Using Employer-based Wellness Programs to Reduce Health Care Costs

June 1, 2009
Policy makers and employers should take a serious look at the overall reduction in employee health charges that may be achieved by improving worker access to employer-based wellness programs.

President Obama, members of Congress and dozens of interest groups have pledged to find new ways to provide Americans with better access to health care while regaining control of health care spending. With public and private health spending predicted to reach $2.5 trillion in 2009 -- a 17.6% share of the U.S. gross domestic product-many policymakers are arguing that effective, evidence-based, preventive services such as smoking cessation programs not only promote health, but also offer high economic value.

Employers have a huge financial stake in the success of these efforts. Effective employer-based wellness programs can reduce absenteeism, increase productivity and lower health care costs by helping workers avoid or postpone serious diseases. A comprehensive nationwide survey of 583 workers conducted in late March, demonstrates that preventive health services in the workplace is and will be an important issue in the upcoming health care reform debate.

"Healthy at Work?", a report from Rutgers University's John J. Heldrich Center for Workforce Development, found that nearly four in ten workers say their employer provides some kind of wellness program, ranging from classes in nutrition to a newsletter to a fitness center.

Nearly one third of those respondents think wellness programs have a major impact on the health of people in their workplace. And 70% of working adults think employers should offer wellness programs that address important health issues such as diet, exercise, stress reduction, and how to manage chronic illnesses, such as diabetes.

Not every worker enjoys access to these programs. Workers who are less affluent and less educated are less likely to have access to employer-provided preventive health services. Nearly half of college-graduates (46%) report an employer wellness program, compared to just one-quarter of employees with a high school education or less (25%). About four-in-ten workers (44%) with incomes of $70,000 or more say they have access to a wellness program, compared to just two in ten (21%) of those making $35,000 or less.

Workers are also divided over the incentives and penalties employers might use to encourage healthier behavior among employees. Most workers surveyed do not feel it is appropriate to provide increased salaries or extra time off to those who participate in wellness programs. Instead, three-quarters of workers (74%) say employers should lower health care premiums to employees who participate in wellness programs.

Many of the workers also feel it is unfair for workers to pay higher premiums because of existing health conditions:

  • Just half (47%) of workers say employers should be allowed to charge smokers more for health insurance.
  • Barely 4 in 10 workers (43%) support higher rates for people who drink too much alcohol.
  • Only one-quarter of workers (26%) think people who are very overweight should pay more.

Finally, workers express strong concern for the privacy of their health care records if the trend toward using electronic records continues as expected.

In mid-May, President Obama held a roundtable with the CEOs of a number of companies to discuss their successes with wellness programs and innovative practices. A few of these best practices are highlighted here:

  • The Hotel Employees and Restaurant Employees International Union (HEREIU) Welfare Fund provides multi-employer health insurance coverage for 90,000 eligible employees and their families and has worked to align good health outcomes with lower costs by informing patients about high-performing doctors, rewarding high-performing doctors and giving incentives for workers to obtain prenatal care.
  • Johnson & Johnson has a long history of workplace health programs, including disease management and prevention interventions, risk-based incentives, and exercise equipment available for offices. From the late 1990s to 2006, J&J was able to identify a decline of smoking in their workforce from 12% to 4%, incidents of high blood pressure dropped from 14% to 6%, and workers dealing with high cholesterol declined from 19% to 6%.
  • Pitney Bowes has established onsite health clinics and fitness centers, incorporates lower-priced, healthier foods in their cafeterias, and offers low- or no-cost health screenings and immunizations. These and other programs have resulted in a reported $40 million in savings over the last nine years.

Policy makers and employers should take a serious look at the overall reduction in employee health charges that may be achieved by improving worker access to employer-based wellness programs. At the same time, federal and state laws need to be strengthened and enforce laws to protect workers from discrimination due to health factors.

Carl Van Horn, Ph.D. is professor of public policy and director of the John J. Heldrich Center for Workforce Development at Rutgers, The State University of New Jersey

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