Workplace Wellness Programs May Cost More Than They’re Worth
Life + Money

Workplace Wellness Programs May Cost More Than They’re Worth

U.S. companies have increasingly embraced workplace wellness programs as a way to help control health spending on their workers. One Kaiser Family Foundation survey even found that the majority of companies – 71 percent - ranked the programs as one of the most effective ways to cut costs.

However, to many employers’ disappointment, a number of recent studies suggest the programs might not be working as well as intended.

Related: How the Obesity Epidemic Drains Medicare and Medicaid

The programs are supposed to incentivize employees to maintain healthy lifestyles, the idea being that healthier employees would cost less for workers to insure. The Affordable Care Act includes a provision that allows companies to reward workers who participate in these programs and in some cases penalize those who don’t.

They typically include financial incentives for workers - including discounts on health insurance for those taking health risk assessments, or subsidies for gym memberships. Others penalize workers who engage in unhealthy activities like smoking. Some even have gone so far as to penalize employees with higher than average body mass indexes.

The programs are increasingly popular among U.S. employers. Earlier this year, the RAND Corporation estimated that about half of companies with 50 or more workers offer some kind of wellness program. The RAND survey estimated that the workplace wellness industry is worth an estimated $6 billion a year - and includes about 500 vendors selling programs either individually or as part of an employer-based plan.

While many companies have been quick to invest billions of dollars a year in the programs, some experts say they may actually be more costly than they’re worth - since there is no scientific evidence (so far) to suggest they actually reduce health care costs.

Related: U.S. CEO’s Threaten to Pull Tacit Obamacare Support Over 'Wellness' Spat

The same RAND Corporation study also concluded that the savings were not “statistically significant.” They found that workers who participated in the programs had average health care cost savings of about $2.38 in the first year of the program and $3.46 less in the fifth year. The researchers said that was so low that it could have been due to a number of things, and not necessarily the programs themselves.

Other studies have found similar conclusions. Researchers at the University of California San Francisco, for example, reviewed dozens of existing studies on existing wellness programs and found that participating in work-based wellness programs did not result in participants’ lower blood pressure, blood sugar levels, and rarely led to weight loss, Reuters reported.

Still, employers are confident in their ability to reduce costs.

One report by Fidelity Investments and the National Business Group estimated that mid-sized to large employers spent an average $521 per employee on wellness programs in 2013. That’s double what they spent just five years ago, health economists Austin Frakt and Aaron E. Carroll noted in The New York Times’ Upshot.

Related: Health Spending Growth Lowest on Record This Year

What’s more, despite health economists warning of their ineffectiveness, employers seem to be fans of the programs. Some 44 percent of companies told Rand last year that they were “overwhelmingly confident” that the programs reduced medical costs.


Since smoking has been declared an addiction, and obesity is officially a disease - two of the primary behavior-based causes of poor health - it's no wonder that these incentive programs simply don't work. It's like trying to cure a broken leg with an aspirin.

Still, other issues with the programs remain. Some companies have faced  workplace discrimination lawsuits. The Obama administration's Equal Employment Opportunity Commission has filed several lawsuits against companies like Honeywell International for allegedly violating the Disabilities Act by requiring employees to participate in medical testing or be subjected to a penalty.

The lawsuits have outraged the business community, since the president’s health care law was the main motivator for many of the firms to move to the wellness programs in the first place. Last month, a group of chief executive officers met with the president to discuss the issue. It is unclear whether the White House will reconsider the lawsuits.

“The fact that the EEOC sued is shocking to our members," Maria Ghazal, vice-president and counsel at the Business Roundtable, told Reuters. 'They don't understand why a plan in compliance with the ACA [Affordable Care Act] is the target of a lawsuit.”

For now, the White House has not said whether it will try to stop the lawsuit from moving forward. Regardless, this along with the lack of scientific evidence proving the cost effectiveness of these programs may cause employers to rethink using them.

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