Wednesday, January 08, 2014

Why do corporations do lifestyle "wellness" programs?

Even with rather generous tax breaks, wellness programs cost corporations money. So why pay companies like South Africa's Vitality Group to run them?

It's not because they save money on health care expenses. A Rand study of long tenure employees found that over 7 years PepsiCo got 48 cents in savings for every dollar in expenses. Other recent studies have had similar results; better results with older studies may reflect higher smoking rates back in the 80s.

So why do it?

One reason is that current implementations do a great deal of cost shifting from the young and/or healthy to the older and/or sicker. With Vitality programs a low cholesterol healthy slender non-smoker pays less each month for health insurance than the average employee. (A "3000 point" gap -- enough to qualify for @$1000+ yearly insurance cost reductions.)

These programs follow the same logic as a briefly infamous 2005 Walmart healthcare memo. They shift costs to employees with family or personal health risks....

Wellness programs don’t save money | The Incidental Economist

Horwitz, Kelly et al ....Our evidence suggests that savings to employers may come from cost shifting, with the most vulnerable employees—those from lower socioeconomic strata with the most health risks—probably bearing greater costs that in effect subsidize their healthier colleagues. ..

Is that enough of a shift to make wellness programs covertly cost-effective? Or are corporations just being irrational? I suspect a bit of both, but we gotta remember that Walmart memo. At the very least, they shift costs from the blessed to the unblessed.

The Incidental Economist has covered this topic in some detail ...

See also

No comments: