The Economics of Wellness:Is Your Wellness Program Making an Impact?

Lee Dukes, PresidentPrincipal Wellness Company

Costs Follow Risks

While there are many reasons why

health care costs have risen rapidly

over recent years, researchers agree:

poor health caused by unhealthy

behaviors is the largest controllable

factor. Costs follow risks!

UnhealthyBehavior

Health CareCosts

Physical inactivity, poor eating habits, tobacco use, unmanaged stress

Health Risks

Obesity, high blood pressure, elevated cholesterol and blood sugar

ChronicDisease

Diabetes, heart disease, hypertension, stroke

While there are many reasons why

health care costs have risen rapidly

over recent years, researchers agree:

poor health caused by unhealthy

behaviors is the largest controllable

factor. Costs follow risks!

UnhealthyBehavior

STD, WC, Productivity

Costs

Physical inactivity, poor eating habits, tobacco use, unmanaged stress

Health Risks

Obesity, high blood pressure, elevated cholesterol and blood sugar

ChronicDisease

Diabetes, heart disease, hypertension, stroke

Costs Follow Risks

N = 27,799

Wellness Score 81.1

Mean Cost $5,150

9,452 (34%)71.8

$7,728

18,347 (66%)85.9

$3,822

6,285 (22.6%)

71.4$8,801

3,167 (11.4%)

82.8$5,675

2,810 (10.1%)

75.6$7,051

15,537 (55.9%)

87.0$3,691

4,819 (17.3%)

70.9$9,555

1.466 (5.3%)82.6

$6,564

1,131 (4.1%)74.8

$6,812

2,036 (7.3%)83.9

$4,899

1,306 (4.7%)74.3

$9,078

1,504 (5.4%)84.1

$6,728

1,742 (6.3%)76.0

$6,893

13,795 (49.6%)

87.6$3,704

University of Michigan Health Management Research Center

Year 1

Year 2

Year 3

Translating Health Status to Dollars

Medical Paid Amount x Age x Risk

Medical Costs Associated with Risks

$2,098

$4,530

$5,813

$1,550

$2,667

$3,364

$4,718

$1,351 $2,110

$2,912

$3,894

$1,122$1,523 $2,081

$2,941

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

19-34 35-44 45-54 55-64

Annual Medical Costs

Moderate

Unknown

Low

High

$7,123

Musich, Lu, McDonald, Champagne, Edington. AJHP. 18(3): 264-268, 2004

36 Studies

• 22 medical costs, 22 absenteeism, 8 both

• Healthcare average ROI 3.3:1

• Absenteeism average ROI 2.7:1

Other Meta Analyses

• 2001 by Steve Aldana 3:5 - 5.8:1

• 2005 by Larry Chapman 5.8:1

Health Affairs: February 2010

Return on Investment

Can be prospective or retrospective

Estimate of how much you saved compared to how much you spent

Expressed as a ratio (2:1)

Not the same as savings• Savings = difference in dollars with vs. without the

investment• ROI = Savings / program costs in today’s dollars

ROI can be low but savings can be high

What Is ROI?

Source: Ron Z. Goetzel, Forecasting ROI for Improving Employee Health and Productivity, NBGH Oct. 2007

If health care costs trended upward or downward, was it the result of changes related to…

• Plan design• Employee population• Available services• Employer policies• Government policies• Healthcare providers

Probably a combination, with various degrees of

impact

Challenges of Measuring ROI for Wellness

Zero Trend

Time

Yea

r-O

ver-

Yea

r In

crea

se

35%

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

do-nothing trend

negative trend

zero trend

Why only measure economic impact?

Other important metrics • Health of the population

• National health standards • Economic impact studies

• Engagement rates• Employee satisfaction and perceptions• Changes in company policies• Environmental changes• Leadership support• External exposure• Preventive care

Evaluating Program Impact

Considerations

• Expectations

• Baseline status

• Claims data

• Privacy

• Outliers

• Time period

Evaluating Program Impact

Option 1Claims experience: compare claims of wellness participants to non-participants

Pros – connects engagement to dollars

Cons – the smaller the number of participants, the likely to include biases

– if little or no incentive, will attract healthiest

– if high participation for participating in DM or coaching, will attract the least healthy

– must account for changes in plan design and/or plan choice

Evaluating Program Impact

Evaluating Program Impact

Option 2Changes in risk status; model the estimated economic impact by risk changes compared to a do-nothing strategy; medical, productivity, STD, Workers’ comp

Pros – aligns health improvement with wellness effort

– does not require claims data

Cons – modeled approach

– requires high engagement rates

– requires some sophistication to both explain and understand

– does not account for non-participants in cohort group

Evaluating Program Impact

Translating Health Status to DollarsN = 672

Estimated Economic Impact - Modeled

Option 3Changes in risk status compared to claims experience; Markov Chain analysis

Pros – aligns risk group with average claims experience

– easy to communicate to C-suite

Cons – requires high engagement rates

– baseline diminishes over time

– does not account for costs that would likely have been incurred if no program in place

– does not account for non-participants

Evaluating Program Impact

26

2010 Risk Transition 2011

Net Change in Risk Status is 4.4% Improvement90% Low Risk stayed Low Risk

Low Risk6,947 (76%)

Moderate Risk1,877 (20%)

High Risk393 (4%)

High Risk298 (3%)

Moderate Risk1,621 (18%)

Low Risk7,298 (79%)

Low Risk (n=6,231)

Moderate Risk (n=675)

High Risk (n=41)

Low Risk (n=981)

Moderate Risk (n=758)

High Risk (n=138)

Low Risk (n=86)

Moderate Risk (n=188)

High Risk (n=119)

Translating Health Status to DollarsN = 9,217

$5,565 $5,615

$6,685 $6,724

$11,755 $12,915

XYZ Claims Cost Per Employee

27

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Ave

rage

Cla

ims

per

Em

ploy

ee

Without Wellness With Wellness Running Average

Lee DukesPresident, Principal Wellness Company

dukes.lee@principal.com

Contact Information