Organizations that adopt employee wellness programs often report benefits like increased employee well-being, improved productivity, and higher engagement levels. But with the steady increase in healthcare spending, many organizations are wondering how healthcare costs can be reduced through wellness programs.
In this post, we’ll look at some of the driving factors behind rising employer healthcare spending and how wellness programs can curb some of the leading contributors to increased costs. We’ll also explore some of the research that shows how wellness programs can help employees reduce their risk of disease and adopt healthier lifestyles — two factors that directly influence how much companies spend on healthcare.
How Much Do Companies Spend on Healthcare?
In 2020, U.S. employers spent an estimated $13,728 per employee on healthcare — an over 16% increase from 2015. Employer healthcare costs are only expected to continue to rise, as the Centers for Medicare and Medicaid Services projects that national health spending will increase at an average annual rate of 5.4% until 2028.
Some of the drivers of high employee healthcare costs include:
- Unhealthy lifestyles and behaviors that increase disease risk
- Increased cost of prescription drugs
- Expensive routine tests and procedures
- Lack of coordination among various medical professionals
- Poor healthcare cost transparency
Unfortunately, most organizations have very little control over most of the factors that drive up healthcare costs. However, one area they can influence is the prevalence of unhealthy lifestyle habits among employees.
Research shows that the more health risk factors an employee has, the higher the cost of insuring them and the more the organization pays in healthcare compared to employees with fewer risk factors.
By helping employees adopt better health habits, organizations can reduce the number of healthcare expenditures associated with disease and illness.
How Do Wellness Programs Reduce Healthcare Costs?
Do wellness programs reduce healthcare costs? Wellness programs are workplace health strategies that target behaviors that increase the risk of disease, effectively reducing the related healthcare costs for employers. For wellness programs to be profitable, the interventions must reduce healthcare costs by more than the cost to adopt and run the program itself.
In recent years, many organizations and research firms have investigated whether wellness programs are worth it and if they can produce a return on investment. Below are three ways that wellness programs can reduce healthcare costs.
1. Reduces Health Risk Factors
Health experts have long identified a set of specific health factors that are the biggest contributors to disease and premature death. Many of these risk factors are due to unhealthy lifestyle behaviors, such as lack of physical activity, poor diet, high stress, and other habits.
The top risk factors for increased healthcare costs include:
- Hypertension (high blood pressure)
- High cholesterol
- High blood sugar
- Overweight and obesity
The above factors increase a person's risk for heart disease and stroke — the leading causes of death in the U.S. Certain combinations of the above factors also increase a person’s risk of diabetes and cancer, which both account for hundreds of billions of dollars in healthcare costs.
In 2014, RAND conducted a study to assess whether employee wellness programs saved companies money. The researchers found that the majority of savings come from a wellness program’s ability to provide disease management, meaning whether companies offer interventions that help employees manage existing health conditions.
Wellness programs that help employees identify any of the above risk factors as present in their lives can provide interventions to help manage disease and mitigate conditions from worsening over time.
2. Promotes Preventive Health Behaviors
Effective wellness programs aim to reduce healthcare costs by taking a twofold approach. First, they provide interventions that help manage existing levels of disease and risk factors among employees. Secondly, they encourage employees to adopt better lifestyle habits to prevent the risk of future health problems.
Wellness programs can encourage healthier behaviors among employees who are currently relatively healthy, effectively reducing the risk of long-term healthcare expenditures.
Some of the common ways that wellness programs promote healthy lifestyle behaviors include:
- Rewarding higher levels of physical activity
- Encouraging smoking cessation
- Providing personalized health coaching
- Teaching stress management skills
Organizations with wellness programs that target a combination of lifestyle behaviors can see improvements in healthcare expenditures over time thanks to higher levels of employee well-being.
Increasing physical activity alone can have a positive impact on healthcare spending. According to the CDC, 11% of total healthcare costs in the U.S. are attributed to inadequate levels of physical activity. By promoting healthier lifestyle habits, employers can see a reduction in healthcare costs due to a lower risk of employees developing chronic diseases.
3. Creates a Culture of Wellness
When organizations prioritize employee well-being, and workers make noticeable changes to their lives, it creates a workplace culture of greater commitment and engagement. Employees begin to feel good about their health and see themselves as integral contributions to the organization, leading to increased productivity.
Effective wellness programs are designed to increase employees’ motivation to participate. Wellness programs like fitness challenges, healthy food options, and mental health support encourage higher rates of program adoption among employees. The more employees feel engaged with the wellness program, the better results they’ll get, further fueling their commitment to wellness.
Wellness programs help create a positive feedback loop between high engagement and improved well-being. The more organizations can encourage employees to participate in wellness programs, the lower the healthcare costs for employers.
Maximizing the Return on Employee Wellness
Employee wellness programs encourage workers to adopt healthier habits and take control of their health, resulting in reduced healthcare costs for themselves and their employers. Maximize your return on investment in employee wellness programs by taking both a disease-management and preventive-health approach to reducing healthcare costs.
Beyond managing healthcare spending, employee wellness programs impact other aspects of an organization as well. Research shows that people who live more active lifestyles report having better mental health and overall quality of life. When employees feel good, they tend to be more productive and perform better, leading to greater organizational success.
Discover how Wellics' workplace wellness programs can help your organization monitor, control, and reduce healthcare costs. Our employee wellness platform allows you track custom metrics, like health care spending, showing you how effective workplace wellness initiatives are at keeping your employees fit and healthy. Learn more about how the Wellics employee wellness program works.
Originally published May 18, 2022 - 6:15 AM, updated September 3, 2024
Sources
- https://www.statista.com/statistics/240690/companys-medical-and-drugs-costs-in-the-us/
- https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
- https://pubmed.ncbi.nlm.nih.gov/16966956/
- https://www.mayoclinic.org/diseases-conditions/heart-disease/in-depth/heart-disease-prevention/art-20046502
- https://www.rand.org/content/dam/rand/pubs/research_briefs/RB9700/RB9744/RAND_RB9744.pdf
- https://pubmed.ncbi.nlm.nih.gov/25559060/
- https://www.health.harvard.edu/healthbeat/exercise-advice-for-people-with-heart-problems
