Most Employers Underestimate Full Costs of Employee Health on Productivity

April 22, 2009
Poor health among workers is far costlier to U.S. employers than they realize, impacting their profitability and undercutting the nation's overall productivity. A recent multi-employer study published in the Journal of Occupational and Environmental Medicine indicates that the costs of poor health are much greater for employers than medical and pharmaceutical spending alone.

The multi-year study of 10 organizations employing more than 150,000 workers indicates that employers who focus only on medical and pharmacy costs in creating employee health strategies may misidentify the health conditions that most impact the productivity of their employees – while underestimating the impact of other factors.

One such factor, "presenteeism," occurs when employees with health conditions are present at their jobs but are unable to perform at full capacity. The study closely examined the effects of presenteeism, concluding that impaired employee-performance typically creates a greater drain on a company's productivity than employee absence – a finding which could come as a surprise to some employers.

The study also found that when considering medical and drug costs alone, the top five conditions driving costs are cancer (other than skin cancer), back/neck pain, coronary heart disease, chronic pain and high cholesterol. But when health-related productivity costs are measured along with medical and pharmacy costs, the top five chronic health conditions driving these overall health costs shift significantly, to depression, obesity, arthritis, back/neck pain and anxiety.

The study suggests that many employers miss an opportunity to improve productivity and their bottom-line results by failing to recognize and prioritize these health conditions when they develop integrated employee-health strategies and related interventions.

The study, coordinated by the American College of Occupational and Environmental Medicine (ACOEM), the Integrated Benefits Institute (IBI) and Alere LLC, is one of the largest of its kind to date.

Wake-Up Call

"The wake-up call for U.S employers is that simply looking at the costs of specific medical conditions by adding up medical and pharmacy claims costs alone won't give a true picture of the full impact of poor health on the much greater costs of lost productivity in the workforce," said Ronald Loeppke, MD, MPH, executive vice president of Health and Productivity Strategy for Alere and one of the study's lead researchers. In addition to his role at Alere, Dr. Loeppke serves on the board of directors of both IBI and ACOEM.

"Employers need to move beyond solutions that focus only on specific medical conditions and toward the development of integrated personal health support strategies that deal with multiple health conditions and health risks by focusing on the whole person as well as the whole population," added Thomas Parry, Ph.D., president of the Integrated Benefits Institute. "This is especially important if American business is to remain competitive in the midst of a dire global economy."

Study highlights include:

• Health-related productivity costs are significantly greater than medical and pharmacy costs alone. On average, every $1 of medical and pharmacy costs is matched to $2.3 of health-related productivity costs – and that figure is much greater for some conditions. 

• Co-morbidities – employees with multiple chronic health conditions – drive the largest effects on productivity loss. The study calls for further research to better evaluate the impacts of co-morbidities by conditions and combinations of conditions.
• The impact of poor health on productivity impacts all levels of an enterprise. Executives and managers seem to suffer high presenteeism productivity-loss related to specific health conditions along with those in non-managerial jobs.

Researchers analyzed more than 1.1 million medical and pharmacy claims during the study. The 10 corporations that participated ranged from an industrial chemical manufacturer and a computer hardware manufacturer to telecommunications and technology companies.

To fully gauge health-related productivity costs, researchers measured medical and pharmacy spending along with lost-productivity costs related to absence and presenteeism. The study notes that employers have not historically assessed costs in this way, limiting themselves instead to a "siloed" approach that seeks to manage single health-cost categories, such as medical visits or pharmaceuticals, through benefit-package design.

The analysis employed by the research team breaks down the silos typically used when examining the cost of health care for a company. "When medical costs are viewed in a silo, or without the broader context of the full health-related costs, the full impact of a given health condition may be seriously underestimated without accurately assessing the accompanying costs of lost productivity," Loeppke said.

"A healthy workforce is critical to an employer's ability to compete in today's economy," explained Dan Leonard, president of the National Pharmaceutical Council. "This landmark study can help employers understand the importance of balancing health care costs with quality of care and wellness and prevention initiatives when designing benefits. By recognizing these issues, employers can take steps toward improving employee health, productivity, and retention, as well as spend their health care dollars more effectively."

ACOEM's Health and Productivity Management (HPM) Center offers resources to help assess full costs.

Related Article

Health and Productivity as a Business Strategy.

Sponsored Recommendations

Free Webinar: ISO 45001 – A Commitment to Occupational Health, Safety & Personal Wellness

May 30, 2024
Secure a safer and more productive workplace using proven Management Systems ISO 45001 and ISO 45003.

ISO 45003 – Psychological Health and Safety at Work

May 30, 2024
ISO 45003 offers a comprehensive framework to expand your existing occupational health and safety program, helping you mitigate psychosocial risks and promote overall employee...

DH Pace, national door and dock provider, reduces TRIR and claims with EHS solution

May 29, 2024
Find out how DH Pace moved from paper/email/excel to an EHS platform, changing their culture. They reduced TRIR from 4.8 to 1.46 and improved their ability to bid on and win contracts...

Case Study: Improve TRIR from 4+ to 1 with EHS Solution and Safety Training

May 29, 2024
Safety training and EHS solutions improve TRIR for Complete Mechanical Services, leading to increased business. Moving incidents, training, and other EHS procedures into the digital...

Voice your opinion!

To join the conversation, and become an exclusive member of EHS Today, create an account today!