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Workplace Wellness Programs: The ROI Wars

May 13, 2015 (1 min read)

Depending on which study you believe in, workplace wellness programs may or may not be a good return on investment for employers. On the one side you have studies showing that for every $1 invested in a workplace wellness program, there’s a $1.88 to $3.92 reduction in health care costs. On the other side are studies, such as the new study by RAND Corporation that was released on May 11, 2015, which found no significant savings in health care costs among a sample of 589 public- and private-sector businesses.

RAND examined at a granular level the effect of the lifestyle management program on participants’ health care costs and utilization, but came up empty in terms of finding any significant cost savings or reduction in utilization. Nor did RAND find any evidence of cost savings in relation to the predisease management program. Both types of programs actually resulted in a $25 to $38 per member per month increase in health care costs among participants.

Even if people participated in more sessions per year in the wellness program, this did not equate to any substantial health care cost savings. Costs were actually about $20 higher for these “high-intensity participants”. RAND further found that while lower cardiovascular event rates for participants reduced costs, the savings “did not come close to offsetting cumulative costs of participation.” In sum, the RAND study suggests only “modest gains” result from workplace wellness programs in comparison to “other well-accepted treatments and interventions.”

The Truth About Incentives and Penalties

The RAND study found that while incentives (e.g., rewards) and penalties (e.g., higher insurance contributions for smokers) helped increase the median participation rate by about 20 percentage points, the researchers warned that incentives are not a “panacea.” In fact, the study casts doubts on the effectiveness of penalties such as when a large employer’s use of a $600 penalty increased participation in a smoking cessation program by only 8 percent and didn’t increase uptake of a disease management program.

The RAND study results show that employers should focus instead on creating a comprehensive, well-designed and accessible program because it’s just as effective in promoting participation as it is to incentivize employees to participate in a limited program.