With health care costs accounting for an increasingly larger portion of business expenses, many firms are finding that wellness programs can help drive down health care spending.

Employer-based health care expenses have been on the rise for decades and account for an increasingly larger portion of private-sector spending. However, new research shows that company-sponsored wellness programs and health incentives often lead to lower health care costs, meaning that an investment in employee well-being can result in significant long-term savings.

According to the California Health Care Almanac (CHCA), overall health care spending in the United States reached $2.49 trillion in 2009 and is expected to total $2.7 trillion in 2011. By 2019, national health spending is projected to climb to 19.6 percent of gross domestic product. In 2009, private businesses accounted for 21 percent of overall health care spending.

On average, companies spent 8 percent of their total compensation on health expenses in 2009. That year, private businesses spent approximately $518 billion on health care, with $398 billion on private health insurance alone.

These rising costs highlight the importance of finding ways to cut down on health care expenses and reduce the burden on business budgets. To that end, research now suggests that companies willing to spend on wellness programs for their employees can ultimately reduce their expenditures.

A new report from health care consultancy Vitality Group explores the effects of the world’s largest incentive-based health program, examining results for 300,000 participants over a five-year period.

According to Vitality Group’s findings, released last month, wellness programs caused the number of participants who used a gym one or more times a week to increase 23 percent. The number of people who joined a gym but were “inactive” also decreased by 8 percent over time, while there was an increase in the number of “medium- and high-engaged” members.

Moreover, participants who showed higher engagement in fitness activities also had a 16 percent decline in hospital admission and treatment costs, while those who went from “inactive” to “active” yielded a 6 percent cost reduction.

The research suggests that introducing a corporate health and wellness program that educates, assists and motivates individuals to pursue healthier lifestyles leads to fewer and less costly medical claims. In fact, increasing gym visits by two per week reduced the probability of a hospital admission by 13 percent.

“This research provides compelling evidence that effectively designed incentive programs can motivate people to change their behaviors, leading to better health outcomes and lower health care costs over the long term,” Arthur C. Carlos, CEO of the Vitality Group, said. “This increase in activity is particularly exciting as we know from secondary research that physical activity typically decreases with age.”

Even modest efforts toward improving employee health can yield major cost benefits. According to risk management firm Aon Hewitt, every $1 spent on an employer-based wellness program can generate a $3 to $6 return on investment, usually two or more years after investment.

Aon Hewitt’s analysis of 42 published studies found an average $5.93 to $1 savings-to-cost ratio derived from wellness programs, along with an average 28 percent reduction in work absenteeism due to illness, a 26 percent reduction in health costs and a 30 percent drop in workers’ compensation and disability claims costs.

“Wellness programs not only improve an individual’s short-term and long-term health, but they also help curb absenteeism and presenteeism, improve productivity and aid quicker return to work for employees on disability leave,” the company explained in an announcement of the findings. “Companies also offer wellness programs to remain competitive in the marketplace and as a recruitment and retention benefit.”

Earlier: Keep Your Business and Employees Healthy

Resources

Health Care Costs 101
California Health Care Almanac, May 2011

…Incentive-Based Wellness Programs can Produce Cost-Saving Behavior Change
Vitality Group, May 2, 2011

Wellness and Beyond: Employers Examine Ways to Improve Employee Health…
Aon Hewitt, August 2008

Wellness and Beyond: Employers Examine Ways to Improve Employee Health and Productivity…
Aon Hewitt, 2011