May 1996

Health Care Savings through Wellness Programs

by Martin Ackley, Consultant for Health Policy

Michigan companies are finding that work-site wellness programs for their employees are an important ingredient in a strategy to limit the growth of health-care costs. Whether initiated through a state-funded program (discussed below) or through programs they launch themselves, employers are using health promotion to leverage lower premiums from health insurers.

A unique effort in east central Michigan will allow small businesses to reap the benefits of health promotion and wellness programs. The newly created Health Care Alliance Pool (HCAP) will offer health benefit plans for employers in the 14-county region, emphasizing wellness and prevention.

"Our philosophy is that you indeed can affect premium cost through health promotion and wellness programs," says HCAP President Randolph Flechsig. "As our May 1996 survey of the region’s businesses illustrates, small businesses cannot afford their own individual health-promotion programs. They do, however, recognize the value of such programs. The new HCAP ACCESS insurance plans will go hand in hand with the development of region-wide wellness programs that will improve employees’ health status and therefore lower premiums. This all can be done with community-based programs, in which providers and employers work together."

The 1996 survey of employers in east central Michigan finds that 80 percent of the respondents believe work-site wellness programs can lower health-care costs and improve employee morale and productivity. Eighteen percent of the respondents (including almost half of the companies having more than 100 employees and a tenth of those with fewer than 25 employees) actually have such programs.

Steelcase Proves It

HCAP is using the results of a 10-year wellness study at Steelcase, Inc., in Grand Rapids as the foundation for its program. The study, which compares health risk and lifestyle assessments with medical claims costs, was conducted by the University of Michigan Fitness Research Center. In an internal report to employees, Steelcase reports that if all high-risk employees practiced low-risk lifestyles, "the savings could amount to roughly $20 million over three years."

The Steelcase study demonstrates that high-risk employees who engaged in low-risk behaviors from 1985 to 1990 lowered their average annual health care claims by $618—from $1,155 in 1985–87 to $537 in 1988–90; high-risk workers who did not change their lifestyles had an average increase of $122.

A confidential health risk assessment engaged in voluntarily by Steelcase employees permits U-M’s Fitness Research Center to measure the effects of 14 risk behaviors that include smoking, failing to exercise, consuming more than 14 alcoholic drinks per week, having high blood pressure, having 240+ cholesterol level, suffering high stress, rarely using seat belts, feeling dissatisfaction with life and job, taking more than five sick days a year, and being more than 20 percent overweight. High-risk employees are categorized as those having 2 or more of the 14 risk behaviors. According to the center’s director, Dr. Dee Edington, health care costs begin to rise significantly when employees have 4–6 risk factors.

Flechsig points out that this is the first time there have been data that actually show the relationship between behavior and health costs and present proof that healthy behavior saves money in the workplace. "[The Steelcase study] clearly demonstrates that with a work-site wellness program, over a decade a business can lower the rate of increase in its health care costs."

Work-site wellness programs generally focus on improving the health of high-risk workers, but the Steelcase study reveals that keeping low-risk employees healthy is just as important to keeping a company’s health-care costs down: Low-risk employees with healthy lifestyles saw a marginal reduction in their average annual medical claims, from $655 to $638, in the study period. Low-risk employees, however, who lapsed into unhealthy behavior saw their medical claims soar, from $655 to $1,513. When one considers that most companies have many more low- than high-risk employees, the value of efforts to keep low-risk workers healthy is even more obvious.

The Steelcase study also finds that when employees with two or more risky behaviors are compared to those with fewer, the former have average medical costs 75 percent higher; in addition, 10 percent of its workforce is responsible for 80 percent of the company’s annual health-care costs.

The result of wellness programs will vary according to the composition of a firm’s work force. Seventy-seven percent of the Steelcase employees are males averaging 44 years of age; companies with younger and more female personnel will have different outcomes. Level of education is also a factor: People with post-secondary schooling, on average, have fewer health-risk behaviors than others.

The table presents 10 tips offered by Pamela Witting, Steelcase’s manager of wellness and health services, for businesses with limited resources wishing to embark on an employee wellness program.

Help for Small Companies

Flechsig says the HCAP ACCESS program has two goals: to (1) save on health care costs, and (2) help smaller employers to generate work-site wellness programs. "Unlike large employers with large resources, the small employer has difficulty connecting with wellness programs," he says. "Our hospitals have been developing wellness programs over the years, and we want to develop programs that small operations can benefit from."

A state-funded resource small companies may tap is the Worksite and Community Health Promotion (WCHP) Program, operated by the Michigan Department of Community Health (MDCH). Some 850 grants totaling $1.8 million are awarded annually, providing health risk assessments and prevention programs for about 43,000 employees; the services funded by the grants include heart-healthy screening, fitness assessments, and a one-year followup with high-risk employees.

Over 6,000 work-site wellness grants have been awarded during the past 8 years, with 80 percent accorded to employers having fewer than 200 workers. In 1994 (latest data available), private-sector work sites, including manufacturing, retail, and service-related businesses, received 68 percent of the grants; the balance went to public sector employers, e.g., schools and local governments. Special consideration is given to applicants that typically have employees at high risk; examples are companies with a high proportion of low-wage workers and racial and ethnic minorities, no health insurance, and/or no wellness activities in place.

The grants average $2,200, and most recipient companies continue the wellness programs after the first year, according to George Lafka, chief of the Community Health Unit at the MDCH. The grant program focuses on preventing cardiovascular disease (CVD), the leading cause of death in Michigan.