Human Capital & Careers

Claims of Wellness Cost Savings Are Overblown: RAND

In fact, the programs lose 50 cents on the dollar, says Soeren Mattke, senior scientist at the nonpartisan research organization.
Soeren MattkeJune 3, 2015

Workplace wellness has become a $6 billion industry in the United States, as employers hope these programs can help control health-care costs. In 2012, half of all employers with at least 50 employees offered programs, and nearly half of employers without a program said they intended to introduce one.

The consumer and business media, and even normally skeptical academics, strongly endorse workplace wellness programs as a good investment for employers. For example, a 2010 review by a Harvard economist stated that wellness programs returned three dollars in health-care savings and three dollars in reduced absenteeism costs for every dollar invested.

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But our research tells a different story. The RAND Wellness Programs Study, which included almost 600,000 employees at seven employers, showed that wellness programs are having little if any effect on health-care costs.

The finding was confirmed by an analysis of 10 years of data from a Fortune 100 employer whose wellness program includes lifestyle management and disease-management services. The former focuses on employees with health risks, such as smoking and obesity, and supports them in reducing those risks and preventing the development of chronic conditions. The latter is designed to help employees with a manifest chronic disease by helping them take better care of themselves — for example, by adhering to medications — or communicate gaps in care, such as missed lab tests, to their physicians.

Soeren Mattke

Soeren Mattke

The program reduced the employer’s cost by about $30 per member per month for an overall ROI of 1.5. But disease management was responsible for 87% of those savings, driven by a nearly 30% reduction in hospital admissions and an ROI of 3.5, whereas the lifestyle management component returned only a quarter on the dollar. Adding in its effect on absenteeism, lifestyle management returned 50 cents for every dollar invested.

We believe our contrarian findings are plausible for two reasons. First, not everyone with a health risk will develop a disease and cause increased health care costs. Second, it takes a long time before a risk factor like obesity leads to the development of a costly disease like diabetes. But employers have to cover the cost for every program participant, and they have to cover it today. Thus, preventive interventions, the core of lifestyle management, can save money but only if the risk is high in relation to the cost of the intervention. In contrast, the savings from successful disease management (e.g., keeping people out of hospital) can be realized in the shorter term.

We see two main lessons for CFOs. First, they need to be clear about their goals for the program. If a company wants to improve employee health or productivity, an evidence-based lifestyle management program can achieve this goal. But companies seeking a healthy ROI should target higher-risk employees.

Second, given the lack of financial return from the lifestyle component, CFOs need to pay attention to its cost. Targeting broad-based screening and one-to-one counseling and coaching to employees with health risks is expensive, but other interventions such as promoting healthy food choices and educational campaigns to use the stairs are not.

Soeren Mattke is a senior scientist at the RAND Corporation, a nonprofit, nonpartisan research organization.