By Len Strazewski

Are they worth it? Only if employees are willing, able and driven to participate.

Employee wellness programs-sponsored by employers throughout the country-provide a wide range of resources and incentives designed to improve the overall health of each employer's workforce. And, in turn, they reduce the cost of health insurance claims, reduce absenteeism and improve productivity.

But wellness programs have their own costs, including purchase and administration of biometric screening tests, health risk assessment questionnaires, health improvement programs (such as smoking cessation and weight reduction classes) and performance incentives.

A government-funded study on wellness programs, conducted by Boston-based RAND Corp., determined that employee wellness spending in the United States topped $6 billion in 2012. Savings over a five-year period were measurable but not very significant and were achieved only by employees who participate in the programs.

And not all employees participate at the same levels, if at all. Other research shows that wellness programs are under-recognized and underused by employees.

According to national survey research from Washington-based Gallup, Inc., published in the company's Gallup Business Journal, more than 85% of employers with 1,000 or more employees provide wellness programs. However, only about 60% of employees in those organizations actually know those programs exist.

Of those who recognize that their employers provide wellness programs, only about 40% actually participate. The net result: Only 24% of employees on average actually participate in wellness programs at all.

Why? Poor communication is one answer, but the Gallup research pegs the problem to both management and plan design. Managers and their practices are the key drivers of engagement, the Gallup report states, and engagement should not be restricted to physical well-being but, rather, should include social, financial and community well-being.

Do the costs outweigh returns on the investments? It depends on your perspective. Wellness program results from several other research studies indicate that they are effective if employees participate-but they confirm that employees are not participating at great rates.

HumanaVitality, a Chicago-based division of Humana, Inc., markets a data-driven wellness and rewards program with about 3.5 million participants. A two-year study of health claims and productivity measured among 13,000 Humana employees participating in the program indicates that wellness programs do, indeed, reduce health costs and unscheduled absences, among employees who actively engage in the programs. Engagement, however, is critical. Unengaged employees, those not actively participating in the programs, spent 53% more per month on health care claims than employees who were engaged. Unscheduled absences were 56% higher among unengaged employees.

The program had its biggest impact on employees with chronic diseases, such as high blood pressure or diabetes. Engaged employees had 60% lower health claims cost than unengaged employees.

Employers, however, do not have consistent ways of building the necessary engagement. "Employers know why they need to focus on employee wellness, but they struggle with how to achieve it," notes Beth Bierbower, president of Humana's employer group division, in the study report.
The most popular approach to improving engagement is health incentives. Employers are investing more in wellness programs, particularly in employee incentives, another study notes.

In May, bswift, a Chicago-based employee benefits technology company released the finding of its fifth annual employee benefits benchmarking study, prepared with Employee Benefits News. The study was based on the results of an online survey of 388 benefits decision makers at employers with 50 or more employees that offer health benefits. For large employers (more than 500 benefits-eligible employees) and smaller employers (50 to 500 benefits-eligible employees), the top wellness program components included biometric testing and health risk assessments.

Among employers with wellness programs, 83% of large employers offered incentives, up from 78% last year and 78% of smaller employers up from 68% last year. Health insurance premium discounts or credits were the most popular form of incentive.

Nearly one quarter of large employers with wellness programs now provide outcomes-based incentives for employees who meet or exceed biometric thresholds, and almost half are considering this approach for 2015.

This trend is likely to continue, according to Brad Wolfsen, executive director of the company's products for health care exchanges, "as CFOs and HR leadership focus in on wellness program return on investment, employee accountability and outcomes-based approaches that tie dollars to employee health improvements will become more commonplace."

However, while employers expanded wellness programs and increased incentive amounts in 2013, participation rates decreased, with fewer employers achieving rates above 50%. The study notes that this result underscores the challenge of maintaining employee engagement in wellness while faced with rising corporate economic pressures and communication demands created by rapid regulatory changes.

The study suggested that defined contribution plan design that provides employees with an established budget of funds to spend on health benefits may be one solution. Employees would be forced to engage directly with health care spending and make choices about the structure of their plan design. As a result, they will see the results of their decisions and make choices that earn incentives. However, despite the promotion of this model, employers have been slow to adopt this new approach, according to the bswift study.

More large employers are considering defined contribution, 18%-up from 14% last year, primarily for medical benefits only. However, less than 1% of employers actually implemented the strategy for 2014 and it is likely that the adoption rate will remain low for 2015, the survey indicates.

Employee self-service and automation-tools that also are supposed to drive engagement-saw the slowest growth in the past year, with some benefits enrollment functions trending in the wrong direction. Almost 30% of large employers lack an online enrollment process for new hires and still rely heavily on paper and manual processes.

In the face of health care reform, wellness programs may be facing their biggest challenges. While the law supports the intentions of wellness programs and allows for incentives in plan designs, the subsidies and other incentives built into the law could direct employees away from employer-directed wellness programs as they purchase individual coverage from public and private exchanges.

Wellness plans may then fall back into the purview of health insurers who may be less motivated for positive results. However, bswift executives say that the opposite may be true as the laws encourage greater self-service and online tools that help facilitate better employee decision making.

"The rise in public and private exchanges has created a clear shift in organizations' approach to health care, and the prediction is that the transition to more widespread self-service and automation, outcomes-based wellness initiatives and adoption of defined contribution will accelerate," says bswift CEO Rich Gallun.

The author
Len Strazewski has been covering employee benefits issues for more than 30 years. He has a M.S. in Industrial Relations from Loyola University in Chicago.