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January 17, 2014

Wellness Programs Take a Punch to the Gut at PepsiCo

Summary:

Brokers and consultants would be well-advised to start backing off from employee wellness programs.

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The report in the journal Health Affairs about PepsiCo marks the first time a major organization has been found to be losing money in a wellness program (not including the ones that my colleagues and I are exposing as frauds, like British Petroleum and the Nebraska state employee program).  Highlights are as follows:

  • Disease management alone was highly effective, with an ROI of almost 4-to-1;
  • Wellness alone was a money sink, with each dollar invested returning only $0.48 in savings;
  • The wellness savings were attributed to an alleged reduction in absenteeism, as reported by participants.  There was no measurable reduction in health spending because of wellness.

There are many reasons to think that this result, as unimpressive as it is, overstates the value of the program.  For instance, the report doesn’t measure the time that employees spent completing the forms and getting their blood drawn.  Nor does it include staff time or the fees to Mercer, which advised PepsiCo to launch the program. Nor does the report take into account the bias caused by participants having a more engaged mindset than non-participants, or the self-reporting of data for absences, the only slightly bright spot in the report. One suspects that the author, RAND’s Soeren Mattke, pulled some punches for political reasons, to avoid having PepsiCo suppress the entire study.

So where does this result leave the wellness industry, and by implication brokers who are earning commissions from it?

First, wellness only has one supporter left in Washington, DC, the Business Roundtable, an association of chief executives of large U.S. corporations. Its vice president was quoted in Reuters as saying Roundtable members are “as enthusiastic as they have ever been about these (workplace wellness) programs,” adopting them to boost employee morale and improve recruitment.  One irony is that the Business Roundtable’s Health Committee is chaired by a CEO in the casino industry, an industry which has steadfastly defended its right to expose its employees to more second-hand smoke than all other industries combined.   Hence, one suspects an ulterior motive for the Roundtable’s support, such as being able to control employee behavior and increase employee share of premiums.

The other irony is that employees usually resent and sometimes revolt against programs designed to “boost their morale.”

Second, no wellness program has ever saved any corporation a nickel.  The simple sleight-of-hand of comparing participants to non-participants and/or just measuring people who were high-risk to begin with while ignoring those whose risk factors increase will show savings where none exist.  Indeed, how could it be possible to improve health, let alone generate savings by improving health, by doing the opposite of what guidelines recommend, which is what wellness companies do.  For instance, the United States Preventive Services Task Force recommends screening asymptomatic people only once every five years (except for blood pressure), whereas almost all wellness vendors insist on annual screenings.  The literature is very clear that annual checkups for asymptomatic adults are expensive and counterproductive, and yet many wellness programs are measured by how many people they send to the doctor.

Third, there is more bad news on the way.  This Health Affairs article is a start, sort of like busting Badger or Skinny Pete, but there is some investigative work that will be revealed in the weeks ahead that, to continue the analogy, will be more akin to blowing up Gustavo Fring’s whole operation, exposing wellness as possibly the biggest scam ever to be played by the healthcare industry on corporate America.  (This may seem like a strong statement, but if you doubt it, simply bookmark this column for a month or two.)

Brokers and consultants would therefore be well-advised to start backing off from these programs.  The short-term commission sacrifice will more than pay for itself in long-term client retention.   Note that I said, “back off,” not “run away.”  Your clients have in many cases staked their reputations on wellness, advocating –- possibly with your help — for steadily larger budgets for programs and especially incentives.  You need to step back from the ledge together, keeping in mind the amount of political capital they’ve invested.  They relied on you to take them here.  Now they will need to rely on you to bring them back.

Editor's Note: See also our thought leader Tom Emerick's take on the PepsiCo news.

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