Generally speaking, organizations that start wellness programs shouldn’t expect a positive return on their investment (ROI) for at least 18 months. Actually, companies can pretty quickly gain a fair amount of “soft” ROI: improved morale, employees feeling like you care about them more, and similar touchy-feely returns. But CEOs, CFOs, controllers, and finance directors are rarely impressed by soft returns.

Unfortunately, the bottom line on wellness programs isn’t something that fits neatly on a graph or pie chart. Much of the hard ROI is speculative. Example: Preventing a single stroke results in a $50,000 to $75,000 savings in related medical claims.

But there’s good news: It’s getting easier to reliably predict and show a hard ROI on wellness. As more and more employers go down the wellness road, more and more vendors get in the game and more and more plan sponsors have multi-year track records with their programs, employers can now benchmark their program against the average ROI.

You get what you pay for. By and large, the cost savings from a wellness program will be driven by how much you’re willing to spend. Generally, you get what you pay for – both in time and money invested.

The 18-month guideline

Conventional wisdom says that, in as early as 18 months, you can begin to expect to see some results on your healthcare plan bottom line. After three years, you should definitely see results. At this stage, the ROI tends to be about $4 to $5 saved for every dollar spent. As a rule of thumb, the average cost per employee  to the employer is about $3 to $5.

The key to maximizing wellness ROI: Knowing your cost drivers.

Tools for finding your cost drivers

A crucial first step for finding your health cost drivers is to have employees undergo a health risk assessment. The results of these assessments help you get a feel for what your employees’ baseline physical problems are before you try to design a program around them.

But health risk assessments are only a first step. Many organizations stop there, but to truly get to the root of the problem, you’ll need to get access to detailed data from a variety of areas:

• your organization’s medical-claims breakdown for the last three years
• prescription-drug claims
• employee absence information
• EAP use
• disability claims, and
• employee demographics (employees’ ethnic, gender, age and dependents carry specific health risk factors associated with each category).

Make no mistake: It takes some time and costs money to explore each of these avenues in addition to having employees undergo health risk assessments. But it’s worth it.

A real life example

Here’s an example of the payoff of taking the aforementioned evaluation steps.

A company in Kansas City was approached by a health insurance carrier. The carrier offered – at a discounted cost of $75,000 a year – to roll out a four-pronged wellness program to deal with any employee with heart disease, diabetes, obesity, and/or smoking. That’s pretty standard stuff, and in many cases, a sound investment.

But after the company dug into its healthcare plan claim data, it learned that, in three of those four areas the wellness program would cover, the firm already had claims that were below the national benchmarks.

The company avoided wasting $75,000 on a program that didn’t suit its needs, and learned which areas it could better invest the money.

Keeping short-term costs under control

How can you manage the cost in the short-term? In many cases, employers pass the cost of the wellness program on to the employees.

For example, let’s say you want to roll out a wellness program effective January 1 (or whatever your first day is of the new plan year). You may roll that $3 to $5 per employee per month cost directly into the employee’s monthly share of their healthcare premium. That makes the wellness program a budget neutral expense for your organization.

Some of the programs that have proven most effective have higher monthly costs per employee, but also can considerably bring up your long-term ROI.

For instance, some programs feature intensive, one-on-one interaction between employees and onsite or offsite wellness coaches. Onsite coaches are more expensive. This approach can achieve some significant results but it’s not inexpensive – you’re looking at an extra $9 to $12 per employee per month.

The payoff: The coaches get to know the employees — and their families, if you allow dependents to participate – and get to understand their problems. The coaches meet with employees regularly and drive them, encourage them, chastise them, and cajole them into changing unhealthy behaviors.

You can do other things, too. For about $2 per employee per month. For instance, you can utilize online health education materials instead of – or in addition to – the wellness coaches. Just remember that the ROI is directly proportional to the time and money invested.