Jamie Aslin is team leader of institutional employee well-being at the Los Alamos National Laboratory, a place where precise measurements matter. So when he saw an annual health-care premium trend that went from increasing more than 7 percent annually to suddenly being negative, he thought something had to be wrong.
"We couldn't believe it," Aslin said. "We thought it was a fluke, but it wasn't."
The reason: In 2014, Los Alamos had implemented a new employee wellness program. In fact, as its health-care costs went down — in the first year after the wellness program, the total cost declined from $141 million to $138 million — Los Alamos had an unexpected problem: what to do with the extra money.
"We started having so much money in reserve, we had to do something with it or the government was going to take it back," he said. Los Alamos is part of the Department of Energy. So the employer created its first-ever health insurance premium holiday — for two pay periods, no premium payments were taken out of worker paychecks.
Overall, Los Alamos saved $21 million in three years, and while the health insurance premium trend could not stay negative forever, it has stabilized at an annual rate of 2.5 percent, much lower than the national average of more than 7 percent. It saw the most savings, not surprisingly, among overweight and obese workers, the ones who were getting hurt the most. Los Alamos estimates a $100,000-per-employee health-care cost avoidance.
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Los Alamos uses a wellness program from Virgin Pulse, a company started under the Richard Branson corporate brand (the billionaire sold his 26 percent stake last May), which represents 7.5 million members and roughly 4,000 companies.
"His mantra was 'You take care of your people, they will take of your business,'" said David Osborne, Virgin Pulse CEO.
Virgin Pulse launched this idea 14 years ago, and it is increasingly becoming adopted across the corporate sector.
"Millennials now want more than a paycheck," Osborne said. "They want to have an employer invest in well-being, not just in their skills training."
A $40 billion industry, and growing
The wellness industry has recently been valued at more than $40 billion globally, and venture capital continues to pour into start-ups focusing on health and wellness. Venture capital industry tracker CB Insights estimates the wellness market opportunity — broadly defined as everything from fitness classes to meditation apps, digital fitness devices, genetic testing-linked personal nutritional programs, CBD oil and healthy beverages — as a $4 trillion addressable market currently being targeted by more than 150 start-ups.
Early results within the corporate wellness segment have been encouraging. Academic studies have shown a correlation between wellness benefits and stock performance, and a return on investment that reaches as high as $6 for every dollar invested by a corporation in employee health.
But there is still a lot of companies that don't know how to make wellness work under their watch and how companies can continue to improve their own labor force wellness.
"How do you measure productivity gains?" Aslin said. "That is always a tough one when it is not an assembly line."
"It is more of a softer ROI," Osborne said. "If workers are happier and healthier and come to work more engaged and productive."
Measuring wellness is increasingly important to companies spending more money on it.
Los Alamos gives employees up to $250 in a health savings account for conducting a personal health assessment on a quarterly basis (spouses are also entitled to the benefit) and there is room for greater financial incentives.
"To get to the next step, we have to do something, put a bigger carrot out there," Aslin said. Research he reviewed shows that spending up to $2,000 per employee can increase participation and engagement and still save the employer money.
Seeing small upticks in enrollment and engagement
"If we incentivize more, we enroll more, and we could get to 75 percent or 80 percent enrollment, but employees are not vending machines," he said. "There is a sweet spot with the incentive structure, but it's unrealistic to think you can get to 100 percent." He added, "Right now for every dollar, we get a $4 return, but if we give them more, do we get a greater return? We don't know. Management feels pretty good where we are now."
Los Alamos has seen its wellness participation reach 67 percent of its workforce, up from a 60 percent rate at which it started, and a huge increase over its previous effort to create and manage its own in-house wellness effort before Virgin Pulse, which saw only 10 percent enrollment. Enrollment and engagement continue to see "small upticks year over year, Aslin said. He added that having a wellness program has definitely helped in recruiting the 4,000 employees that have joined Los Alamos over the past four years.
"When we talk about total rewards, people are asking, 'What is your wellness program?'"
Recent five-year trend lines in workplace wellness (2018 vs. 2014)
- General wellness programs: 62 percent (unchanged)
- Programs for chronic health conditions: 25 percent (-17%)
- Onsite health screening program: 47 percent (-17%)
- Onsite stress management program: 12 percent (+9%)
- Onsite massage therapy: 10 percent (+4%)
- Standing desk: 53 percent (+33% )
Source: Society for Human Resource Management, 2018 Employee Benefits Survey
Dr. Zirui Song, M.D., Ph.D., an assistant professor of health-care policy and medicine at Harvard Medical School and Massachusetts General Hospital, worked on one of the early meta-analysis studies of workplace wellness return on investment back in 2010. It found a cost savings of roughly $3 for every dollar spent, but Song said it is important to not place too much faith in early results from wellness programs, given limitations in the design of those evaluations.
That is not to say wellness is not a worthwhile workplace investment, but since the industry is relatively new and return on investment a subject of ongoing study, employers ought to proceed with modest expectations. Companies should also consider both financial and non-financial metrics. Some employers, for example, might find changes in health behaviors that contribute to employee well-being to be valuable even if a high ROI is not indicated by quantitative health or financial statistics.
