You promised great results from your wellness program; now management wants to see those results—in dollars. Here’s how to talk about wellness in their language: Return on Investment (ROI).
When management reviews the success of your wellness program, it’s likely that the first number they’ll ask to see is the program’s ROI. Fortunately, most wellness programs show an impressive ROI, so that shouldn’t be a problem. Courtesy of BLR’s Workplace Wellness book, let’s look at how to go about the calculation.
ROI analysis deals strictly with the financial impact of a program. It answers this question: For every dollar invested in wellness, how many dollars does the employer get back?
Corporate Wellness programs show a great ROI. And as one expert noted, there’s little downside—even small improvements make a difference. Check out Workplace Wellness at no cost or risk. Read more
ROI is easy to calculate. Say you spent $100,000 on your wellness program, but as a result of that expense, your documented program costs dropped $325,000. Simply subtract the cost from the savings, and divide the resulting answer by the cost. Finally multiply the final answer by 100 to get a percentage, as below:
($325,000 – 100,000) = 2.25 x 100 = 225%
100,000
An ROI of 225% means, in everyday wallet terms, that your company is getting back (actually not having to spend) an additional $2.25 over and above every dollar they invest and then get back—not a bad deal by anyone’s terms. And that’s not counting the benefits of better health which are, as they say in the credit card ads, priceless.
To document those savings, the experts advise keeping track of costs and cost savings from the beginning. Costs may include:
- ▪ Plan design and development (outside consultants for health risk assessments, outside partnerships)
▪ Promotion (newsletter and poster printing)
▪ Administration (planning, running, tracking participation)
▪ Delivery (staff, technology/online component, outside consultant)
▪ Materials (pedometers, health fair supplies)
▪ Facilities (on-site exercise equipment, walking paths, outside gym memberships)
▪ Employee wages (wellness team members)
▪ Evaluation (outside evaluation consultants)
Wellness—NO downside! Wellness programs show impressive ROIs, so management and employees are happy. And that means HR is happy. Check out BLR’s Workplace Wellness. Read more
Savings derive primarily from health insurance cost reductions, but don’t forget these additional, indirect benefits:
▪ Productivity increases through reduction in absenteeism and presenteeism (sick employees coming in to work, often making mistakes and infecting others)
▪ Lower workers’ compensation costs
▪ Lower turnover costs
A Tool to Build Your Wellness Program
These are the kind of results that well-structured and well-run wellness programs can make. But the key words are well-structured and well-run, because poorly structured programs just spin wheels—no health benefit and no positive ROI either.
Many readers have told us that BLR’s comprehensive guidebook, Workplace Wellness: Healthy Employees, Healthy Families, Healthy ROI, has helped them get programs up and running that achieve wellness objectives with a great ROI, while avoiding the legal hassles that, these days, seem to attend any worthwhile venture in HR.
Check out BLR’s Workplace Wellness at no cost or risk. Click here for details.
It’s a comprehensive guide that takes you step by step through setting up a program, from convincing management to creating and implementing a workable plan for your workplace. The guide also includes a vast collection of ready-to-use forms, handouts, and checklists that both structure your program and provide the metrics to prove its effectiveness to management’s satisfaction.
If you’d like to examine Workplace Wellness: Healthy Employees, Healthy Families, Healthy ROI on a no-cost, no-obligation basis for 30 days, we can arrange for you to do so. Click here and we’ll be happy to set it up.
Oh, if only determining wellness program ROI could only be this simple!
Your formula assumes that there is a direct link between the wellness program outcomes and healthcare cost savings and that these savings translate directly into reduced premiums. In theory, this may work for self-insured organizations or large, fully insured organizations whose premiums or costs are based on their claims costs. Unfortunately, the annual health insurance premiums for most small organizations are usually based on a community rating. What this means is that the organization’s health insurance premium costs are set based on the community’s costs, not the organizations. So no matter what the organization does, it has no effect on its premium costs.
While I agree that ROI is often critical in getting C-Suite/senior management support and commitment for wellness, how does your formula account for all the variables that go into determining healthcare costs and utilization? For example, how does your formula prove that any savings experienced by the health plan are directly related to the wellness program and not the result of one or more of the following:
* Any benefit changes?
* A decrease in costs due to a fewer number of high-cost/catastrophic cases?
* A decrease in costs due to a difference in the frequency and types of services utilized that year by health plan members?
* A decrease in the number of hospitalizations that year for reasons unrelated to wellness program activities?
* A shift in the number, age, demographics and geographical location of health plan memebers?
* The normal types of cost swings that you expect to see when comparing costs on a year – to – year basis?
Bill McPeck
William McPeck
Certified Worksite Wellness Program Consultant
Work-Life Certified Professional
Certified Health Promotion Director
Director, Employee Health and Safety
Maine State Government
207-287-6780 (voice)
207-287-6796 (fax)
william.c.mcpeck@maine.gov