 award-winning and recognized workplace wellness systems. Companies included the likes of Johnson & Johnson, L.L. Bean, and Safeway. Average annual health care cost increases at the organizations studied were 1 to 2 percent compared to the 7 percent national average.
Again, the more deeply committed a company is to its wellness initiatives and the more programs it offers that promote long-term results, the better the chance for an impressive ROI.
But ROI isn’t the only metric that should be considered.
Value on Investment: The New Wellness Program Metric
Employers who look strictly at ROI in evaluating the success of their wellness programs might want to also consider other criteria. Though sometimes more difficult to measure, areas such as employee morale, energy, and retention can all be affected by improved employee well-being.
Value on investment (VOI) takes into account measures such as absenteeism, employee engagement, productivity, recruitment, worker comp claims, and turnover. According to a recent study by the International Foundation of Employee Benefit Plans, 50 percent of employers use at least one VOI measure to track the overall success of their wellness efforts.
In a Harvard Business Review article, Hector De La Torre and Ron Goetzel, PhD., espouse the benefits of adding VOI to the measurement mix:
“In our view, ROI in isolation fails to capture the full benefit of workplace health promotion. VOI calculations, on the other hand, allow employers to examine the broader impact of programs and their impact on core priorities for their organization, which may include improved employee morale, talent attraction and retention, enhanced company loyalty, and heightened customer loyalty.”
Think of ROI as a quantitative measurement and VOI as qualitative. Both yield insights that when taken together paint a much clearer picture of the effectiveness of your wellness program.
Says Kevin Klein, Manager, Strategic Customer Engagement at Kaiser Permanente, “In addition to ROI and VOI, many employers are being encouraged to focus on a culture of health in the workplace. Making sure that employees are involved in the design, implementation, and ongoing activities of their program can make a huge difference and go a long way to the programs success. Wellness champions, team leaders, or location experts can be another way to keep momentum throughout the year.”