Osborne said reduced medical costs, less absenteeism and better ROI are all important, but the recruiting benefits remain, regardless of other outcomes. "Employees want to be part of something better and want to feel employers care about them — their health and well-being. I think millennials are part of the driving component, well-being becoming more important and attractive for everyone."
Toward a broader view of corporate health
Viewing wellness as a much bigger issue is where Ron Goetzel, vice president of IBM Watson Health and senior scientist at the Johns Hopkins Bloomberg School of Public Health, hopes the corporate sector is headed.
He led a study of how workplace wellness correlates to public company stock performance, and while correlation is not causation, the results were encouraging. Across a group of 26 companies — close to the size of the Dow Jones Industrial Average group of stocks — that had wellness programs, over a 14-year period this "wellness index" produced a stock return of 325 percent, versus 105 percent for the S&P 500. An investment of $10,000 in stocks listed on the S&P 500 in January 2001 would have returned $20,500 in December 2014, reflecting slightly more than a doubling of the initial investment. In contrast, a similar $10,000 investment in the wellness portfolio in January 2001 would have returned $42,500 over 14 years, thus generating about a $20,000 advantage over a return from the S&P 500.
In a more recent study of 17 companies with wellness programs, outperformance of top internal wellness programs over the S&P was repeated in a four-year period between 2013 and 2017, 115 percent versus 69 percent.
We are competing against Europe and China and India and everywhere else in the world, and you need a healthy and productive workforce.Ron Goetzelv.p. of IBM Watson Health and senior scientist at the Johns Hopkins Bloomberg School of Public Health
While that might pique the interest of Wall Street investors, Goetzel said any narrow view based on a single metric is not where wellness should be headed. Value on investment, a new term, is more important that return on investment, he said.
"ROI is an economic term of cost-benefit analysis. You invest in a new machine and over time you get the return on it and you can do the calculation. Numerators and denominators are monetizable. But what about things like morale our reputation or social responsibility, or a relationship with a co-worker? ... Our interest is in expanding metrics beyond core ROI, which is narrow and hard to prove."
The health promotion programs that dole out $250 to $300 per person, per year, are tackling a fraction of what we pay as a society to treat diseases like heart disease and diabetes, asthma and cancer, and many other preventable illnesses. "I am comfortable with a $100 to $500 to get attention, and put in an HSA, but I get worried when it is higher number because whether it is a voluntary action or compelled because the employee needs money ... it becomes a gray area."
C-suites need a more holistic measurement apparatus too, Goetzel said. They need consumers to be interested in products, loyal to their brand, and the same of their employees.
"In the U.S., we spend $3.3 trillion to $3.5 trillion each year and on a per capita basis, $10,000 to $11,000 on health care," he said. For employers offering family coverage it is close to $20,000 per year.
"Has anyone ever asked for an ROI on the treatment side? The answer is most things on the medical treatment side do not yield a cost-benefit, so what's important is to think about cost effectiveness."
Goetzel said as an example, a decision between treatment A or B — surgery or chemo or radiotherapy, or watchful waiting — still is not done today and that is the kind of analysis needed.
"95 percent of what companies are spending on is treatment, and about 75 percent is spent on treating chronic illness, and they should be looking at effectiveness of treatment," he said. "Our society does not allow that. We don't say, we won't pay for a medicine or treatment. It is off the table as a conversation. We can say we won't pay for smoking cessation or obesity prevention because we don't care, but that comes under the gun and is something much more up to debate."
Goetzel said this view should be more important within the workplace because there are so many things outside the workplace that influence health, too, whether it is banning trans fats, or public transport systems and walkable communities.
"Companies should be looking at the bigger picture, not just for their own self-interest, but to improve the culture of health. Public health is here to stay, and the job is to protect health and improve health in the community."
The recent study of companies with wellness efforts did not indicate that external wellness efforts in the community resulted in stock outperformance as did the internal efforts, so more study is needed to prove a statistically significant link.
It is by and large still a new frontier, but one more companies need to consider as part of their mission. "The younger workforce is beginning to ask for how their company is socially responsible, and this is one other element of that," Goetzel said. "How you treat the health of workers and the footprint in the community, and handprint on the community, has quite a bit of impact on reputation and consumer confidence, and it will become much more important."
Poverty, housing, education, crime and wages all influence health and health outcomes, and it is a much larger challenge for corporations to consider their role in that equation, but it is the next frontier. Berkshire Hathaway, JP Morgan and Amazon all recently combined to create a new health care venture, Haven, to attack the health care spending that Warren Buffett has called "a tapeworm on the US economy." These three employers have a combined total of 1.2 million workers.
"Look at it as global competition. We are competing against Europe and China and India, and everywhere else in the world, and you need a healthy and productive workforce," Goetzel said. "We are struggling with opioid addiction and mental health problems and gun violence, which are issues that will get in the way of doing things competitively and working toward a common goal. The bottom line is we need to compete as a society."
