Investing in Company Wellness Programs: Does it make Financial Sense?

Abstract

Wellness programs have been adopted to impede the rising cost of providing employees with health benefits. Studies indicate that 50 per cent of corporate profits go for health care costs versus only 7 percent three decades ago. Though the spike was caused by just a handful of employees, management viewed the spike as a harbinger of future problems unless steps were taken to control the claims. Their case was not unique, nor was their solution. In response to the rising health care costs, companies responded with company wellness programs. To encourage employee participation in wellness based programs, companies have offered incentives to employees. With the current laws backing incentive-laden wellness programs, companies have the flexibility they need to implement and execute their wellness goals. The monetary benefit of participation acts as a carrot to lure people into the programme and it appears to be working. A study revealed that cost savings were greater when incentives were used to encourage participation.

In this study, we explore one company’s wellness program and analyze the investment it has made in the wellness of its employees. We make the assumption, based on western economic models, that companies are concerned with the cost of company expenditures and their future return on investment (ROI).