The Return on Investment (ROI) for Employee Health and Wellness Programs

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An impressive number of studies have shown that lifestyle is the root cause of what ails us, particularly for chronic conditions. The studies also show that changing one’s lifestyle can have a dramatic effect on health improvement, both in the prevention and treatment of disease. So, given the benefits of lifestyle medicine interventions, it would seem that our health care system would rush to embrace this movement; however, little could be further from the truth. Now, I know we have a for-profit healthcare system, but even just from a dollars-and-cents perspective, it may make sense—and dollars!

A majority of Americans have health care insurance through their employers, the cost for which is rising at an alarming rate. Health insurance premiums continue to go up year after year. Unfortunately, all the money we’re spending has not translated into healthier employees or healthier Americans. We spend more on healthcare per person by far, yet the U.S. population is not healthy. By 2014, our life expectancy had slipped down to 43rd in the world. And since then, our life expectancy declined year after year. It’s not just that other countries are doing better; we now may be living shorter and shorter lives. And unhealthier lives—again even just from a financial bottom-line perspective––hundreds of billions in productivity lost, beyond all the healthcare costs.

One employee gets diabetes, and it costs about $10,000 more per year. So, if a self-insured company could prevent or reverse that case, they could save the company a lot of money, raising the possibility that workplace wellness programs could not just be cost-neutral––in other words pay for themselves––but actually save the company money, even make the company money. This brings up the concept of ROI, or return on investment. That’s how much money you get back for every dollar spent. So, an ROI of 3 to 1 means every dollar you spend yields $3 back; so, by investing in such a program, you’d end up tripling your money. You don’t know though, until you put it to the test.

Johnson & Johnson, for example, claimed that investing in employee wellness yielded around 2 to 4 dollars for each dollar they spent. Citibank estimated their return on investment was $5 saved for every dollar spent. A compilation of a handful of such studies found an average ROI of more than three dollars of healthcare cost savings for each dollar spent on health promotion. A more recent review including more than 20 studies came up with a return on investment exceeding 5 to 1, though an even more recent review out of Harvard looking at more than 30 studies found the ROI closer to three dollars. Spend one dollar, get three back. Not a bad deal.

One heavy manufacturing company reported an outstanding 34-to-1 return on investment, and that’s just direct healthcare costs. Some of their indirect costs, like lost workdays and disability, fell even more. Then, you can imagine other potential benefits—happier employees, more productive employees, making them more likely to stick around. So, do companies that invest in health promotion have a competitive advantage?

Publicly traded companies that got Corporate Health Achievement Awards outperformed the S&P 500 by 40 percent. C. Everett Koop Award winners outperformed the S&P 500 two to one. Those scoring higher on workplace health promotion best practices, same trend. And the same thing most recently with companies investing in an internal culture of health.

Of course, instead of healthier employees leading to a more profitable company, maybe more profitable companies have more money to spend to make employees healthier. Is there a link between stock market price growth and having a great employee wellness program? Maybe, but correlation doesn’t mean causation. Maybe prioritizing wellness is just a sign of a great management team, and that’s the real reason they’re raking in the dough.

Even most of the ROI studies lacked an adequate control group. You can’t just compare the costs of employees that signed up versus those that didn’t, because maybe healthier people are just drawn to such programs in the first place. That’s why you need randomized clinical trials to really put it to the test, which we’ll cover, next.

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Motion graphics by Avo Media

• chronic diseases
• cost savings
• lifestyle medicine
• workplace wellness