Modern Logic
By Seth Serxner, PhD, MPH
The body of research validating health promotion’s ability to improve health and save money is steadily growing—in fact it’s becoming quite substantial. But it takes more than stacks of research to convince management to invest (or invest more heavily) in employee health improvement programs. It takes logic. It takes a carefully orchestrated rationale, and the statistics to back it up.
This article will address the basic question of whether or not health promotion programs can save money for business, and reveal the “modern logic” behind why health promotion is an idea whose time has come.
The “modern logic” goes something like this:
- Logical Assumption #1:
Business bears a sizable portion of US health care expenditures - Logical Assumption #2:
Employer health care costs are increasing at a rapid rate - Logical Assumption #3:
Employers also bear substantial indirect costs due to poor employee health - Logical Assumption #4:
Lifestyle health risks are directly related to higher health care costs and indirect costs - Logical Assumption #5:
Health promotion programs lower employee health risks, reducing both direct health care costs and indirect costs to the employer - Logical Assumption #6:
The costs of health promotion programs are less than the benefits they provide
Each of the above statements will be reviewed for its relative strengths and weaknesses. The overall logic will be assessed given the weight or lack thereof of supporting evidence.
Logical Assumption #1: Business Bears a Sizable Portion of U.S. Health Care Expenditures
Private-sector health care costs represent approximately 26% of the total health care expenditures in the United States1 ($1.2 trillion in 1999) or about $312 billion in 1999.2 Regardless of cost shifting and other expense-saving measures, business will continue to bear a significant portion of health care costs.
Logical Assumption #2: Employer Health Care Costs Are Increasing at a Rapid Rate
Total health plan costs for active employees are expected to climb between 10% and 13%, from an average of $4,222 per employee in 2000, to $4,707 in 2001.3 This substantial increase continued the trend from prior years and is anticipated to continue into the foreseeable future. Chronic illnesses such as diabetes, asthma, and cardiovascular disease are very expensive and also quite prevalent in the working population. Medical costs for the approximately 100 million Americans living with chronic diseases account for a large portion of United States health care expenditures, totaling more than $425 billion in 1997.4 Four chronic diseases (cardiovascular disease, cancer, chronic obstructive pulmonary disease, and diabetes) account for 72% of all deaths in the United States.5
Logical Assumption #3: Employers Bear Substantial Indirect Costs Due To Poor Employee Health
In addition to the direct costs noted above, employers experience substantial indirect costs due to poor employee health. One study documented median annual health and productivity costs (i.e., direct and indirect costs) per employee of $9,992,6 of which 47% were group health costs and 3% workers’ compensation. The remainder were productivity-related costs such as turnover (37%), absenteeism (8%), and non-occupational disability (5%). The study noted that employers’ median opportunity for direct health and productivity cost savings associated with five program categories—Group Health, Turnover, Unscheduled Absence, Non-Occupational Absence, Non-Occupational Disability and Workers’ Compensation—was approximately $2,600 per employee.6
The link between health and productivity has recently been receiving considerable attention in the United States. One example is a special issue of the Journal of Occupational and Environmental Medicine on “Health, Productivity, and Occupational Medicine,” published in January of 2001.7 One study in this issue addressed the impact of disease management for allergies on worker productivity.8 Researchers found that worker productivity was negatively correlated with allergen count and that a significant improvement in worker productivity resulted from appropriate use of medication.8 Another study in the issue documented a strong link between depression and reduced worker productivity.9, 10 Many chronic medical conditions are associated with work loss and work cutback. Kessler and others found that cancer had resulted in the highest level of impairment followed by ulcers, major depression, and panic disorders.10
Logical Assumption #4: Lifestyle Health Risks Are Directly Related To Higher Health Care Costs and Indirect Costs
Several major studies sponsored by the Health Enhancement Research Organization (HERO) have clearly documented the direct medical costs associated with increased behavioral health risks.11 At the individual level, this research found that high-risk employees had significantly higher mean medical costs for seven of the 10 factors examined—including depression (70%), stress (46%), blood glucose (35%), overweight (21%), former tobacco use (20%), blood pressure (12%), and exercise habits (10%)—than low-risk employees for those same factors. Population level analysis indicated that risk factors were associated with 25% of the total medical expenditures for the organizations in the study. Stress was the most costly factor, with tobacco use, overweight, and lack of exercise also being linked to substantial expenditures.12 To further build the case that health risks are associated with increased medical costs, Dee Edington and Associates published work which determined that low-risk populations left unattended increased their health risks and, consequently, their health care costs also increased.13
Poor employee health is related to increased operating costs due to excessive health care expenses as noted above. However, there are also indirect costs associated with impact of chronic disease and behavioral health risk factors (e.g., smoking, obesity, physical inactivity, and poor nutrition) on lower production output,14 increased 
absenteeism,15 increased turnover and lower employee morale.16 Additional indirect costs include workers’ compensation costs and days away from work due to short-term non-occupational disability. One study looking at the association of health risks with workers’ compensation costs found that high workers’ compensation costs were related to individual health risks such as smoking, poor physical health, physical inactivity, and life dissatisfaction.17 In the study population, 85% of the workers’ compensation claims could be attributed to excess risks (medium or high risk) or non-participation.23
Logical Assumption #5: Health Promotion Programs Lower Employee Health Risks, Reducing Both Direct Health Care Costs and Indirect Costs To The Employer
Given the clear evidence that unhealthy lifestyle behavior is related to higher costs, the next issue is whether or not interventions can have an impact on employee health and productivity. One study involving six different employers documented the impact of a telephone-based intervention targeting high-risk employees on reducing behavioral health risks. Follow-up assessments an average of two years after a pre-intervention baseline assessment indicated that participants in the program had a .85 net reduction in health risk compared to high-risk counterparts not participating in the program.18
In addition to research demonstrating program impact on health behavior, several studies have documented the impact of comprehensive programs on employee health care costs. For example, one study involving a large public employee population and a comprehensive mail-based health promotion program, found dramatic differences in medical claims between control and intervention groups. Depending on the group analyzed, the claims differences ranged from $361 to $758 per employee lower than comparison groups. Projecting these differences over the entire population, the authors estimate savings between $3.2 to $8.0 million.19 Another important study documenting the impact of comprehensive health promotion programs on medical expenses is known as the “Citibank Study.”20 The health promotion intervention was made available to all employees and involved Health Risk Assessments, targeted interventions, and self-care books. Analysis comparing medical costs of participants to those of non-participants yielded a $4.56 to $4.73 return on each dollar invested.16 The analytic model used in the study is considered to be among the most rigorous and sophisticated in the literature to date.
