1. A RAND study found that workplace wellness programs are only cost-effective when they focus on helping employees manage chronic health conditions, rather than general health habits among healthy employees. 2. Many employers are rethinking their approaches to wellness programs due to doubts about their effectiveness in improving health and reducing costs. Some companies are focusing more on environmental changes and better engaging employees. 3. Financial incentives are common in wellness programs but have been controversial, as they could unfairly shift costs to employees in poorer health. Regulations now limit the size of incentives.

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Health
Firms revamping employee
wellness programs
By Steven Ross Johnson
Posted: May 24, 2014 -
For years, Barb Kildow, 55, wanted to lose 10 to 15 pounds.
But she never got motivated to eat healthier or exercise
regularly even though her employer has an on-site fitness
center.
About a year ago, Kildow, assistant vice president of
communications at Chicago-based Equity Residential, began
participating in the company's employee wellness program run
by the Vitality Group. She received a health risk assessment
survey asking her about smoking, alcohol consumption, and
eating and sleep habits. Based on her answers, she received recommendations to help her meet her health
goals. She upped her workouts in the company gym from “maybe once or twice a week” to four or five times a
week during her lunch break.
She credits the program's assistance on nutrition and stress management and the on-site gym with helping her
lose 27 pounds and drop her body mass index from 24 to 21. A major motivating factor was the $500 annual
discount on her health insurance premium for completing the survey, with the promise of additional reductions for
meeting specific fitness goals. “That (discount) certainly is a driver for me,” Kildow said.
Equity Residential is one of a growing number of U.S. employers that have implemented wellness programs with
a goal of improving employee health and productivity and reducing healthcare costs. While such programs have
been used by most large companies over the past decade, they have spread to smaller firms, driven by
employers' desire to lower the cost of their health plans and avoid the 40% excise tax starting in 2018 on high-
cost plans under the healthcare reform law. Companies also have been persuaded to launch wellness programs
by marketing from the burgeoning industry of wellness providers.
But experts question these programs' effectiveness in improving health and reducing costs, and some employers
are rethinking their approach. A RAND Corp. study last year found that such programs are only cost-effective
when they focus on helping employees manage chronic health conditions and that efforts focusing on health
habits among otherwise healthy people produce little return on investment in the short term.
Some employers are working on more effective ways to engage employees in increasing physical activity, making
healthy food choices and stopping smoking and excessive alcohol consumption. A number of firms also have
made environmental changes in the workplace, such as adding walking paths, increasing nutritious food choices
in cafeterias and adding on-site fitness centers. “Employers have moved from just a programmatic focus to
actually creating a view of health as a strategic value to the organization,” said Shelly Wolff, a leader of the health
Barb Kildow credits her company's workplace
wellness program and the one-site gym with
helping her lose 20 pounds.
Photo credit: Michael A. Marcotte

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and group benefits unit at Towers Watson.
MH Takeaways
A RAND study last year found that wellness programs are only cost-effective when they focus on helping
employees manage chronic health conditions.
Still, some experts are dubious. “Wellness has been a noble experiment,” said Thomas Emerick, president of
Emerick Consulting, an employer health-benefit consultant based in Fayetteville, Ark. “But the jury is in and it
doesn't work.”
Employers themselves have doubts about the effectiveness of wellness programs. In a 2013 survey of nearly 900
large employers in 15 countries conducted by consulting firm Towers Watson and the National Business Group
on Health, less than half of benefit managers surveyed ranked their wellness program as successful. Most saw
the problem as low employee engagement. According to the survey, 50% of workers in U.S. companies
completed a health-risk questionnaire and 41% received a preventive screening. But only 13% took part in a
disease-management program.
The survey also found that half of employers with a wellness program lacked a clear strategy for how to increase
employee engagement or improve health outcomes. But 59% planned to develop a strategy over the next three
years, and 84% planned to increase their investment in wellness programs over the following two years.
A 2013 survey by the Global Corporate Challenge of health and wellness managers from 378 organizations
around the world found that 86% said the main reason employees don't take part in wellness initiatives is a lack of
time. The report said it's essential for companies to better integrate wellness initiatives into the daily lives of
workers and make them more fun.
Despite their doubts, employers “are desperate to do something about healthcare spending,” said Marianne
Udow-Phillips, director of the Center for Healthcare Research and Transformation in Michigan.
