Employee Wellness Plans : The Case for Company Health Promotion Programs

Workplace Health Promotion Programs first became popular during the economic boom of the late 1980s and early 90s. Programs featured on-Site health clubs and massages, and were used as recruitment tools for young staff members searching for nontraditional work environments. Nevertheless, when the tech bubble burst, so too did the willingness to spend money on perceived perks, and employers returned to a more traditional benefit structure focused on managed healthcare.

In recent years, as Medical Care costs have spiraled out of control, organizations have explored the potential of Company Wellness Programs as a cost-saving strategy. Businesses such as Johnson and Johnson, General Motors, Motorola and Union Pacifi c Railroad have all seen a signifi cant return on investments in employee health (See Case Studies, p.20). Company Wellness Programs can help lower the costs associated with:

Medical Care premiums – The cost a employer pays for health insurance: According to a 2005 study by Hewitt, the Medical Care cost per employee in the American in 2006 will average $8,046, with organizations absorbing nearly two-thirds of that cost.

Pharmaceutical costs – The price of a prescription plan: According to a 2005 study by Mercer, the average annual prescription costs for big companies grew 11.5 percent, making it nearly a decade straight of double-digit rises in cost.

Short-term disability (STD) – The cost of offering STD insurance to staff members: According to a 2004 study by insurance provider Cigna, the average STD claim results in $13,094 in direct disability payments and medical costs. The report also found that 26 percent of claims related to health care events were a result of chronic conditions that could likely be mediated through Corporate Wellness Programs, and that these cases amount for 56 percent of the STD-related medical costs.

Rates of Absenteeism – The price of missed work: Rates of Absenteeism cost corporations $660 per employee in 2004, with nearly one-third of corporations characterizing the trend as a genuine concern.

Presenteeism – The price associated with employees who work at decreased productivity levels: Sixty percent of the total cost of employee illnesses come from presenteeism, according to a 2004 study by the Institute for Health and Productivity Studies at Cornell University.

The evidence is clear that strategically designed Worksite Health Promotion Programs can reduce both direct and indirect Medical Care costs. A 2004 review of Worksite Health Promotion Programs revealed that, in total, an investment of $1 by a business in Wellness Programming returned a median cost savings of $2.05 to $4.64.