Regarding the impact of health promotion programs on indirect costs, one study of absenteeism over a four-year period found that employees who participated in a program experienced 4.6 fewer absentee hours annually than non-participants after controlling for baseline absenteeism and other demographics.21 Another study looked at the impact of participation in employee fitness programs and found that frequently-participating employees reduced their sick days by 4.8 days, compared to no changes for those who participated less frequently.22 Another study indicated that not only were high-risk employees absent more often, but that when high-risk employees lower their risk they were also absent less often.23
A different study addressing indirect costs looked at the impact of health promotion program participation on short-term disability absence. In this study, researchers looked at those employees on short-term disability (STD) leave and compared participants in the company health promotion reimbursement program to non-participants. The analysis showed that participants had an average of six days fewer “net days absent” than non-participants while controlling for pre-intervention STD absence and other demographic characteristics.24
Logical Assumption #6: The Costs of Health Promotion Programs Are Less Than The Benefits They Provide
A substantial number of studies published over the past decade have generally reported that health promotion programs have a very favorable ROI. Recent reviews of the peer-reviewed literature by Pelletier,25 Aldana,26 and Goetzel and colleagues27 conclude that the research evidence indicates the financial benefits of well-designed, well-implemented health promotion programs substantially exceed the costs—i.e., they have a positive ROI or benefit/cost ratio.
Anderson and colleagues note that it is ironic that the need for well-documented ROI data has been a barrier to the growth of worksite health promotion, given its popularity with employees and its modest cost compared to other health-related interventions.28 Employer health plans routinely pay for extremely costly surgeries, medical procedures, and pharmaceutical agents based on no ROI data at all. These medical interventions need only be demonstrated to be safe (i.e., yield a mortality or morbidity rate no greater than non-surgical alternatives), effective (i.e., produce a better outcome than no treatment at all), and possibly cost-effective (i.e., achieve a positive outcome less expensively than alternatives).29 The health promotion field, however, is continually challenged to prove something medical researchers cannot—that the financial benefits of health promotion exceed its costs. While these disparate investment criteria may not seem rational, ROI data is essential for health promotion to become a priority for employers.30
Many organizational costs may be positively impacted by health promotion. In addition to health care costs and absenteeism, which have been the focus of most ROI research to date, health promotion programs are likely to have a positive impact on employers’ costs for short-term disability, long-term disability, workers’ compensation, defined-benefit pension plan payments, and life insurance, as well as related administrative costs. Additionally, many believe that health promotion may have its greatest financial impact on employee productivity, and corporate interest in this issue is escalating.31
What’s The Strategy?
The health promotion community is constantly confronted with the question of return on investment. In a recent article, McGinnis discusses at length why it is that in light of such strong evidence for health promotion, so very little action is taken.32 The question to corporations is—what is your strategy? If left without intervention, there is good evidence that employee populations will have increased risk and much higher health care costs over time.13 In one study the difference between doing nothing (and letting health costs continue to rise as per forecast) versus having even a minimal 0.1% annual impact on employee health risks was worth $20.7 million over 10 years in a population of 56,000 employees.33 Therefore, if the choice is to do nothing and let nature and economics take their course versus doing something proactive, there is compelling evidence that implementing a comprehensive health management strategy will save companies money.
To view the reference list for this article, click here.
About Seth Serxner, PhD, MPH
Dr. Seth Serxner earned his Masters in Public Health from the University of California, Los Angeles, and his PhD research was in health promotion and disease prevention in Social Ecology from the University of California, Irvine. Dr. Serxner spent the last 10 years directing StayWell’s research programs, which included outcome studies and market research. He also collaborated on the design of disease management programs that apply targeted behavior-change methodology. He is frequently invited to present at industry conferences. Prior to joining StayWell, Dr. Serxner held academic positions with the University of Hawaii Medical School and Cancer Research Center of Hawaii. Dr. Serxner is a member of the editorial review board of the American Journal of Health Promotion. Currently Dr. Serxner is an independent consultant.
