Workplace wellness fails bottom line, waistlines: Report

Savings averaged US$2.38 per month
By Sharon Begley
||Last Updated: 05/28/2013

NEW YORK (Reuters) — A long-awaited report on workplace wellness programs, which has still not been publicly released, delivers a blow to the increasingly popular efforts, Reuters has learned, casting doubt on a pillar of the Affordable Care Act and a favorite of the business community.

According to a report by researchers at the Rand, programs that try to get employees to become healthier and reduce medical costs have only a modest effect. Those findings run contrary to claims by the mostly small firms that sell workplace wellness to companies ranging from corporate titans to mom-and-pop operations.

Rand delivered the congressionally mandated analysis to the United States Department of Labor and the Department of Health and Human Services last fall.

The report found, for instance, that people who participate in such programs lose an average of only one pound a year for three years.

In addition, participation "was not associated with significant reductions in total cholesterol level." And while there is some evidence that smoking-cessation programs work, they do so only "in the short term."

Most large U.S. employers believe the programs improve workers' health and reduce or at least keep the lid on medical spending.

"Companies from the CEO on down feel that these programs are bringing value," said Maria Ghazal, a vice president at the  Business Roundtable, the association of chief executives of big companies. "The criticism is surprising, because companies are not hearing that internally."

Some experts not involved with the new report say even the modest benefits Rand found need qualification.

"The strongest predictor of whether someone will lose weight or stop smoking is how motivated they are," said Al Lewis, founder and president of the Disease Management Purchasing Consortium International, which helps self-insured employers and state programs reduce health-care costs. "Since the programs are usually voluntary, the most motivated employees sign up. That makes it impossible to credit the programs with success in smoking cessation or weight loss rather than the employees' motivation."

For its report, Rand collected information about wellness programs from about 600 businesses with at least 50 employees and analyzed medical claims collected by the Care Continuum Alliance, a trade association for the health and wellness industry.

Industry experts noted that whenever researchers analyze hundreds of programs, there are inevitably more effective and less effective ones.

"Traditional workplace wellness barely scratches the surface," said Keith Lemer, president of WellNet, which provides programs to Cumulus Media, Viking Range Corp and the Charlie Palmer Group of  restaurants, among others. "Done right, (the program) requires the integration of clinical data, wellness, health coaching, and work flow." The initiatives succeed if they have "senior level support and a high-degree of employee engagement in healthy behaviors," he said.

Savings of US$2.38 per month

The report's conclusions about the financial benefits of workplace wellness programs are also grim. In theory, the programs should reduce medical spending as employees become healthier and thereby avoid expensive conditions such as heart disease, cancer and stroke.

In fact, workers who participated in a wellness program had health-care costs averaging $US2.38 less per month than non-participants in the first year of the program and US$3.46 less in the fifth year. Those modest savings were not statistically significant, meaning they could have been due to chance and not to the program.

More surprisingly, workplace wellness did not catch warning signs of disease or improve health enough to prevent emergencies.

"We do not detect statistically significant decreases in cost and use of emergency department and hospital care" as a result of the programs, Rand found.

The RAND report was mandated by the Affordable Care Act, the health-care reform law known as Obamacare. Two sources close to the report expected it to be released publicly this past winter. Reuters read the report when it was briefly posted online by Rand on May 24 before being taken down because the federal agencies were not ready to release it, said a third source with knowledge of the analysis.

From subsidy to penalty

Starting next year, the health-care reform law allows employers to reward employees who participate in workplace wellness programs with subsidies equal to 30 per cent of the cost of insurance premiums, or about $US1,620 annually per worker.

If wellness programs do not reduce health-care spending, some employees could suffer financially. If an employer is subsidizing employees who use its program but is not reaping lower health-care costs, it has three choices. It can absorb the costs, perhaps figuring it helps recruit or retain valued employees. It can raise health-care premiums across the board. Or it can raise costs only to workers who do not participate, through higher deductibles or premiums, by at least that US$1,620.

Cost-shifting seems especially unfair if wellness programs don't deliver medically or financially, said senior counsel Dania Palanker of the National Women's Law Center, which generally supports the programs: "We've seen plans that appear to cost-shift, with wellness programs rolled out at the same time that premiums or deductibles are increased."

Workplace wellness is a $6 billion industry in the U.S., with an estimated 500 vendors now selling the programs. Fifty-one per cent of employers with 50 or more workers offer one, the Rand report found. Medium-to-large companies now spend an average of US$521 per employee per year on wellness incentives (gift cards for losing weight, for instance), double the US$260 in 2009, according to a survey by Fidelity Investments and the National Business Group on Health released in February.

For many employers, wellness programs are a recruiting and retention tool, attracting the health-conscious employees they prefer. The programs also promise to control an employer's health-care spending. By getting workers to stop smoking they should reduce expensive emphysema treatments, for instance, and by nudging workers to get annual physicals they are expected to help companies avoid such financial black holes as cancer treatment and stroke rehabilitation.

Employers told Rand they were "overwhelmingly" confident that workplace wellness reduces medical costs. Yet only 44 per cent have actually evaluated their efforts, and only two per cent had precise savings estimates. Most leave those calculations to companies that sell them the programs, or to consultants, opening the door to creative accounting, say skeptics.

Tom Emerick, president of Emerick Consulting and former vice president of global benefits at Walmart, is one of them: "Many of the vendors reporting savings are making it up."

Ghazal of the Business Roundtable acknowledged that calculating savings from wellness programs is tricky: "Sometimes the benefits are way down the road, when the person is not at that employer anymore."

On the bright side, the Rand report says health-care costs and use of expensive medical services rose more slowly for program participants than non-participants. That offers hope "that a reduction in direct medical costs would materialize if employees continued to participate."

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