Intro

As a small business owner or manager, you’ve got a lot on your plate. It’s tough to keep profits up and costs down, especially when so many factors are beyond your control, like consumer preferences, the national or regional economy, reductions in employee productivity due to illness or medical problems, and the rising costs of health insurance benefits.

But wait: Is there something you can do about those last two costs? Many employers are discovering that, by actively promoting employee wellness, they can improve employee productivity and keep their health insurance expenditures stable—for a net profit on every dollar they spend.

To gain these advantages, you don’t have to be a giant corporation that can build its own gym, serve fancy salads in the employee lunchroom, and create an on-site employee clinic complete with nurses, acupuncturists, and massage therapists. Comprehensive programs like these do attract the media spotlight. But your business, whatever its size, can make health-related changes that deliver significant results.

In this book, we’ll show you how a small business can, with creativity and smart planning, create a workplace wellness program that achieves both better health for its employees and an improved bottom line. This chapter gets started by:

• laying out the trends in health-related costs for employers
• exploring the potential benefits of employer-sponsored wellness programs
• examining how much a good program costs, and
• summarizing the potential for a positive return on your health dollar investment.

Health Concerns: What Do They Cost Your Business?

Your employees’ health impacts your business’s bottom line in two important ways:

• You’re probably paying to provide employees with health insurance benefits.
• Your business may be losing productivity due to employee health problems.

We’ll focus on each of these separately.

The Rising Costs of Health Care Coverage

Employers provide health coverage to the majority of U.S. workers below retirement age—over 60% at last count. Although no law requires them to do it—and employers are more frequently shifting some of the costs to employees—these employers form the backbone of the American health care system. And for many workers, provision of health benefits is a central concern when looking for a job.

If you provide health coverage, however, you know how expensive it is. Between 2001 and 2008, annual average U.S. health care premium costs per employee nearly doubled, from $4,336 to $8,331. Early reports for 2009 saw a jump to $8,863 per employee. You may already be paying even more, and further increases are predicted. In a 2007 Business Roundtable survey, CEOs pointed to the cost of health care as the single biggest threat to their company profits. No wonder almost half of all small businesses have decided they can’t provide health insurance.

Why do these costs keep going up? While part of the cause is the ever-increasing cost of medical care, another part may be a direct result of your own employees’ usage levels and health conditions. In other words, when your company’s health insurance policies are up for renewal, the insurer may look at how much each employee is costing it to cover, and then adjust the overall rates accordingly. (Insurers are not allowed, under federal law, to create separate rates for each employee, but this doesn’t prevent them from taking individual health factors into account when setting an aggregate rate.)

For example, if Bob had a heart attack last year and Jan’s soda addiction launched a case of diabetes, these alone may, in a small shop, be enough to raise your rates. Chronic conditions like heart disease, diabetes, arthritis, allergies, kidney disease, multiple sclerosis, and cancer are the most likely culprits, accounting for about 75% of U.S. health care costs.

Employee health may also factor into the amount you pay for workers’ compensation insurance. Although state regulators typically set the base premium rate, insurers can adjust this based on what’s called an “experience modifier,” or your workplace’s claims history. The more claims submitted by your employees every year, the more you’ll likely have to pay at renewal time. And while some on-the-job injuries are random, many can be traced back to underlying health troubles. For example, Karen’s alcohol addiction may account for her slip-up with machinery, while Raymond’s lack of physical conditioning and poor posture may contribute to his developing carpal tunnel syndrome.

It’s even possible that the amount you pay for life insurance benefits could be affected by employee health. Depending on your insurer and how much coverage you offer, your employees may be required to undergo a health exam as a condition to coverage. More often, however, you’ll offer a simple group life policy in which individual medical conditions are not taken into account when setting your premiums. But larger employers—those with roughly 1,000 or more employees—may face an extra hurdle. Even with a group life policy, an unusually high rate of claims coming out of one workplace may drive premiums higher.

Behind the Scenes Costs: Absences and Lost Productivity

In tough economic times, when you may have already cut your staffing to its leanest possible levels, every employee is crucial and needs to be working at maximum efficiency. Both absenteeism and “presenteeism”— that is, showing up to work despite feeling under the weather, stressed, or distracted—can hurt your bottom line. And it can damage your relationship with customers—for example, if a supervisor or lead chef is absent, or the receptionist or cashier is sneezing and unfriendly.