Financial incentives
In 2012, half of all U.S. employers with at least 50 employees had a wellness
initiative, according to RAND. Larger companies are more likely to have such
programs, with 79% of employees in companies with 50 or more workers
having access.
The typical wellness program offers a health-risk assessment and provides
screening for hypertension and high cholesterol. Programs often provide health
and nutrition education and weight management support through an on-site
gym or discounted membership to a fitness club.
Many companies are offering discounted health insurance premiums and cash
bonuses to increase employee participation in programs. Employers planned to
spend about $594 per employee on wellness incentives in 2014, up from $521
in 2013 and more than double the average of $260 per employee in 2009, according to Fidelity Investments and
the National Business Group on Health.
Critics say such incentives have the potential to unfairly shift the cost burden to workers in poorer health who
don't participate or can't meet targeted health outcomes. A rule issued last year by the CMS set maximum
financial rewards and penalties for wellness programs.
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But Renee-Marie Stephano, president of the Corporate Health and Wellness Association, an industry trade group,
defended the use of incentives. “We all live in a world of sticks and carrots,” she said. For employers that provide
company-paid health benefits, it's reasonable for employers to ask workers to engage in healthy behaviors and
penalize them if they do not, she added.
Some companies have made wellness a part of their overall business strategy, aligning a healthier workforce with
greater productivity. Johnson & Johnson began promoting better health among its workers in 1978 and is
regarded as one of the leaders in employee wellness, running its own program. Dr. Fikry Isaac, the company's
vice president of global health services, said J&J's employee wellness program has maintained a participation
rate of nearly 90% among its more than 31,000 U.S. employees since the introduction in 1995 of a $500 credit
toward the annual premium for those who complete a health assessment; it offers an additional $100 to $250
reduction for employees who meet specific health goals.
The company has generated a return on investment of up to $4 for every dollar spent on wellness, he said. “Not
all wellness programs are the same,” Isaac said. “When it becomes part of the business imperative, it makes a
huge difference versus when it's just an add-on.”
Unlike J&J, most employers hire a wellness vendor to design and manage the program. It costs an employer an
average of about $150 per member a year, said Soeren Mattke, a RAND senior scientist who authored the 2013
report on wellness programs.
Financial boon for wellness vendors
The growing interest in employee wellness has given a
boost to wellness vendors. Estimates of the size of the
industry range from $2 billion to $6 billion. Annual
revenue growth was 5.6% between 2008 and 2013 and
is projected to grow an average of 9.4% annually over
the next four years, according to a 2013 report by
market research firm IBISWorld. The firm reported that
the provider with the largest market share, at 6.6%, is
Minneapolis-based Health Fitness Corp., with an
estimated 2013 revenue of $144 million.
Overall, the wellness industry is composed of small
local and regional providers. The four largest on IBISWorld's list—Health Fitness, Healthways, Healthtrax and
Viverae—compose only about 12% of the market share. The number of vendors now totals more than 8,000.
Despite employers' growing investment in wellness programs, the evidence is mixed on whether such programs
produce short-term return on investment. A 2010 study in Health Affairs found that medical costs were reduced by
an estimated $3.27 for every $1 spent on wellness programs, and that costs associated with absenteeism fell by
$2.73 for each dollar spent. Last year's RAND study found the overall return on every dollar invested in a
wellness program was $1.50. It found there were significant savings from the disease-management component of
these programs, with savings up to $3.80 for every dollar spent, including a 30% reduction in hospital admissions.
But features that focused on tobacco cessation, weight loss and lowering stress were found to save only about
$0.50 for every dollar spent.
Mattke said the best programs are reasonably effective in helping workers with smoking, weight reduction and
diet. “What they don't do, at least from what we have seen from our data, is reduce healthcare costs,” he said.
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Part of the problem, he said, is that some employers expect immediate cost savings rather than looking at the
longer-term impact.
“Strategically, it's been a mistake by the wellness industry to let themselves be judged based on whether there's a
return on investment,” said Dr. Kevin Volpp, a professor of medicine and healthcare management at the
University of Pennsylvania. “The real question should be whether or not you improve health at a price that's
reasonable compared to what we're spending for treatment.”
The bottom line is that employers need to develop better ways to engage their workers in improving their own
health, experts say. “Worksite wellness programs are great programs and they can be reasonably cost-effective,”
Udow-Phillips said. “I just think people have to be careful about not overselling what they can actually
accomplish.”