Cost savings associated with health risk reduction begin accumulating in as little as one year, particularly for those with chronic conditions, according to a 2012 employer study by StayWell Health Management and Towers Watson. The research showed that a reduction in employee health risks led quickly to cost savings.
The research report, “Association Between Changes in Health Risk Status and Changes in Future Health Care Costs: A Multi-Employer Study,” was published in the November 2012 issue of Journal of Occupational and Environmental Medicine (JOEM).
Although health risks have been associated directly with higher health care costs, and a growing body of research shows that improving health can generate a positive long-term return on investment (ROI), there has been limited research on how soon cost savings begin accruing and the relative cost impact of health-risk accumulation versus health risk-reduction.
To fill this research gap, this study integrated data from six large U.S. employers representing the finance, manufacturing, health care, energy and education industries. Nearly 23,000 individuals were included in the analysis, which combined standardized health assessment data from a single provider of health management services with health care (medical and pharmacy) claim data from a single data warehouse provider.
Specifically, the findings suggested the following:
• If you reduce health risks, lower costs begin accruing very quickly. There was a reduction in health care costs in the same year risks decreased. Coupled with prior research showing employers can “break even” on their investment in the second year of a wellness program and achieve up to a 3:1 ROI in the third year, this immediate savings from risk reduction makes the financial case for prevention stronger.
• The financial implications for prevention may be greater than for risk reduction. For every health risk added, costs increased by 45 percent above the cost savings that resulted from eliminating a risk. This means that 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.
• A long-term solution is better than a quick fix. A greater immediate savings was realized from reducing health risks for people with chronic conditions than for the average employee. After controlling for differences in age, gender and company, those with chronic conditions who added health risks doubled the cost burden compared to those without a chronic condition. Moreover, cost savings were four times greater for those with chronic conditions who reduced their health risks compared to those without chronic conditions.
The study authors stressed that although there always will be a highest-cost group, an ongoing focus on prevention can benefit the entire population by avoiding chronic disease altogether in some cases or slowing the progression and diminishing the severity of chronic conditions. All of these potential outcomes from prevention would be expected to reduce the company’s total health care spending.
Direct and Indirect Savings
Previously published literature reviews and studies indicated wellness programs can produce immediate savings in productivity-related costs, including reduced absenteeism, disability and workers’ compensation costs, as well as enhanced work performance. The combination of direct health care savings, which grow over time, coupled with these more immediate, indirect productivity savings, further supports the business case for investing in a prevention-focused, population-based health management strategy, according to the study’s authors.
“The bottom line for employers is that if you start to change employee behaviors, you will start seeing health care cost savings very quickly. An employer can save an average of $100 in health care costs per employee per health risk eliminated in the year of the change, and $105 per risk reduced in the year following the reduction,” said Steven Nyce, senior economist at Towers Watson and lead author of the study. “But if you don’t keep healthy people healthy and employees start accumulating new health risks, you not only negate this savings but stand to add health care costs of $145 per employee per health risk added within just one year.”
While the study findings provide employers with specific short-term dollar amounts associated with risk change, the total value of behavior change programs may not be fully captured in its findings. “More research is needed with a longer follow-up period to measure the full cost impact of risk change,” said Jessica Grossmeier, vice president of research at StayWell Health Management and co-author of the study. “We know from extensive published research that program impact does not fully emerge for at least three years, which means this study did not have a long enough follow-up period to quantify the full cost savings employers ultimately will realize from a given level of risk reduction or prevention.”
More Findings on Health Risk Reduction
Lowering risk factors to their theoretical minimums, if this were possible, would reduce average annual costs per working-age adult by 18.4 percent, according to study results published in the January 2013 issue of the Journal of Occupational & Environmental Medicine.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Launching a ‘Winning’ Wellness Contest, SHRM Online Benefits, December 2012
Study: Wellness Programs Saved $1 to $3 for Every Dollar Spent, SHRM Online Benefits, September 2012
Incentivizing Good Health: A Mid-Sized Firm's Success Story, SHRM Online Benefits, October 2012
Communication Is Key for Wellness Success, SHRM Online Benefits Discipline, August 2012
Use of Monetary Incentives to Promote Wellness Grows, SHRM Online Benefits Discipline, August 2012
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