Your workforce may also be aging, especially because so many baby boomers who thought they’d be retiring soon are discovering—with their investment portfolios hit hard or in tatters—that they can no longer afford to do so. You may have employees working well into their 70s. Advanced years don’t inevitably mean serious medical troubles, but the importance of screening and preventive care certainly goes up. And for those who have a lifetime ignoring their body’s health, nutrition, and fitness needs, the outlook could be troublesome.

Absenteeism. Health problems cause the average employee to miss five days of work each year. And the “average” person doesn’t really exist. While some of your employees may almost never take sick days, others will probably be away for more than five days—many more, if they have serious or chronic illnesses.

Absenteeism may affect your business’s profitability in more ways than you realize. It’s not just about losing the value of a worker’s activity for a period of time. Depending on your business, you may lose revenue that can’t be earned back—for example, if you have to turn away walkin or one-time customers during the absence. The resulting delay may also interrupt team members’ progress on a larger task, or you might need to pay a replacement worker who doesn’t perform as efficiently. The smaller your company, the more dramatic the impact—if two out of your eight employees are out sick, that’s 25% of your workforce. In fact, one study found that, on average, the business cost of an absence is 28% higher than the worker’s actual wage. (See Sean Nicholson, et. al., “How to Present the Business Case for Health Care Quality to Employers,” Knowledge@Wharton (2005). Available at http://knowledge.wharton. upenn.edu/papers/1303.pdf.)

Presenteeism. What about those employees who show up for work every day? Are they really giving their all or are some just struggling through despite an emotional or physical health problem? (These troubles could include anything from the common cold to worry about a sick child or spouse to chronic depression.) Studies show that three out of ten working people admit that health problems lower their productivity at work. The problem tends to get worse in a down economy, when people are concerned that if they don’t show up every day, they may be among the first laid off.

It’s hard to measure the exact productivity difference caused by working while under the weather, but we all know how, on a good day, we may feel sharp, quick, creative, or responsive, while on a bad day, we may feel like we’re moving through molasses, grumpily waiting for the day to end. It’s easy to see that more can be achieved, and more mistakes can be avoided, by workers who have more good days.

More than one study has concluded that companies would be far better off if sick workers just stayed home. For one thing, the strategy of coming to work while feeling sick tends to backfire, as workers who do so take more sick days than other workers in the long run. Productivity has been shown to drop only 28% when employees stayed home sick compared to a 72% drop when they tried to gut it out and keep working. And, according to industry expert Ron Goetzel, between 20% and 60% of the total health-related costs faced by employers can be traced to on-the-job productivity losses. (See Ron Goetzel, et. al., “Health, Absence, Disability, and Presenteeism Cost Estimates of Certain Physical and Mental Health Conditions Affecting U.S. Employers,” Journal of Occupational and Environmental Medicine, (2004) Vol. 46, No. 4.)

Of course, the exact numbers depend partly on what type of business you’re running and what you expect of your workers. But the effects of working while sick cut across many types of jobs. Managers and data entry workers need to be able to think clearly; air traffic controllers and bus drivers need to stay alert; cashiers need to remain patient and friendly; and construction workers need to be strong and coordinated. All of these can be affected by illness or poor health.

Are productivity losses inevitable? To some extent, worker illness is just a cost of doing business. Between genetics, bad luck, and the occasional flu bug so virulent that not even the vaccine creators predicted it, getting sick is, in some ways, a natural part of life. But not in every way. The toll that personal lifestyle and behavior choices take on Americans’ health—particularly when it comes to chronic conditions— is staggering. An estimated 70% of all U.S. deaths are linked to chronic conditions that may be traced back to poor nutrition, physical inactivity, smoking, and mental illness that’s gone untreated.

Let’s look, for example, at the impact that excess weight has on American workers, as shown in the table below. Keep in mind that around one-third of the U.S. population is classified as not merely overweight, but obese. And the trend is toward further weight gain: While 28 U.S. states had obesity rates below 20% in the year 2000, by 2007 the obesity rates in 49 out of the 50 U.S. states had topped 20%. The resulting total cost to employers is estimated at $45 billion per year.

Omitted from sample chapter: Workdays Missed Each Year chart

Weight isn’t the only problem that leads to poor health and missed workdays. The table below shows many of the chronic conditions that cause people to miss work—all of which can be either reduced in severity, cured, or forestalled with the right prevention, early diagnosis, or behavioral changes.

Omitted from sample chapter: Workdays Lost to Chronic Conditions chart

Clearly there’s a lot to be gained by having a healthy workforce. But can an employer really bring about meaningful change? Let’s take a closer look.

