1. The Economics of Wellness: Is Your Wellness Program Making an Impact? Lee Dukes, President Principal Wellness Company

2. Costs Follow Risks While there are many reasons why health care costs have risen rapidly over recent years, researchers agree: poor health caused by unhealthy behaviors is the largest controllable factor. Costs follow risks! Unhealthy Behavior Health Care Costs Physical inactivity, poor eating habits, tobacco use, unmanaged stress Health Risks Obesity, high blood pressure, elevated cholesterol and blood sugar Chronic Disease Diabetes, heart disease, hypertension, stroke

3. While there are many reasons why health care costs have risen rapidly over recent years, researchers agree: poor health caused by unhealthy behaviors is the largest controllable factor. Costs follow risks! Unhealthy Behavior STD, WC, Productivity Costs Physical inactivity, poor eating habits, tobacco use, unmanaged stress Health Risks Obesity, high blood pressure, elevated cholesterol and blood sugar Chronic Disease Diabetes, heart disease, hypertension, stroke Costs Follow Risks

4. N = 27,799 Wellness Score 81.1 Mean Cost $5,150 9,452 (34%) 71.8 $7,728 18,347 (66%) 85.9 $3,822 6,285 (22.6%) 71.4 $8,801 3,167 (11.4%) 82.8 $5,675 2,810 (10.1%) 75.6 $7,051 15,537 (55.9%) 87.0 $3,691 4,819 (17.3%) 70.9 $9,555 1.466 (5.3%) 82.6 $6,564 1,131 (4.1%) 74.8 $6,812 2,036 (7.3%) 83.9 $4,899 1,306 (4.7%) 74.3 $9,078 1,504 (5.4%) 84.1 $6,728 1,742 (6.3%) 76.0 $6,893 13,795 (49.6%) 87.6 $3,704 University of Michigan Health Management Research Center Year 1 Year 2 Year 3 Translating Health Status to Dollars

5. Medical Paid x Age x Risk Medical Paid Amount x Age x Risk Medical Costs Associated with Risks Annual Medical Costs Moderate Unknown Low High $7,123 Musich, Lu, McDonald, Champagne, Edington. AJHP. 18(3): 264-268, 2004

14. 36 Studies 22 medical costs, 22 absenteeism, 8 both Healthcare average ROI 3.3:1 Absenteeism average ROI 2.7:1 Other Meta Analyses 2001 by Steve Aldana 3:5 - 5.8:1 2005 by Larry Chapman 5.8:1 Health Affairs: February 2010

15. Return on Investment Can be prospective or retrospective Estimate of how much you saved compared to how much you spent Expressed as a ratio (2:1) Not the same as savings Savings = difference in dollars with vs. without the investment ROI = Savings / program costs in today’s dollars ROI can be low but savings can be high What Is ROI? Source: Ron Z. Goetzel, Forecasting ROI for Improving Employee Health and Productivity, NBGH Oct. 2007

16. If health care costs trended upward or downward, was it the result of changes related to… Plan design Employee population Available services Employer policies Government policies Healthcare providers Probably a combination, with various degrees of impact Challenges of Measuring ROI for Wellness

17. Zero Trend Time Year-Over-Year Increase 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% do-nothing trend negative trend zero trend

18. Why only measure economic impact? Other important metrics Health of the population National health standards Economic impact studies Engagement rates Employee satisfaction and perceptions Changes in company policies Environmental changes Leadership support External exposure Preventive care Evaluating Program Impact

19. Considerations Expectations Baseline status Claims data Privacy Outliers Time period Evaluating Program Impact

20. Option 1 Claims experience: compare claims of wellness participants to non-participants Pros – connects engagement to dollars Cons –the smaller the number of participants, the likely to include biases –if little or no incentive, will attract healthiest –if high participation for participating in DM or coaching, will attract the least healthy –must account for changes in plan design and/or plan choice Evaluating Program Impact

22. Option 2 Changes in risk status; model the estimated economic impact by risk changes compared to a do-nothing strategy; medical, productivity, STD, Workers’ comp Pros – aligns health improvement with wellness effort – does not require claims data Cons – modeled approach – requires high engagement rates – requires some sophistication to both explain and understand – does not account for non-participants in cohort group Evaluating Program Impact

23. Translating Health Status to Dollars N = 672

24. Estimated Economic Impact - Modeled

25. Option 3 Changes in risk status compared to claims experience; Markov Chain analysis Pros – aligns risk group with average claims experience – easy to communicate to C-suite Cons – requires high engagement rates – baseline diminishes over time – does not account for costs that would likely have been incurred if no program in place – does not account for non-participants Evaluating Program Impact

26. 26 2010Risk Transition2011 Net Change in Risk Status is 4.4% Improvement 90% Low Risk stayed Low Risk Low Risk 6,947 (76%) Moderate Risk 1,877 (20%) High Risk 393 (4%) High Risk 298 (3%) Moderate Risk 1,621 (18%) Low Risk 7,298 (79%) Low Risk (n=6,231) Moderate Risk (n=675) High Risk (n=41) Low Risk (n=981) Moderate Risk (n=758) High Risk (n=138) Low Risk (n=86) Moderate Risk (n=188) High Risk (n=119) Translating Health Status to Dollars N = 9,217 $5,565$5,615 $6,685 $6,724 $11,755 $12,915

27. XYZ Claims Cost Per Employee 27

28. Lee Dukes President, Principal Wellness Company dukes.lee@principal.com Contact Information