The ROI of workplace wellness

One of the most comprehensive studies found that medical costs fall $3.27 for every $1 spent and absenteeism costs fall $2.73 for every $1 spent.  A Harvard Business Review study also concluded thatproperly run wellness programs could save up to $6 for every $1 spent.

Wellness programs are relatively inexpensive to fund. The average business spends about 2 percent of its total health-care claim dollars on them. Yet most program administrators have no clue how well they are performing. Two out of 3 have no measurable program goals, and 60 percent do not know their return on investment.

Some of the bigger payoffs are less obvious. Two types of ROI are typically calculated. “Hard ROI” consists only of direct medical costs. “Soft ROI” also includes productivity gains. The indirect costs of poor health can be double or triple those of direct medical costs. They include productivity losses from absenteeism or attempting to work with a brief illness or chronic condition, also known as presenteeism. The payback rises to as much as $15 for every $1 invested when indirect costs are included.

It typically takes a few years to have adequate information to determine the return on investment. Start-up costs can be substantial, and improving employee health behavior takes time. The long payback period is enough to deter some organizations, especially small businesses with limited resources. Such programs also make less sense in industries with high employee turnover and younger employees, such as hospitality, restaurant and retail.

Businesses prefer to measure the impact of their programs by overall health-cost increases. The most consistent performers have kept cost increases to about 2 percent over the last four years, compared with nearly 7 percent for all companies.

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