Could Poor Employee Health Be Hurting Your Business?

A dollars-and-cents explanation of how employee health problems can drive up health insurance costs and lower workplace productivity.

Employees are a critical resource for any business, small or large. An energized, enthusiastic workforce helps with innovation, productivity, and ultimately profitability. Unfortunately, as many businesses have found, poor employee health can drag a company down by leading to:

  • increases in health insurance benefits costs, and
  • decreases in productivity.

Let's take a separate look at some of the facts and figures concerning each of these.

The Rising Costs of Health Care Coverage

Employers provide health coverage to the majority of U.S. workers below retirement age -- around 60% at last count. Although no law requires them to do it -- and many employers are shifting some of the costs to employees -- these employers form the backbone of the U.S. health care system.

If your business provides health coverage, however, you know that it costs thousands of dollars per employee per year. Many CEOs point to the cost of health care as the single biggest threat to their company profits.

Why do health care costs keep going up? The ever-increasing cost of medical care is one part of the reason. But another part may be traced to 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 aren't 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 one of your employees had a heart attack last year and another one'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.

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.

An Aging Workforce

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 not providing the cushion they thought they'd have -- that they can't afford to do so. You may have employees working well into their seventies. Advanced years don't inevitably mean serious medical troubles, but the importance of screening and preventive care certainly goes up. And for anyone who's spent a lifetime ignoring their body's health, nutrition, and fitness needs, the outlook could be troublesome.


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 walk-in 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.


What about the 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 the latter: 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.

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 others 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.

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 cuts 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 has gone untreated.

Tip Hiring only healthy workers isn't the answer. The Americans with Disabilities Act (ADA) forbids making inquiries into an applicant's health at the pre-offer stage. 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.

Clearly there's a lot to be gained by having a healthy workforce. But how can an employer really bring about meaningful change? For a look at how workplace wellness programs offer potential solutions, see Nolo's article How a Wellness Program Can Help Your Business's Bottom Line.

Next Steps

For tips to improve your employees' health, program design principles, and money-saving suggestions, see Healthy Employees, Healthy Business: Easy, Affordable Ways to Promote Workplace Wellness, by Ilona Bray (Nolo).

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