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3 ways to tell if your wellness program is paying off

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in Compensation and Benefits,HR Management,Human Resources

Congratulations! You’ve cleared the first wellness hurdle: Executives have finally agreed to implement a wellness program. Now comes the hard part.

They’re asking for hard evidence that the company’s financial investment in the program will pay off.

It’s a reasonable request, but one that can easily trip up comp and benefits pros. The problem: There is no single way to measure a wellness program’s return on investment (ROI). Not only that, but changing participation rates, health plan design shifts and employee turnover can skew the validity of ROI measures.

If measuring your program’s ROI seems akin to scaling Mount Everest, take comfort in the fact that more and more employers are successfully making the climb.

According to a survey by the consulting firm Health2 Resources, more than one-quarter of 225 employers that offered a wellness program successfully managed to measure their ROI. That’s up dramatically in a short time; in 2007, only 14% could calculate ROI.

The wellness payoff? Of firms able to calculate ROI, 83% said they more than broke even.

How much will you save?

Ron Z. Goetzel, research professor and director of the Institute for Health Productivity Studies at the Rollins School of Public Health at Emory University, estimates that for every dollar invested in a wellness program, employers can expect to save between $1.50 and $3.

To determine how much money your organization is saving, follow these steps:

  • First determine the questions you (or, more accurately, top executives) want answered.
  • Next, identify the data necessary to answer those questions.
  • Then, develop a data-collection proc­ess that will allow you to gather necessary information.
  • Finally, determine how to analyze the data.

The numbers you need

When it comes to collecting and asses­sing data, the National Wellness Insti­tute encourages employers to consider these categories of potential financial returns:

1. Medical claims. Compare pro­gram participants’ pre- and post-wellness program costs against nonparticipants’ pre- and post-program costs.

That’s what Highmark Inc., did. Over a four-year period, the Penn­syl­vania health insurance company compared the medical claims of its employees who participated a wellness program against the claims of those with similar health risks who did not participate.

The comparison revealed a total savings of $1.3 million during those four years.

Advice: Make sure your employee comparisons are valid, or else you’ll never get an accurate, realistic ROI figure. “Participants and nonparticipants in the program were carefully matched to one another to minimize the effect of selection bias, a common threat to the validity of work-site health promotion studies involving workers in real-world settings,” says Goetzel.

2. Cost of sick leave. Figure this cost by adding up the amount of sick leave employees took over a set time span before participating in your wellness program. Then tally the amount of sick leave taken in a similar period after participating. Multiply the differ­ence by the employees’ average wage scale during both periods. That’s how much you saved in sick leave not taken.

3. Cost of workers’ compensation claims. This is a similar before-and-after calculation. Add up total claims costs pre- and post-wellness program participation. Divide both sets of costs by the number of full-time employees covered during the relevant periods to find your per-employee workers’ comp costs. See whether the number changed after you instituted your wellness program.

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