The state of California has embarked on an innovative new workplace wellness pilot program with the goal to improve the overall health of state employees while at the same time reducing the cost of health care, ultimately saving California taxpayers money. This is not a new solution: Wellness programs implemented by California businesses have proven to boost health of their employees and positively impact their bottom lines.
For the first time, State Controller John Chiang, State Treasurer Bill Lockyer, Department of Personnel Administration, the California Public Employees' Retirement Systems (CalPERS) and the Service Employees International Union (SEIU), in partnership with Kaiser Permanente, The California Endowment and HealthCorps, implemented a pilot program that closely follows how the investments in wellness impact the cost of state health benefits and the quality of health of the workers.
This program was inspired by a study from The Urban Institute, commissioned by the California State Controller's Office with support from The California Endowment, that analyzed the cost of healthcare expenditures for state employees by CalPERS, the largest purchaser of public employee health benefits in California. The study found that 22.4 percent of CalPERS' medical expenditures in 2008 were spent treating chronic diseases that we know could be positively impacted by changes in diet and increased physical activity.
CalPERS could realize substantial savings by implementing effective interventions, such as workplace wellness programs. A reduction of 5 percent in the conditions would potentially result in annual savings of $18 million; just a 1 percent reduction in such costs could net CalPERS an annual savings of $3.6 million.
An increased focus on workplace wellness is critical to ensuring the quality of the state's health. A recent report published by the United Health Foundation, the American Public Health Association and Partnership Prevention puts California 24th among the states in overall health. Reaching the workforce in even larger numbers with effective preventive measures and wellness programs could improve this low ranking.
Gallup recently estimated that 86 percent of full-time employees in this country are above normal weight or have at least one chronic condition. Together, these employees miss an estimated 450 million extra days of work each year, compared to healthy workers, costing at least $153 billion in lost productivity. Other studies indicate that lost productivity could be as high as $225 billion annually.
Absenteeism is only part of the problem employers can address with increased commitment to health and wellness programs. "Presenteeism," which occurs when employees come to work sick or with other ailments that limit their productivity, is also a growing problem. Employee Benefit News reported in 2002 that Pitney Bowes, a postage meters and machine company, found that presenteeism cost the company more than $51 million in lost productivity in one year -- the equivalent of more than 1,400 annual employee salaries.
These are all symptoms of a much larger issue. How we approach and view health care must change. Programs aiming to keep employees healthy are generally less expensive than reactive health care options that are often costly and temporary.
A 2010 Harvard Business Review article reported that one study found companies with wellness programs saved as much as $6 in health care for every $1 invested. That same dollar spent on wellness programs also reduced workers' compensation claims from $5 to $3.
CBS Money Watch cited recent research showing employee health and wellness programs nationwide save $1.9 trillion in health care costs per year. Successful programs save money, increase employee productivity, improve morale, and improve the quality of life for employees by improving their personal health and well-being.
Wellness programs are no longer "nice-to-have" extras. They have become a strategic business objective to manage health care costs. Let's look to the business community for examples of why wellness programs are needed and how they have been helpful. A San Diego Union Tribune article reported that the latest MetLife Annual Employee Benefits Trends study found almost half of employers offer such programs -- nearly double the share reported in 2005. And among companies with 500 or more employees, the share jumps to about 75 percent.
It is exciting to see this critical shift in the way government views health and is moving toward making prevention a priority. The two-year pilot is based on proven interventions with a focus on moving more, eating better and reducing stress. Clear benchmarks have been established so that both changes in the health status of the participating employees and savings to the state can be measured over the course of the pilot.
We know health happens in the workplace and there is plenty of research now telling us that savings happen with prevention. We believe this pilot has the potential to serve as a model for other states and it is great to see that in California, prevention is not only seen as a health issue but key to creating a healthier workforce and state.
Watch the launch of the workplace wellness pilot program:
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