TIP: Hiring only healthy workers isn’t the answer. The Americans with Disabilities Act (ADA) forbids making inquiries into a job applicant’s health. When making a job offer, you can ask only about how the applicant would perform the essential functions of the job—those duties that are fundamental to the position. Once you extend a job offer, you can require applicants to take a medical examination, but only if you require all applicants to do so.

How Can a Wellness Program Help Your Bottom Line?

You can’t wave a magic wand and make all your employees healthy, nor can you force them to change their behaviors overnight. If you already provide health benefits, that’s a good start; it will help make sure your employees don’t ignore health problems until they’ve turned life threatening.

But you’ve probably observed the limits of what doctors can do to promote overall wellness. (Believe us, the doctors are frustrated, too.) Your workers most likely visit their doctors when they’ve got big or obvious problems, but soon forget the doctors’ advice for ongoing lifestyle or behavioral changes. In fact, some people may use the very availability of treatments like high blood pressure medication as a way to avoid making fundamental lifestyle changes.

Yet you’ve got an advantage in this game: As an employer, you have communication channels to your employees that almost no one else shares. Your employees may throw out their newspapers, tune out their mothers, and see their doctors only when they can’t ignore problems any longer. But you’re harder to tune out. Whether it’s via company emails, memos, or meetings, you can use your unique access to convey health information and create a health-minded company culture.

For all these reasons, many employers—nearly 80% of them, at last count—are turning to new initiatives for promoting employee health and well-being. Numerous examples of employee wellness programs have appeared in the media, with companies offering on-site health screenings, exercise equipment, and meditation classes, switching from junk food to healthy food in their employee cafeterias, giving bonuses to workers who lose weight or reduce their cholesterol, paying for smoking-cessation and other treatment programs, and much more.

You don’t have to do all these things, especially as a small business. The basic idea is to respond to your employees’ most pressing health needs by providing a select menu of fitness and behavioral activities, plus some education and guidance toward more specialized health treatments or programs. We’ll get into the details in subsequent chapters.

But first, let’s fast forward to the potential results. A good, comprehensive workplace wellness program can, over time, produce the following benefits:

• fewer absences
• greater on-the-job productivity
• improved worker satisfaction and retention, and
• fewer dollars spent on health insurance.

Here’s why all four advantages are possible and worth aiming for.

Fewer Absences

The science is clear on one thing: People who are physically healthy miss fewer days of work. With workplace wellness programs, employers have been able to greatly reduce absenteeism. Just getting people to exercise can make a big difference: Those who regularly get moderate exercise miss 18% fewer workdays, while strenuous exercisers miss 32% fewer workdays. (See Emmett B. Keelor, et. al., “The External Costs of a Sedentary Life-Style,” American Journal of Public Health, (1989) Vol. 79, No. 8, 975–980.)

CAUTION: Skimping on allotted sick leave isn’t the answer. Sure, workers who aren’t allowed much sick leave are more likely to show up at work no matter how they feel—but that just leads to presenteeim, the risks of which we described earlier in this chapter.

Of course, if your office policy is to lump sick time and vacation time into general paid time off or PTO (as is increasingly common among U.S. employers), you probably won’t see a difference. But at least your employees will be having a better time on their days away from the office, and hopefully come back relaxed, refreshed, and ready to get back to work.

Improved Productivity on the Job

All the research suggests that employee productivity is where workplace wellness programs yield the greatest returns. This makes sense when you consider that almost every worker, whether or not prone to serious medical conditions, can improve in overall health and fitness to some degree. And with better health comes greater energy and productivity. In a 2002 survey of CFOs performed by the Integrated Benefits Institute, 61% said they believe there’s a “strong link” between employee health and productivity.

Imagine what a functional, maybe even fun, workplace you could have if your employees were more fit and healthy. An Australian study found that healthy workers are 3.1 times more productive than others. Healthy employees not only function better at work, but bounce back faster if they do get sick or injured. You might save yourself having to hire more staff in order to make up for the less healthy and productive ones.

Numbers alone can never tell the whole story. Your employees probably don’t work in isolation, but either cooperate as teams, advise each other on work, or hold the classic watercooler conversations. The value of each worker extends far beyond any immediate day’s outcome. An employee with a positive attitude, vital physical state, and optimal physical and mental effort can boost the morale, drive, and productivity of the entire office.

