Reductions in employee health risks lead to immediate cost savings, while the accumulation of additional health risks lead to significantly higher medical and pharmacy costs, according to a study from StayWell Health Management and Towers Watson.
Cost savings associated with health risk reductions can be particularly substantial for those with chronic conditions, the study continues. While improving health has been shown to generate positive long-term ROI, there has been limited research on how soon cost savings begin accruing and the cost impact of health risk accumulation versus health risk reduction.
This is one of the first multi-employer studies to explore the timing of changes in healthcare costs related to increases or decreases in health risks, researchers say, and it suggests that prevention is key to reducing healthcare costs For all employees. These findings are important for employers evaluating their workplace health management programs.
Key findings from the report include the following:
- Reductions in health risks can lead to reductions in healthcare costs in the same year. Employers can break even on their wellness investment in year two and achieve up to a 3:1 ROI in year three.
- If organizations prevent individuals from adding new health risks over time, their cost savings will be greater than if they focus on eliminating a health risk after it emerges.
- Long-term solutions are better than quick fixes. Greater immediate savings were realized from reducing health risks for people with chronic conditions than for the average employee. Cost savings were four times greater for those with chronic conditions compared to those without chronic conditions. An ongoing focus on prevention can benefit the entire population by avoiding chronic disease altogether, or slowing the progression and diminishing the severity of chronic disease. Prevention will improve the company’s total healthcare spend.
Researchers note that wellness programs can produce even greater immediate savings in productivity-related costs, including reduced absenteeism, disability and workers’ compensation costs, as well as enhanced work performance. The combination of direct healthcare savings, which grow over time, coupled with these more immediate, indirect productivity savings, supports the business case for investing in a prevention-focused, population-based health management strategy.
Source: Towers Watson, November 19, 2012
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