Employee Health: Why Wellness Works

When Michael Schrage, CEO OF Centier Bank, was first pitched on the idea of opening an onsite health clinic at the bank’s 72,000-square-foot headquarters in Merrillville, Indiana, he was skeptical, to put it mildly. It wasn’t that it was out of character for the family-owned bank, which had for years invested in employee health-related perks, such as an onsite gym and fitness classes, a cafeteria with healthy options and a robust healthcare plan, check these products that will boost their results.

Schrage himself was a believer in preventative health and has for years had annual physicals at an executive health clinic in Chicago. But opening an onsite clinic seemed the first step toward self-insuring and, many years earlier, Centier had a bad experience with that. “We took horrendous hits on it,” he says. “It was one of those things where I said, ‘I’ll never do that again.’”

Plus, the numbers just didn’t seem possible. How could providing free care to 800 employees and their families possibly cost less than a traditional health insurance plan? “I had a very persistent team in human resources who pursued me, saying this will pay for itself,” says Schrage, who finally relented after a year and a half of convincing. “I said, let’s try it—but no promises.”

Four years later, Schrage is a believer. Since the clinic opened, the number of catastrophic claims has declined substantially and the bank has seen an overall savings of about 20% on its healthcare costs. “It really has paid for itself,” he says.

“Since the clinic opened, the number of catastrophic claims has declined substantially and OVERALL the bank has SAVED about 20% on healthcare costs. It has paid for itself.”

The clinic also might have saved Schrage’s life. “I went in for a sore throat and found out I had a basal cell carcinoma. Fortunately, it was caught very early,” says Schrage, noting he has heard many similar life-saving stories from employees, who thank him constantly for opening the clinic. “With early detection, you don’t have many of the big astronomical bills that you might have with diseases as they become more evident and prevalent.”

Reducing Healthcare Pain
Lowering expenses associated with chronic disease and catastrophic care is one of the most common reasons for investing in employee wellness programs. The U.S. currently spends over 17% of GDP on healthcare—the highest percentage of any country in the world, according to the most recent World Bank figures. More than three-quarters of that is spent on chronic diseases, many of which could be prevented with diet and exercise.

Around half of all Americans live with at least one chronic disease and a quarter have two or more, per the Centers for Disease Control and Prevention. Plus, productivity losses associated with workers with chronic diseases—in the form of disability, unplanned absences, reduced workplace effectiveness, increased accidents and negative impacts on work quality and customer service—cost 400% more than the cost of treating chronic disease, according to a report cosponsored by the World Economic Forum and PwC.

“Metabolic syndrome is massive,” says David Roddenberry, cofounder of HealthyWage. “Between diabetes, heart disease and musculoskeletal disease for aging populations, health-care costs are crazy. So what can you do? You can either push the costs to employees, or you can empower employees to improve their health.”

HealthyWage administers outcomes-based wellness challenges for companies like Geokinetics, a Houston-based geophysical solutions company that serves the oil and
mining industries. Given the price of oil, Geokinetics has had a rough go of it over the past few years, including a Chapter 11 restructuring in 2013 and a significant reduction in headcount. “At a time when we’re asking employees to wear two and three hats, we have to acknowledge that we’re creating a stress level that didn’t exist before,” says CEO David Crowley.

That exercise and healthy diet can help mitigate stress was just one of the reasons Crowley began looking for a program three years ago that would incentivize a healthy lifestyle among his employees. He also needed something low-cost. With HealthyWage’s solutions, companies can spend almost no cash if they choose not to subsidize. Employees pay a small fee to participate, but then get it back if they meet their stated weight loss or fitness goal. They can also win prizes from HealthyWage.

“It helps morale and the camaraderie that goes along with that,” says Crowley. Plus, Cigna, the company’s health insurance provider, said that participants will earn a discount on premiums down the road.

Humana offers a similar premium discount to participants in its Go365 wellness program, up to 15% off based on level of engagement. The company rolled the program out internally in 2011 and then set out to measure the impact on those who more actively used the program vs. those who did not. Over a three-year period, engaged users had a 20% reduction in sick time; health claims costs decreased 10% among engaged users, while increasing 17% for unengaged employees. On the other hand, unengaged users had 56% more emergency room visits and 37% more hospital visits than engaged users, says Stuart Slutzky, chief of product innovation at Go365, an entity set up by Humana to offer its members wellness programs.

At the Cooperative Educational Service Agency (CESA 1), which uses Humana’s Go365, 86% of 175 employees have reached the engagement level needed for a reduction in premiums. “As an agency, we’ve saved $300,000 in premiums over the last five years,” says Mary Gavigan, executive director. Reported cases of diabetes have fallen 55%, and sick time fell 15% over the last year alone. “It’s been great for our staff, it’s great for the agency, and it brings a positive, healthy sense of well-being into the climate of the agency. This has become a part of who we are now.”

