More Power Plays: Using economic arguments for wellness

flickr, aswendener

flickr, aswendener

 

I just went through a list of key humanitarian arguments for wellness programming in our last post, but we also need to play our economic cards as well!  Remember our series on how to measure the five major economic variables that wellness programs impact in work organizations? Health plan cost, sick leave absenteeism cost, workers’ compensation cost, disability insurance costs and presenteeism costs.  Now let’s talk about how to effectively position the economic rationale for wellness.

 

Economic Rationale: It’s the Money Stupid!

For decades wellness advocates have promoted programming to senior managers as tangible ways to affect health plan costs, whose rapid increases have deeply troubled all organizations.  But over the past decade single digit increases have replaced the double digit increases of previous decades removing some of the economic pressure for wellness.  Looking forward under the ACA it’s difficult to know exactly what is likely to happen to national medical trend.  My opinion is that we are likely to see high single digit annual increases for the foreseeable future because I believe that there are ample market and population undercurrents that will guarantee this pattern.  Even with steady rates of growth in per capita health plan costs I believe it makes good sense in most cases to position wellness as addressing all five economic variables that are important to employers.

 

We have pulled together a few arguments you can use to connect the dots between wellness and bottom-line impact:

 

Argument #1: Good health is good business!

  • We intuitively know that healthy employees cost less and can produce more.
  • Most organizations including yours can benefit from increased efficiency.
  • Wellness can help employees increase their efficiency.

 

When to use this argument: In businesses with management that is new to wellness, this general argument is very powerful.

 

Argument #2: Wellness can be focused on specific (and multiple) economic variables

  • We have a large number of scientific studies of the economic return from wellness programs. (Watch for our updated eBook that examines 90+ peer reviewed studies)
  • We can implement specific interventions targeted on each of the five economic variables.
  • Wellness can be designed and implemented to maximize economic return.

 

When to use this argument: In companies with an aging workforce, increasing market competition or ailing profitability, this argument would be most effective with all levels of management.

 

Argument #3: The economic return of Wellness can be rigorously measured

  • To gain an accurate accounting of the full economic return from a wellness program requires a sound evaluation design and some money spent on evaluation research.
  • Most organizations including yours can design and conduct a rigorous economic evaluation with a little focused help.
  • Wellness can be economically validated through sound program evaluation methods.

 

When to use this argument:  In companies with a high expectation for quantitative evaluation, this argument works best with managers.

 

Argument #4: Wellness economic return needs to reflect a valid and fair comparison between the program’s costs and savings

  • We need to recognize that wellness programs affect all five economic variables but if we only look at one or two and then compare it with the total direct cost of the wellness program we are unfairly examining economic return.
  • Most organizations including yours probably don’t look at all five economic variables.
  • To be fair the total cost of a wellness program should be compared with all the economic savings caused by the program.

 

When to use this argument:  When a company’s management places great importance on Return-on-Investment (ROI) but fails to see the full economic picture this argument is often helpful.

 

 

Argument #5: Wellness can be configured to better balance short and long term economic return

  • Wellness programs need to take a balanced approach to short and long term economic return.
  • Most wellness programs are heavily weighted to produce long term economic return.
  • Wellness programs can be configured to include short term economic return through interventions such as:  medical self-care, consumer skill building, injury prevention, high risk pregnancy prevention, intervention for somatization disorder, presenteeism interventions, etc.

 

When to use this argument: When an organization’s management have an immediate need for economic return, this argument works well.

 

 

Other arguments indirectly related to the organization’s bottom-line that might help…

 

Argument #6: Wellness can directly improve the economic condition of the average employee

  • Healthy people have lower out-of-pocket health costs and can benefit from using pre-tax dollars to pay for their out-of-pocket health costs. In addition wellness financial incentives can benefit those who participate in wellness programs.
  • Wellness programs that address “financial wellness” often improve the financial well-being of employees and their families.
  • Wellness can lead to significant financial benefits for employees.

 

When to use this argument: In organizations with collective bargaining, labor force and employee relations challenges and recruitment needs management often resonates to this argument.

 

 

Argument #7:  Wellness can be used to help reduce the “entitlement mentality” of employees

  • Employers need to reduce the sense of entitlement that characterizes most employee groups.
  • Wellness can be positioned as part of the emerging partnership between employers and employees, particularly if information on the relationship between health risks and health costs is shared with employees.
  • Wellness should be seen as an opportunity to work together to help preserve the generosity of health plans, insurance benefits and future compensation.

When to use this argument:  Organizational managers that have a long history with a work force that evidences a deeply held sense of entitlement should be good candidates for this economic argument.

 

As with playing your humanitarian cards, it is critical that you narrow your choice of arguments to focus on one main argument in the economic area.  Even though we may see all the many benefits of wellness, executives can easily get overwhelmed with a laundry list of rationales.  Often they perceive that many ‘good’ arguments aren’t as convincing as one or two powerful ones that fit their strategic imperatives and are followed up with particularly cogent (and pragmatic!) examples.

 

When you think about your audience, one key question is how they think about the total health-related cost of their employee base. How much are employee-related costs on their minds?  How much pain do they feel today about health-related costs? Are they worried about future costs or trends? Have they determined what the effect of future cost increases will be on the organization?  Are they feeling the burn on the total employee costs of their business?  How do these costs compare to expected after-tax-profitability (or net revenue in the public and non-profit world)?  National data shows that these five economic variables represent between $25,000 to $35,000 of annual cost per employee per year.  If they grow at a rate of 10% per year…. can your organization survive another decade?

 

Executives who feel cost and competitive pressure strongly are typically the best targets for the economic message, but in almost every setting, your best bet is to pair one strong humanitarian argument with an equally strong economic argument to seal the deal!

 

Don’t forget, strategies for building executive support for wellness is one of the key skills we teach in our Level 1 WellCert worksite wellness certification program!

 

 

3 Comments

  1. Another great blog, Larry! This should help move the needle forward.

    Do you happen to have a reference for these figures in your blog, or did you figure it (like I do) based on several sources of data:

    “National data shows that these five economic variables represent between $25,000 to $35,000 of annual cost per employee per year.”

  2. Hi Jack,
    Always good to hear from you! Actually I took the original HERO study by Ron Goetzel, updated it to 2010 using the Mercer multi-employer medical trend data and then added in the Collins JOEM study on Presenteeism from Dow Chemical and cut the presenteeism amount in half to be conservative. It comes out to $28,000+ a year per employee. I have a slide I can send you if you ping me on my regular email at Larry@ChapmanInstitute.com. Merry Christmas and Happy New Year to you!

  3. Larry, great stuff as usual.

    I had a couple questions for you related to the economic argument. In Argument #7 about entitlement I see a continued problem with employers not being totally transparent (or putting the effort into educating employees) about the true costs of healthcare and more importantly how much the organization helps to subsidize the rising cost of healthcare. It seem that this would be critical to employees being more understanding of the challenges employers face and how employees can play a more active role.

    In addition, I didn’t read anything about the economic return of turnover and or talent retention. To me this is a valuable metric to get our hands on. Granted, it would seem to be a real challenge to measure but limiting the number of new hire trainings and keeping highly skilled staff within the organization could be significant. I remember reading a study http://www3.weforum.org/docs/WEF_HE_WellnessImperativeCreatingMoreEffectiveOrganizations_Report_2010.pdf that reported on the value of wellness programs on work performance and talent retention. How can we better help to draw a correlation and economic benefit? Thoughts?

    Thanks and Happy Holidays!

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