Slimming Down Employees to Cut Costs

Companies are targeting employee fitness to contain health-care costs, creating individualized plans using wearable technology and Web sites

Joyce Boyes, a human resources manager at a Massachusetts hospital, wanted to lose weight. When her employer, UMass Memorial Health Care, pressed employees to get fitter, she took up the challenge.

One year and 50 fewer pounds later, the employee-compensation manager is a model for how employer-sponsored health programs are supposed to work. Boyes joined an online social network called Shape Up The Nation and started using a pedometer to log her activity. E-mailed reminders to exercise and eat correctly came to her in-box. Her colleagues could use the Web site to see if she was meeting her goals. "This program was a starting point," Boyes says. The healthier habits stuck: Her doctor even reduced the amount of Lipitor, a cholesterol-fighting drug, that she takes.

UMass Memorial, one of the largest employers in Worcester, Mass., is trying to contain employee medical costs. State and federal health-care reforms require employers to cover a greater share of their staff, which means companies are on the hook for higher payments to insurers. U.S. health-care costs are rising rapidly, fueled by greater spending on prescription drugs, the increasing prevalence of chronic illness, and an aging population. Obesity alone costs U.S. companies as much as $45 billion annually, according to a 2008 report by the Conference Board, a nonprofit research group.

In response, companies such as Intel (INTC), Papa John's International (PZZA), Timberland (TBL), Scotts Miracle-Gro (SMG), and International Paper (IP) are signing employees up for memberships on Web sites that provide information about nutrition and fitness. They're conducting health screenings and tracking staffers' workouts. Some companies are even giving workers pedometers to track how many steps they take.

The goals are the same: to make employees fitter and reduce health-care expenses. "A small group that's not healthy is increasing the cost for everyone," says Jodi Fuller, director of global benefits at packaging maker MeadWestvaco (MWV). "As a benefits director, [I ask] what can I do to lower those costs?" she says.

Will Health-Care Reform Raise Costs?

Companies are increasingly turning to technological solutions. In addition to Shape Up The Nation, they are trying online services from Virgin Group's Virgin HealthMiles, Limeade, and RedBrick Health. These services have helped increase employee participation in wellness programs by offering incentives that range from cash to health-insurance discounts in exchange for meeting health and fitness goals.

U.S. companies' medical costs rose an average of 7 percent in 2009, after rising 6 percent in 2008, according to a February report from the National Business Group on Health, a nonprofit association, and consulting firm Towers Watson (TW). Many employers say they expect costs to keep escalating because of recent federal health-care legislation. In March, after the Patient Protection & Affordable Care Act was signed into law, Deere & Co. (DE) said that its expenses would increase by $150 million in 2010.

Some companies have fitness in their DNA. Google (GOOG) offers workers fitness classes, including yoga, tai chi, and dance. There are employee fitness groups—even one for barefoot runners—and sports leagues for everything from volleyball to ultimate Frisbee. Google's campus in Mountain View, Calif., features on-site chiropractic and physical therapists, wellness coaching programs, and meditation centers. Its 16 cafès label foods by health value: green for healthy, yellow for be careful about portion sizes, and red for not-so-healthy.

Other companies are getting up-to-speed. At MeadWestvaco, benefits director Fuller is fighting fat after finding that about 35 percent of the company's 12,000 U.S. employees had such chronic medical conditions as heart disease, hypertension, high cholesterol, and diabetes. In 2008 the company began a program, using Virgin HealthMiles, that gives employees pedometers equipped with USB ports so they can plug them into their PCs and upload data to the Web. Depending on how active they are, workers can earn fitness bonuses of up to $500 a year.

Staff Participation Normally Is Low

Maidenform Brands (MFB), Papa John's, and Timberland last year also began using Virgin HealthMiles. "There's a linear relationship between the amount of reward you offer employees and the pace at which they get significant biometric improvement," says Sean Forbes, president of Virgin HealthMiles. About 40 percent of employees participate at sites where HealthMiles is offered, he says.

Employee wellness programs have suffered from low participation rates, which Forbes says often come in at about 5 percent to 7 percent. LuAnn Heinen, vice-president of the National Business Group on Health, an association of large companies, says employees often don't participate in wellness efforts because they require changes in behavior. "Participation is always the Achilles' heel for these programs," she says.

In 2006, Intel decided to increase participation in its wellness program. The computer chip maker created a program called Health for Life. Intel checks employees' weight and blood pressure and performs blood tests. Employees can access a secure Web site to answer health questions. The data get combined with test results to identify risk factors and workers receive personalized coaching to develop individual fitness plans.

Over the last four years participation has soared, from 7 percent to about 39 percent, according to Intel global health benefits manager Corrie Zenzola. The company will shave $250 off the 2011 health-care contributions from employees who participate.

Other programs also offer incentives in the form of reduced health-insurance premiums or even contribute to Health Savings Accounts. Companies such as Conseco (CNO), International Paper, and Scotts Miracle-Gro use RedBrick Health's online service, which mixes health assessments, personalized recommendations, and coaching with some social networking tools.

Discriminating Against Some Workers?

Regular health assessments are key to the early detection of diseases such as cancer, improving patients' survival rates and containing employers' costs. The average cost per patient when one is diagnosed early with prostate cancer is $22,430 per year, but the expense jumps to $91,268 for a late-stage diagnosis, according to health-insurance company SeeChange Health.

To be sure, as employers get more involved in promoting good health for workers, there are risks that employees who are obese or who smoke tobacco will be treated unfairly. In January, Whole Foods Market (WFMI) said that workers who don't smoke or use other nicotine products, and whose blood pressure is sufficiently low, would qualify for heftier discounts at company stores. In a January letter to employees, Whole Foods Chief Executive Officer John Mackey said the program is voluntary and that no employment decisions would be based on participation or nonparticipation in these programs.

The announcement prompted a spate of blog posts decrying unfair treatment for less-healthy workers. Whole Foods spokeswoman Libba Letton says there have been "misconceptions" about the program, and that it's based on a range of factors including body mass index, cholesterol levels, and blood pressure.

Technology-enhanced wellness programs, many of which incorporate online assessments, can only go so far to improve workers' health. "The jury is still out on whether technology will increase behavior change" such as exercising more and eating better, says Dr. Jeffrey Dobro, a physician consultant at Towers Watson. It typically takes about two or three years for a company to see a positive return on investments in wellness plans, especially if they're starting from scratch, he says.

UMass Memorial's Boyes says personal responsibility is critical to better health. "You can join all these programs but ultimately you have to do it for yourself," she says.

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