20Apr2012

Actuaries: Turn wellness from a dream into a real business advantage

by Andrew Sykes, Health at Work Wellness Actuaries

Hardly a day goes by without another report of the possible and positive returns on investment available from wellness programs. Yet, with few exceptions, companies do not make the investments that they should in employee health. Getting a positive return on a minimal investment is not the point. Knowing how much and what type of investments to make to maximize the overall return (not just per dollar spent) for employers is no easy task, and that is where actuaries can shine.

One of the reasons employers under-invest, despite the regular news reports of 3:1 ROIs, is that most studies on the returns available are less than credible. At least when examined by CFOs and CEOs with an eye for financial mathematics. The errors in ROI calculations run the gamut of statistical blunders from confusing cause with correlation, to ignoring many of the costs (lowering the real cost of the investment) or using “estimates” of what the return should be as a result of a certain level of engagement (often based on a wellness company’s single best case study).

Creating credible studies of the return on investment from wellness programs requires a unique set of mathematical skills and tools and a particular way of thinking. This toolset and mindset is exactly that possessed by actuaries. Although many of us have spent years working on the negative side of health (death, disability, morbidity), the mathematics of the positive impacts of health habits on health outcomes is very similar, albeit with some important differences.

With a change in mindset and some thought, actuaries could provide employers the missing link behind making and measuring investments in employee health: the credible business case for how much to invest and what to expect as return and a reliable method for measuring success (or failure) over time.

Actuaries could help employers clear away the myths in wellness by helping them to apply an honest approach to evaluating programs. As we have found, when one does this, many of the assumed best practices in wellness are simply not supported by the data. Biometric screenings, for example, usually increase health claims over the short term rather than decrease them! Even considering the health failures avoided by early detection, the net impact of these screenings (taking into account the total costs and the higher drug costs that result from treating newly detected risk factors) is usually negative over the period that most employers would care to look.

Just like health insurance itself was a new frontier for actuaries during the last century, I hope that in this century, wellness will become the industry in which our profession adds credibility, honesty and a serious approach to helping clients understand what truly works. In a field where common sense answers are often wrong, our critical evaluation skills will be in high demand from employers who understand the link between employee health and their companies’ performance. I urge actuaries working in health insurance to apply their minds to guide employers to invest in improving employee health habits instead of just paying for the health failures that result.

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Discussion

3 responses to "Actuaries: Turn wellness from a dream into a real business advantage"

  • Jaqueline ROC says:

    Thanks for your very interesting article on the last edition of the Actuary magazine. As a student in the actuarial field, I would like to learn more about strategies for measuring ROI on Global Wellness Programs. More specifically, It would be nice to hear your thoughts about the data that a Corporation should plan to collect before and after the implementation of Wellness programs in order to quantify the expected results. Also, could you please suggest some study material, books, articles on estimation of ROI related to the implementation of a Global Wellness program in multinational companies?
    Thanks and Kindest regards, Jaqueline

  • Ryan Daniels says:

    I’m also a wellness actuary and I’d love to get to an industry-standard approach to evaluating wellness programs.

    • Sid Porter says:

      As a student still in University, I’ve been doing research on the paths I can take in the actuarial field.
      I came across a youtube video that introduced me to the idea of becoming a “wellness actuary”
      I’d like to get more information on what exactly your role entails, I’d appreciate it so much

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