One of the few things that may be rising faster than the cost of health insurance these days is corporate spending on "wellness." That's the term for a variety of new programs that go beyond traditional health benefits in an effort to keep employees healthy, as opposed to treating them when they're sick -- giving tests for high blood pressure, building in-house gyms, running stop-smoking and nutrition clinics, providing psychiatric counseling, and so on.
It's a bizarre trend, or at least it must seem that way to companies struggling to keep a lid on their current health-related costs. Why would anyone in his or her right mind look for ways to spend additional money on employee health at a time when health insurance rates are soaring 20% or more annually? In fact, the proponents of wellness have a fairly straightforward answer to that question. Spending money on wellness now, they argue, is the best insurance available against even higher future related costs.
Jim Weidaw, director of employee relations at Plaskolite Inc., a $45-million, Columbus, Ohio, plastics manufacturer, says his company started a wellness program three years ago to "make a long-term dent in our medical costs." Initially, the program gave bonuses to employees who did not smoke and to those who actively participated in sports. It is now an on-site fitness program, complete with 12 weight-lifting machines.
"As the company got older and our employees got older with us, our president thought that if we got them into healthy habits right away, in 10 years the risk of lifestyle diseases like diabetes and heart attacks would be reduced," Weidaw says. "This program was never looked at as having any short-term effect costwise." Plaskolite also has found that its program is a good employee-relations and recruitment tool. The company offers smoking-cessation, weight-loss, and stress-management programs, and has regular fitness tests. "We're continuing to see more improvements on the test," says Weidaw. The company's insurance rate, he adds, has gone down over the past three years, although it's too soon to tell whether that is a direct result of the wellness program.
Indeed, the same might be said of most wellness programs. There is almost no statistical proof of the long-run cost-effectiveness of wellness, partly because the trend itself is so young. Nevertheless, a growing body of evidence indicates that businesses pay a steep price for employee health problems that might be prevented.
The Washington Business Group on Health (WBGH), a national employers' organization for health care issues, estimates, for example, that every smoker costs an employer from $624 to $4,611 a year in illness, absenteeism, accidents, disability, and death. Hypertension, according to WBGH, costs businesses $2 billion annually in lost workdays. It's also the primary cause of hospitalization and accounts for 7.5% of all physician visits.
Even more remarkable are the statistics linking health care costs to psychological problems. According to various studies, up to 70% of all physician visits involve a mental health concern. A recent study of 85,000 federal employees and Hawaii residents eligible for Medicaid showed a 37% reduction in medical bills for those given access to short-term psychotherapy. The Samaritan Institute, a Denver-based nonprofit organization with 106 community counseling centers, estimates that productivity losses due to stress cost industry $17 billion annually.
Such numbers may be open to debate, but the evidence is strong enough to have persuaded a growing number of companies that wellness is worth a try. A case in point is Cooley Gravel Co., a Denver company, which has provided employees with psychiatric counseling through Samaritan Centers for the past three years. The company will pay for up to six counseling sessions (more if the center deems it necessary) for all employees and their families. "I don't have any way to measure its success," says company president James Cooley, but he considers it is "money well spent."
Vermeer Manufacturing Co., a Pella, Iowa, construction-equipment manufacturer with 750 employees, changed its traditional health plan "to make it a prevention and treatment plan," says Richard Vander Laan, director of human resources. "It's low-cost and very effective." Vermeer doesn't have a fancy gym -- instead, it sets up incentives for employees to get healthy on their own. If an employee exercises for an hour, Vermeer will donate a dollar to his or her favorite charity; employees who wear seat belts for two weeks are eligible for a prize drawing. It's all on the honor system, but Vander Laan thinks it works. The company holds lunchtime meetings that deal with stress, exercise, nutrition, and family-related issues (all family members may attend).Vermeer also does health-risk profiles of its employees, for early detection of trouble. "We prevented about six people from having serious problems with high blood pressure and cholesterol," says Vander Lann. "We're feeling a need now in three areas -- smoking cessation, drug and alcohol abuse, and mental health," he says. "Once we have those programs in place, the savings in health care costs in the long run could be up to 15%. We think that for every dollar spent, we'll save $10."
"Incentive" programs like Vermeer's are popular among companies that can't afford full-scale wellness programs. Flexcon Co., a Spencer, Mass., processor of pressure-sensitive films, for example, offered a $30 gift certificate each month to ex-smokers who did not resume smoking. Within a year, the number of smokers in the company was significantly reduced, and absenteeism dropped. "We expect a decrease in health claims," says human resources director Joanne Quinn.
Other small companies with effective incentive programs, according to WBGH, include:
* Maupintour Inc., a tour operator in Lawrence, Kans., which gives away exercise clothing to employees who meet monthly fitness goals.
* Schwartz Meat Co., in Norman, Okla., offers its 15 employees up to two weeks of bonus pay if they exercise regularly.
* Sky Bros. Inc., a food distributor based in Altoona, Pa., pays a portion of health club memberships for employees who participate in the company's physical-fitness program.
One of the smartest things a company can do to protect itself from future increases in medical costs is to identify health problems before they get out of control. According to the Work in America Institute, in Scarsdale, N.Y., the most successful types of workplace programs involve disease prevention and control. This includes identifying hypertension, breast cancer, diabetes, glaucoma, and other illnesses whose symptoms may not be immediately recognizable.
Elliot Segal, manager of health programs at William M. Mercer-Meidinger Inc., a benefits consulting firm, suggests that companies survey their employees to determine the specific types of health costs to which they could be vulnerable. "You do a risk assessment," he says. "Say you have 10 people with hypertension problems. You don't run a hypertension prrogram yourself, but there are going to be entrepreneurial employee assistance-type companies springing up and evaluating, designing, and running programs."
To be sure, such programs involve spending cash up front with the understanding that the payoff could be several years down the road. That, in turn, requires a certain leap of faith. But judging from the current popularity of wellness, it's a leap that more and more companies feel is worth taking.
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.