Worker Satisfaction and Retention

Ask any CEO to name the keys to business success, and retention of the best employees will come up high, if not tops, on the list. Given the cost of recruiting and training a new employee, the benefits of keeping someone who has years of knowledge and experience may be incalculable. Unfortunately, the very employees you most want to keep will inevitably have the most opportunities to find a job elsewhere— perhaps one that offers better health benefits or a lower-stress, more functional office environment.

You might feel that your best employees already take good care of their health, without your help. But that would miss part of the point. Will a top employee be happy (to take an extreme example) carrying the extra load for an unhealthy workforce and dealing with the germs, depressed state, or slowness of their less healthy coworkers? Probably not.

On the other side of the coin, workplace wellness programs have been shown to bring employees together in important ways. Your employees are probably already forming office friendships or mutual support networks. It’s only a small step for them to start influencing each other’s health behavior, perhaps by exercising at the same time or competing toward a goal like regular consumption of five daily servings of fruits and vegetables.

Employees at small or medium-size businesses with wellness programs consistently report that they’re working harder, performing better, and are motivated to stay with the company. Managers report that wellness programs improve workplace morale, possibly stemming from the fact that their employees are feeling better all around and sense that their employer is interested in them as individuals.

Reduced Health Insurance Costs

Many employers that have instituted workplace health promotion and wellness programs have been able to significantly reduce their costs of health insurance as well as workers’ compensation insurance, with some studies reporting reductions of up to 30%.

Most experts agree, however, that not every employer should expect to see dramatic results and that reductions in health care costs shouldn’t be your number one motivator for instituting a workplace wellness program. Your health insurance carrier, for example, isn’t simply going to say, “Oh, they’ve started a wellness program, let’s lower their rates.” The rate determination process (called underwriting) involves looking at numerous variables, such as the average age of your workforce and the cost of delivery of health care. Still, in the long run, a healthier group of employees may successfully drive down both insurance rates and workers’ compensation claims for your business.

The trend may be toward even greater possible savings—or at least minimized rate increases—based on wellness programs. Adviser Matt Sears predicts:

Based on my conversations with insurance company executives, health plans may start pushing employers to adopt some more wellness components in their workplace. Some of the insurers are starting to agree with the notion that, if they set up a standard five or six things that employers must do in order to either be allowed to purchase a different or better health plan, or get a rate discount—perhaps a smoking cessation or exercise program, or having employees do screenings or health risk assessments—it will be worth their while.

Dr. Doug Metz (an adviser whom you’ll meet in Chapter 3) echoes the possibility of savings, stating that wellness programs may also help lower workers’ comp costs:

There are workers’ compensation carriers that are looking at the question of how wellness programs will improve workers’ physical conditioning, stress management skills, and levels of presenteeism— improvements which may all potentially reduce workplace injuries. Someone who is fit is less likely to have a back injury. Someone who manages their stress well is less likely to be distracted and cut a finger or otherwise get hurt. So, intuitively, there are very good reasons why a wellness program, beyond traditional safety programs, could work to reduce workers’ comp claims.

Tip: You can create an effective wellness program without offering health insurance. We recommend offering health benefits to your employees— good medical care is fundamental to their health. (We’ll discuss choosing the right plans in Chapter 12, including a focus on how certain health insurance organizations, health maintenance organizations (HMOs) in particular, can provide resources and assistance to augment your wellness program.) Nevertheless, if providing health benefits is way out of your reach, you can still take important steps to promote employee wellness. In fact, if your employees are paying for their own medical coverage, they’ve got a vested interest in maintaining their health in order to keep their premiums down. Read on for suggestions about what you can do and how much it will cost.

How Much Will It Cost?

An effective wellness program will require investment of both time and money, but it doesn’t have to break the bank.

There’s a lot you can do that’s absolutely free, such as holding regular stretch breaks, organizing a walking program (often named by employees as their favorite workplace wellness activity), instituting policies against smoking at work, putting healthy snack choices in your vending machines, and organizing potluck lunches featuring healthy foods. (We’ll expand on all of these possibilities in later chapters.)

Take a look at what on-site assets and advantages your workplace already offers, such as a nearby walking trail or a large conference room suitable for classes, and plan to make the most of those. Beyond what you have on-site, allowing employees to telecommute or use flex-time schedules to participate in wellness activities is also free and a positive way to support employees’ efforts.

If you want to bring in guest speakers (discussed in Chapter 2), some might not cost you anything at all. Adviser Dr. Kenneth R. Pelletier suggests:

Hospitals and universities are terrific sources of speakers available at no or low cost. Check their speaker registries, which may list staff, faculty, or graduate students. And if your employees would be interested in hearing from providers of alternative care like acupuncture, naturopathy, or Chinese medicine, I don’t believe those folks get many invitations to speak to workplaces—they’ d probably be happy to accept.

