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ROI of Wellness Programs

According to the Centers for Disease Control, more than 75% of employers' health care costs and productivity losses are related to employee lifestyle choices. Reviewing wellness programs ROI, a $1 investment in wellness programs saves $3 in health care costs, according to the Wellness Council of America.

http://www.forbes.com/2006/04/21/wellness-programs-gold-standards-cx_tz_0424wellness.html

This was the question addressed by speakers at the 16th Annual Art and Science of Health Promotion Conference in Las Vegas last week. The answer--once again--is a case of "good news; bad news."

On the positive side, it doesn't take much of an improvement to make wellness initiatives pay off (less than a 1% reduction in risk factors). On the negative side, even small improvements can be tough to achieve. People with the most severe problems have little interest in lifestyle changes, and even those that do find it very difficult.

In general, employers can earn back the cost of programs over the course of five years if they can reduce risk factors by less than 0.2 percent. This is the conclusion of research delivered by Dr. Ron Goetzel, Cornell University. He cited one company that stands to make three dollars for every dollar spent, which would mean $50 million over five years.

In a study funded by the Centers for Disease Control and Prevention (CDC), a federal agency, Goetzel looked at a wide range of factors, including healthcare costs, age of workforce, and smoking and other lifestyle factors. Then, drawing on data about the effect of these on healthcare costs and productivity, Goetzel created a return-on-investment (ROI) calculator that allowed him to figure out the minimum improvement required to break even on an investment, as well as the projected ROI that a specific set of improvement assumptions would yield.

Looking at a few specific companies, he found that Dow Chemical would have to achieve a 0.17 percent improvement to break even on its investment. On the other hand, a 1 percent improvement would yield a return of three dollars for every dollar spent. (The dollars at stake are huge for the company, which has 26,000 employees. The 1 percent improvement would mean a savings of about $50 million over 5 years. The Dow budget is estimated at about $15 million over the 5 years.

Other companies had different breakevens, which are a factor of their employee demographics and their investments in wellness. Union Pacific's was about 0.49 percent; Motorola's 0.67 percent.

Goetzel said that he has created an interactive, web-based calculator that would allow employers to calculate ROI and predict returns for themselves (as well as allowing us to "game" what different programs would yield.) He has urged CDC to make it available to the public but had no timetable for when this would happen.