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What’s the Hard Return on Employee Wellness Programs?
by, Leonard L. Berry, Ann M. Mirabito, & William B. Baun December 2010 Issue Since 1995, the percentage of Johnson & Johnson employees who smoke has dropped by more than two-thirds. The number who have high blood pressure or who are physically inactive also has declined—by more than half. That’s great, obviously, but should it matter to managers? Well, it turns out that a comprehensive, strategically designed investment in employees’ social, mental, and physical health pays off. J&J’s leaders estimate that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent. Wellness programs have often been viewed as a nice extra, not a strategic imperative. Newer evidence tells a different story. With tax incentives and grants available under recent federal health care legislation, U.S. companies can use wellness programs to chip away at their enormous health care costs, which are only rising with an aging workforce. Government incentives or not, healthy employees cost you less. Doctors Richard Milani and Carl Lavie demonstrated that point by studying, at a single employer, a random sample of 185 workers and their spouses. The participants were not heart patients, but they received cardiac rehabilitation and exercise training from an expert team. Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety, and other measures), 57% were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs had declined by $1,421 per participant, compared with those from the previous year. A control group showed no such improvements. The bottom line: Every dollar invested in the intervention yielded $6 in health care savings.

57% of people with high health risk reached low-risk status by completing a worksite cardiac rehabilitation and exercise program. We’ve found similar results in our own experience. In 2001 MD Anderson Cancer Center created a workers’ compensation and injury care unit within its employee health and well-being department, staffed by a physician and a nurse case manager. Within six years, lost work days declined by 80% and modified-duty days by 64%. Cost savings, calculated by multiplying the reduction in lost work days by average pay rates, totaled $1.5 million; workers’ comp insurance premiums declined by 50%. 4% is the voluntary turnover rate at SAS Institute, thanks in part to a highly effective employee wellness program. What’s more, healthy employees stay with your company. A study by Towers Watson and the National Business Group on Health shows that organizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9% vs. 15%). At the software firm SAS Institute, voluntary turnover is just 4%, thanks in part to such a program; at the Biltmore tourism enterprise, the rate was 9% in 2009, down from 19% in 2005. According to Vicki Banks, Biltmore’s director of benefits and compensation, “Employees who participate in our wellness programs do not leave.” Nelnet, an education finance firm, asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program. Nelnet asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program.

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