Of course, for anyone offering their services in hopes of referrals, you’ll need to be clear in advance that you don’t expect them to spend much time on business promotion.

As much as you can do for free, some crucial elements of a workplace wellness program will inevitably cost money. It’s recommended, for example, that you begin your program by asking all employees to fill out a health risk assessment (HRA), with the help of an outside provider. HRAs usually cost between $5 and $25 per person. (Chapter 3 contains further discussion of administering HRAs.)

For additional—in many cases, small—cash outlays, you can add other useful elements to your program. Subscribing to a printed health newsletter to be distributed (usually quarterly) to your employees should cost between $.35 and $2 per copy, per employee.

Some companies give participating employees cash incentives or purchase incentive gifts, like pedometers or walking shoes, as encouragement to count their steps toward a regular walking goal. Others install a refrigerator on-site so that people can bring healthy lunches instead of relying on local fast food joints. And some stock up on fruit for the break room to head off less healthy snacking.

Not surprisingly, the sky’s the limit on how much you could spend. Estimates of what’s “normal” range from $0 to $450 per employee per year (including internal staffing costs), but it will depend partly on the size of your office and the program elements and incentives you choose. The biggest costs tend to be for incentives, equipment, or outside service providers like consultants, counselors, and gyms. And some speakers do charge a bundle, in the range of $150 to $300 per hour.

Decide on a budget amount in advance, and then see what you can do within that budget. Sharing certain costs with employees is a popular strategy among small businesses, particularly for things like classes and memberships. You can also protect yourself, where appropriate, by requiring your employees to prove that they actually used the service in question, and then to repay part of the fee if they didn’t.

RESOURCE: You aren’t alone. Local nonprofit or government health agencies, colleges, and even your own health insurers can be great sources of free health information, low-cost supplies, or screening services. For example, your insurer or a health-focused nonprofit might offer regular health newsletters that you can pass on to your employees. Sharing ideas and resources with other small businesses in your area—including holding joint classes or seminars—can also keep costs down. You can start at www.healthfinder.gov (click “Find Services & Information”).

Will Your Investment Pay Off?

No matter how much it costs to institute a wellness program, it will be worthwhile if the returns are high enough. Good news: Based on other employers’ experience, your chances of coming out ahead look good. Numerous studies have found a positive return on investment (ROI) for employers instituting wellness programs—anywhere from $1 to $13 gained (in improved productivity and reduced insurance costs) for every $1 spent. The median return is currently said to be $3.14. Only a small minority of companies fail to break even—and that’s often because their initial investment of time and money was too low.

Still, some experts caution against overoptimism. They note that you’re not likely to see high results within the first year, and that many of the studies were based on large companies or measured results only for participating employees, not for the entire workforce. They also note that certain types of industries get better results than others—those with high employee turnover, for example, have less of a shot at changing their employees’ behaviors or of reaping long-term rewards from any changes.

Nevertheless, says Dr. Kenneth R. Pelletier, “Having reviewed many of the recent studies in this area, I’d say the evidence that workplace wellness programs are both clinically and cost effective is getting more and more compelling.” And even if your wellness program merely breaks even—with a $1 return for each $1 spent—you’ll come out ahead. You’ll have offered your employees a workplace benefit that was essentially free. Along the way, you’ll probably have boosted morale, reduced the odds of unpleasant interactions between sick or unhappy employees, and given your employees a chance to make changes that will benefit them for their entire life. And who knows what fresh ideas or initiatives will come out of a healthy, energized workforce? All in all, it’s a low-cost way to do the right thing for your employees and your business.

Another bit of good news: You don’t have to turn all your employees into super-athletes addicted only to blueberry smoothies in order for your investment to pay off. Studies have found that a small reduction in your workforce’s health risks—even as little as 1.7%—will let you break even within ten years.

The important thing is that, once you start your program, you follow through for a year or more. Results won’t happen overnight and, if you don’t make a real commitment, your employees won’t either. They also won’t believe your efforts are genuine if you try to restart them later.

RESOURCE: Ready to run some numbers? A variety of calculators have been developed to help you estimate the likely ROI at your actual workplace, letting you input actual facts about your company’s health care costs, how many of your employees are obese or smoke, and more. None of these calculators are perfect predictors, but trying them out and comparing results can be instructive. See, for example, www.ncqacalculator.com/Index.asp and www.wellsteps.com.