CEO Bill Donnell reports similar positive results from investment in employee wellness at the National Council on Compensation Insurance (NCCI), which provides information and services to insurance providers related to workers’ compensation.

In addition to a fitness facility and onsite cafeteria with healthy choices, employees can visit a wellness center to get their blood pressure reading, annual biometric screenings, nutrition counseling and personal health coaching. While healthcare expenses have gone up over the past eight years, NCCI has seen a lower increase relative to the market, which Donnell is satisfied with—because saving on healthcare isn’t the main driver for him. “Some of the soft factors that are perhaps more difficult to measure but more important, like the engagement of employees and the energy level they have when they’re here—you get payback from that, in my view,” he says.

Beyond Wellness to “Well-Being”
That notion has gained considerable traction in recent years, leading some companies to expand their focus beyond healthcare and basic wellness to take a more holistic view of employee well-being. Michael Thompson, CEO of the National Alliance of Healthcare Purchaser Coalitions, says some well-intentioned programs have fallen short of expectation because their focus has been too narrowly on risk mitigation or cost reduction, which isn’t all that motivating to employees.

Even when it works, physical health only takes you so far, he says. “When you’re approaching it with a broader ‘people agenda,’ people will be more engaged in taking care of themselves physically. And the interplay between mind, body and spirit really resonates. When they are into being at their best, they not only take better care of themselves, but they can really appreciate an organization that cares about them at that level.”

StayWell, a company that designs solutions for a range of company sizes, even those with just a handful of employees, posits that well-being encompasses financial security, professional development, social connectedness, emotional resilience and physical health. “These concepts interconnect and are mutually reinforcing,” says David Anderson, cofounder and chief health officer. “And as employers begin to think about the well-being of their employees more broadly, the connection with performance becomes immediate.”

It’s a simple enough idea: If your employees are healthier, happier and love to come to work, they’ll work harder with greater energy and stay longer at your company. That’s been Jeffrey Puritt’s view for years. The CEO of TELUS International, an outsourcing firm that employs just shy of 26,000 people in eight countries, estimates that he outspends his competitors two to one on facilities and amenities at his call centers around the world. In fact, the figure was so high relative to revenue compared with his public-company competitors that it caused some concern for Baring Private Equity Asia, which was looking to buy a 35% stake in TELUS last year. “They asked me how I justified that,” recalls Puritt. “I said, my growth rate is more than double—in fact, last year, four times higher than my nearest competitor.” Baring ended up coming in on the deal.

Puritt admits he was fortunate that TELUS began as a wholly owned subsidiary and that cost savings was not one of his charges; he was expected to deliver great levels of service to customers in Canada and given latitude to find ways to enhance that. “I’ve been spoiled in this role. Contrast that with, if you’ve been doing things the traditional way and you’re trying to figure out whether you can afford to divert budget and you don’t have the runway, as so many CEOs of public companies don’t have,” he says, referring to the short-term focus on quarterly results prevalent among public companies.

For Puritt, however, the math is simple. “In outsourcing, the holy grail metric is attrition,” he says. “If you can’t keep your team members long enough, they can’t get good enough, and if you have to keep rehiring and retraining to backfill high levels of attrition, your costs are unsustainable. So there is this vicious cycle where the single most important thing you can do after attracting the best talent is to retain them. The best way to retain them is to engage them, and in my view, the best way to engage them is to provide them with all the amenities that help to inspire them and that demonstrate you’re committed to them as individuals.”

He adds that TELUS’ engagement scores, most recently at 81%, are almost double that of its nearest public competitor and its attrition rates are half as high. “Those are not coincidence in my view—they are inextricably connected,” Puritt says. He acknowledges that plenty of CEOs are not yet sold on that, mainly because the numbers are somewhat “squishy” and a definitive causative link has yet to be found. But, he counters, it isn’t any more difficult to establish than the notion that, say, product sales are a direct result of a specific marketing campaign. “I would argue that that is just as specious a formula. It’s unfortunate that a lot of folks in my position continue to point to the absence of empiricism to defend or rationalize the failure to make these investments.”

The bottom line for Puritt, as it is for others who have had success with wellness efforts, is about making employees happy and proud to be with you, so they see no reason to look elsewhere. Healthy lifestyle, support programs, treating employees with respect and dignity and helping them to support their families, says Puritt, “those are all part and parcel of driving the levels of engagement that are a prerequisite to success.”

THE WELLNESS PAYOFF
A recent study by HERO (Health Enhancement Research Organization) followed the stock performance of 45 publicly traded companies that were identified as following best practices in employee health and well-being from 2009 through 2014. This simulated portfolio of companies outperformed the S&P 500 in the following areas:

• Appreciated 235% compared to 159% for the S&P 500
• Outperformed the S&P 500 in 16 out of 24 (67%) quarters during the study period
• Produced a comparable dividend yield of 1.97% by the end of the study period, compared to a 1.95% yield for the S&P 500

Read More: 5 Ways to Give your Employees a Healthy Start