Industry Market Trends

Are Corporate Wellness Programs a Boon or Boondoggle?

Jun 18, 2013

The U.S. Patient Protection and Affordable Care Act (PPACA or ACA), popularly known as Obamacare, includes greater support for employers who offer wellness and prevention programs to employees. However, some critics argue that such programs do not improve employee health or reduce health care costs.

In background materials about the ACA and its wellness provisions, the U.S. Dept. of Labor explains that, beginning in 2014, the ACA increases "the maximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of health coverage, and [increases] the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use."

Evidence shows, the agency claims, that "workplace health programs have the potential to promote healthy behaviors; improve employees' health knowledge and skills; help employees get necessary health screenings, immunizations, and follow-up care; and reduce workplace exposure to substances and hazards that can cause diseases and injury."

In an interview, Tom Emerick, a benefits consultant and former benefits executive at Walmart, Burger King, British Petroleum, and American Fidelity Assurance, told IMT bluntly that "Corporate wellness programs do not reduce the cost of health plans." Why? "They simply do not work." In fact, Emerick said, such programs were tried and abandoned during the 1970s and 1980s. "They all went away because they just didn't work."

Emerick thinks today's benefits managers have less financial and actuarial expertise than the previous generation of managers who rejected wellness programs. "Back then, it sounded like it had huge potential," he said. "If you used wellness to improve your health, you should be able to reduce things like heart attacks and strokes. We did massive experiments with programs much more extensive than just reimbursement and incentives. Sure, a lot of people got helped along the way, but it was never enough to offset the cost of it."

Emerick referenced recent research by the RAND Corp. commissioned by the Dept. of Labor and Dept. of Health and Human Services. The research finds that about half of U.S. employers with 50 or more employees "offer wellness promotion initiatives," with large employers "more likely to have more complex wellness programs." Most programs involve a combination of screening and interventions, such as weight loss programs, smoking cessation, education, and personalized health coaching.

RAND found that employee participation rates tend to be fairly low but can be increased through incentives. Medical and cost data based on medical claims revealed "a lower cost trend in program participants compared to non-participants." However, "the overall difference on overall health care cost is not statistically significant."

In fact, health care costs among wellness participants were only $2.38 per month lower than for non-participants in the first year and $3.46 less in the fifth year. After five years, estimates point to savings around $378 in direct medical costs per participating employee per year, about 7 percent of the cost of coverage.

RAND's results correlate with a study by researchers at the University of Arizona at Tucson. Researchers did an in-depth study of a wellness program operated at BJC HealthCare, a hospital system in St. Louis that insures about 40,000 employees and family members. The study examined the effects of the program on participants' levels of high blood pressure, diabetes, lung problems, respiratory infections, and stroke. While the study found that the program cut hospitalizations and inpatient costs for those conditions, costs for medications and outpatient care increased. The study's authors concluded that the program "did not save money for the employer in the short term."

However, these results are at odds with the conclusions of other research. For example, a group from Harvard University and Harvard Medical School published a study revealing "a large positive return on investment" based on an analysis of 36 different studies of the effect of wellness programs on health care costs and absenteeism, 90 percent of those in larger companies with more than 1,000 workers. The researchers discovered that, overall, "medical costs fall about $3.27 for every dollar spent on wellness programs, and absentee day costs fall by about $2.73 for every dollar spent."

Glenn Riseley, president of the Global Corporate Challenge, writes that "programs that offer workers cash to do the right thing undermine the messages of trust and responsibility that are essential to any vibrant and competitive company culture." He believes that behavioral change in corporate wellness becomes possible when companies introduce elements that truly motivate employees, such as "competition, teamwork and online engagement," which can foster personal responsibility for health improvement.

In 2011, the Foundation for Chronic Disease Prevention in the Workplace (FCDP) conducted an independent study of employees who participated in the wellness and behavior modification program sponsored by Riseley's organization. The FCDP study found that "53 percent of participants lost weight, with an average loss of 6.2 pounds" and that employees experienced an increase in energy level, sleep quality, and ability to deal with stress. Fifty-two percent of employers reported increased productivity and 75 percent increased morale.