May 10, 2005
Employee wellness programs have a positive and wide-reaching impact on a number of bottom-line issues, from lowering absenteeism to reducing health care claims. This new evidence paired with the steady rise of health care costs has cast employee wellness in a new light.
Editor's Note: This column was prepared by the staff of Winning Workplaces, a not-for-profit organization that helps small and midsized businesses create better work environments.
Not too long ago employee wellness programs were viewed as a recruitment tool and a perk to attract and retain talent. Programs such as employer-sponsored health club memberships, cholesterol screenings, and smoking cessation counseling were perceived as worthwhile investments for manufacturers that could afford it during the talent wars of the mid- to late-1990s.
However, a body of research has emerged that suggests employee wellness programs have a positive and wide-reaching impact on a number of bottom-line issues—from lowering absenteeism to a reduction in health care claims. This new evidence, paired with the steady rise of health care costs, has cast employee wellness in a new light. More and more companies are viewing investments in their employees' health as a way to manage costs.
A recent American Management Association (AMA) study found that the number of organizations offering educational programs has gone up in seven areas:
In addition, more than three times as many respondents reported an increase in wellness programs at their firms as those who reported a decrease.
This development indicates a shift in how companies are thinking about investments in employees' well-being. There has always been a tacit understanding that investments in equipment require spending additional dollars for upkeep and maintenance. Only recently have organizations begun to recognize that attending to the physical and emotional needs of their human resources also makes good business sense.
Today's manufacturers are leaner and meaner with fewer employees asked to produce more. This rise in expectations is accompanied by more job-related stress and less downtime. It also encourages a number of unhealthy habits, from sedentary lifestyles to smoking to higher consumption of fast foods.
Between 1980 and 2000, U.S. obesity rates doubled. Not surprising, chronic, degenerative conditions such as heart disease and diabetes also are on the rise. The declining health of the American work force is fueling an ever-growing health care crisis as employers struggle to keep up with escalating premiums.
It's this last issue of health care costs that poses perhaps the most daunting challenge to today's small and midsized companies.
According to the Kaiser Family Foundation's 2004 "Employer Health Benefits" survey, premiums charged for job-based health insurance rose by 11.2 percent in 2003, exceeding previous growth rates. All types of health plans—including HMOs, PPOs, and POSs—demonstrated double-digit increases.
According to the National Coalition on Health Care, health insurance premiums for families will rise to an average of more than $14,500 by 2006. Employee benefits are the second-largest structural cost after corporate income taxes for U.S. manufacturers, adding 5.8 percent to costs.
Unfortunately, many companies have addressed this issue by placing a greater burden on employees. The Kaiser Family Foundation study found that more than 80 percent of companies with 200 or more workers reported they were very or somewhat likely to increase the amount paid directly by their employees for health care in 2004. And there is little evidence suggesting that trend will abate in 2005.
The health insurance crisis is escalating at a time when the job market is heating up and a restless work force is becoming increasingly anxious to switch jobs. Multiple studies have revealed that as many as 50 percent of employees intend to look for new opportunities in 2005. According to a survey conducted by the Society for Human Resource Management and CareerJournal.com, 38 percent of HR professionals noted an increase in turnover since the beginning of 2004.
Today's jobseekers are weighing potential employers' health insurance as part of their decision-making process. A recent study by Deloitte and the International Society of Certified Employee Benefit Specialists found that recruitment and retention is now the No. 2 priority of benefits specialists; controlling health care costs is No. 1. Thus, the challenge for today's job shop is reconciling cost control while competing for talent.
Employee wellness may be the best way to balance these competing interests. For example, a 21-year study of wellness programs by the University of Michigan Health Management Research Center found that comprehensive, year-round health programs yielded cost savings of $3 for every $1 spent. Additionally, fitness programs yielded a variety of benefits, including lower absenteeism, reduced workplace stress levels, and improved employee morale.
These savings should come as little surprise. For example, Blue Cross and Blue Shield of North Carolina recently announced that its obese members incurred health care costs of at least 30 percent more than normal-weight members. Therefore, an effective weight management program has the potential to yield considerable savings in the form of reduced claims.
An old saying that we often use to describe organizations that focus on short-term, bottom-line numbers rather than investing in their workers is "Penny wise and pound foolish." We use this in reference to stampers that unnecessarily incur costs related to turnover, absenteeism, and inefficiency because they skimp on investments in their human capital.
Reducing benefits or shifting a greater cost burden for health care to the work force before trying to control costs by other means is counterproductive, especially when recruiting talent is becoming more competitive. Investing in employee wellness is not only a way to address the health of your employees, but your business as well.