It’s important to understand that ROI is not strictly a fiscal calculation expressed as a ratio. Because it is difficult to confirm the specific impact that wellness has on cost containment, a more appropriate strategy is to eliminate the expectation of cost reduction and instead approach wellness programming with a view toward projected cost avoidance. This approach combines biometric and behavioural-based outcomes with accompanying financial cost-avoidance estimations.
The business case for wellness extends beyond employees’ personal behaviours and the reduced costs associated with leading healthier lifestyles or properly managing pre-existing illnesses. There are significant cultural drivers that prompt and perpetuate ill employee health. Poor organizational culture breeds ill health, raising the potential for increased healthcare, absence and HR costs due to turnover and other factors.
When a comprehensive wellness promotion is integrated into an overall business strategy, there are many positive outcomes, such as heightened awareness and knowledge of healthy lifestyles; increases in morale and employee satisfaction due to positive corporate culture changes; high levels of employee buy-in and participation in wellness initiatives; positive behaviour modification; and health risk reduction. All of these outcomes have a high propensity to result in healthier, happier employees and lower costs.
What are the most critical measurements for optimal return? The following measures typically result in high-impact outcomes.
Health risks – An essential success indicator of any wellness program is its ability to collect health metrics specific to the employee population. To make improvements to employee health, you must know what you are measuring. Biometric and HRA health data help define the course of programming by illustrating the need for intervention, categorizing participants into medium- and high-risk categories to address the most prevalent health risks, and providing benchmark data with which to compare future results and assess the program’s success.
Subsequent analysis can demonstrate health improvements and changes made by multi-year participants. The migration of participants from “unhealthy” to within recommended health benefits zones could translate into significant prospective cost-avoidance figures. For a wellness strategy to be successful, it should be implemented based on data that reflect the organization’s population and its health risks, obtained through screening clinics and HRA data.
Absenteeism – The absenteeism rate in Canada continues to increase steadily, showing a linear pattern for direct and indirect costs associated with work absences. Absenteeism affects employee performance and the organization’s bottom line.
While health benefits cost avoidance is primarily a prospective calculation, absenteeism can be calculated annually, presenting recent cost-avoidance figures that relate to actual days lost and per diem salary rates. Some companies may not have a comprehensive attendance management program in place, making it difficult to attribute specific reasons for absences. However, inferences can be made using work absence rate statistics. It can be useful to determine the reasons for absences—whether they are due to illness/disability or personal/family issues—which can provide insight into the absence costs pertaining to both categories.
There are also links between health risks and absenteeism. Dr. Martin Shain, director and founder of The Neighbour@Work Centre, states that employees with three or more risk factors are estimated to have 50% more reported absences than those with no risk factors. This is significant, since approximately 25% of the Canadian population have three or more metabolic risk factors.
Long-term disability (LTD) claims – Long-term absences and claims resulting from chronic conditions are on the rise. Annual reviews of new and open LTD claims help to identify which disease classes may result in high-cost absences and medical costs. Reviewing LTD claims on an annual basis not only helps to determine programming but can also reveal upward or downward trends in the cases associated with various categories, showing changes in costs.
Employee morale, engagement and organizational culture – Environments that are committed to supporting and sustaining good health among employees are engaging ones, and engagement is a leading factor in optimal employee health and productivity. Engaged employees are committed to the company’s success. They enjoy their work, are supported in their efforts to lead healthy lifestyles, believe their contributions shape organizational success and are willing to go the extra mile. Incorporating job satisfaction questionnaires into annual wellness interest surveys can help an organization gauge the status of employee morale and satisfaction. Showing employees that you care about their well-being on a holistic level can vastly improve how they perceive the workplace, reducing employee turnover, invigorating employee commitment and circumventing turnover and productivity costs.
The biggest challenge in demonstrating ROI is the limited ability to draw a direct correlation between wellness initiatives and improved health, reduced risk and resultant cost decreases. This is due to the inability to control certain factors; the difficulty of determining specific health benefits cost fluctuations among participants, due to privacy restrictions; and the inability to confirm the impact that wellness has on cost changes and health improvements without the use of a control group. Yet despite these challenges, there are ways to demonstrate the ROI of a wellness program.
The costs of doing nothing far outweigh the costs of acting. However, the success of a wellness strategy is not solely based on cost-avoidance figures. A strategy that focuses on other success indicators—such as reducing risk levels, increasing engagement and participation, and enhancing employee views of the company culture—is essential to the company’s success. The National Wellness Survey results show this tide is already turning: most respondents cited employee-focused objectives as the reason for implementing wellness, which can affect the financial success of any organization.
Ed Buffett is president and CEO, and Sarah Abdelnour is a research specialist with Buffett & Company.
ebuffett@buffettandcompany.com
sabdelnour@buffettandcompany.com
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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the November 2009 edition of BENEFITS CANADA magazine.