Benefits & Compensation News

3 ways wellness programs fail


When it comes to wellness programs, it can be tough to get past all the hype. Here’s how to avoid the three most common traps employers fall into.

Trap #1. The “one-size-fits-all” approach

For good reason, your organization doesn’t simply copy other firms’ 401(k) plans or compensation designs. Yet, all too often, firms adopt ill-fitting wellness programs based on things that have worked elsewhere.

Your CFO may have seen data on the cost savings other employers have achieved via certain wellness incentives. Or an old colleague of your CEO swears by the program at his or her own firm.
In response, the top brass pushes for a copycat program – for instance, offering smoking cessation incentives.

That might be a good idea, as long as smoking-related illnesses are a key driver of your company’s health costs. But how can you be sure? Is it good enough to have your employees undergo a health risk assessment?

Typically, the answer is no.

Health risk assessments are a great starting place, but it’s often a mistake to stop there. The assessments help you get a feel for what your employees’ baseline physical problems are before you try to design a program around them.

This creates rough outlines of what your program goals should be and where to target employee initiatives. If you want the maximum bang for your wellness buck, you’ll have to dig a little deeper for information. Key places to look:

  • your organization’s medical-claims breakdown for the last three years
  • prescription-drug claims
  • employee absence information
  • EAP use
  • disability claims, and
  • employee demographics (workers’ ethnic, gender, age and dependent coverage status points to greater – and lesser – health risks associated with each category).

Trap #2. Leaving the program on autopilot

Many wellness programs often get off to a good start and then fizzle out. Employers are left wondering what went wrong. Their mistake: They failed to revisit the program on an ongoing basis – at least every other year.

Why it’s crucial: Your cost-drivers can easily shift as employees come and go from the company.
Example: This year, emphysema and other smoking illnesses may be your biggest cost driver. But two years from now, it might be obesity and diabetes.

Unless you continuously track the program and adjust your goals as necessary, you may not be prepared to meet those new challenges.

Trap #3. Unrealistic expectations

Generally, it takes at least a year and a half for employers to break even on the cost of a wellness program. As a rule of thumb, the average program cost per employee per month to the employer is about $3 to $5.

If, after three years, you still aren’t seeing results, something went wrong. Currently, the benchmark ROI after the third year of a wellness program is $4 to $5 saved for every dollar spent.

How can you manage the cost in the short-term? In many cases, employers pass the cost of the wellness program on to the employees. For example, let’s say you want to roll out a wellness program effective January 1 (or whatever your first day is of the new plan year).

You can roll that $3 to $5 per employee per month cost directly into the employee’s monthly share of their healthcare premium. That makes the wellness program a budget-neutral expense for your organization.

But remember: You get what you pay for – both in time and money invested. The less guesswork that’s involved in the planning and execution, the better the chance for success.

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  • Judy

    GREAT article – right on the mark with regard to “wellness” programs versus true “health management” programs.

  • I fully agree, a program tailored to the needs of the company is impartive. In addition to the three ways that wellness programs fail I would like to offer one other significant point and that is lack of participation. My research suggests that programs that have less than 80% participation struggle to demonstrate a meaningful ROI. Meaningful in regard to the time it takes to demonstrate savings as well as the overall amount of savings. Companies can achieve a positive ROI in as little as 6 months if the have at least 80% of their workforce participate. Michael Puck, SPHR, Corporate Health Coach.