Date: 2/14/12 To: Judi Kalitzki From: Wil Carletti Subject: Recommendation to Institute a Wellness Program In response to rising

healthcare costs, my team has spent the past few weeks investigating the costs and benefits of instituting a wellness program (as opposed to simply just raising insurance premiums) to help cut costs. This report explains the results of our investigation, which conclude that a wellness program would benefit the company and its employees in the long run and development of such a program should begin as soon as allowed. Background of Wellness Programs Wellness programs were initially instituted into the business world in order to help employees cope with the high stress environment of the typical workplace. Effective employee wellness programs include discounts on gym memberships, access to counselors, healthy diet options, smoking cessation programs, health fairs, motivational speakers, etc. The intent of such programs is to improve the mental and physical health of employees, especially those who are more at-risk than others (overweight, smoke/drink excessively and often, etc.), therefore reducing cost to the employer. More employers are taking a vested interest in the health of employees, as Dr. Steven G. Aldana concluded, health promotion programs can reduce related health care costs and absenteeism (WELCOA-Wellness Council of America). Overview of the Current State of Health Care The United States of America spends more money on health care than any other country in the world, yet our population is not the healthiest. Perhaps more alarming, this spending pattern continues to increase, costing Americans more and more every year. In fact, health care costs for a family of four have doubled in less than a decade from $9,235 in 2002 to over $19,000 in 2011, as reflected in Figure 1 below (Your Familys Health Care Costs: $19,393, CNN Money, May 2011). Health Care Costs Rising From 2002 to 2011

Note: Costs in U.S. Dollars

Figure 1 (source: Your Familys Health Care Costs: $19,393, CNN Money, May 2011)

Changes to Implement Health and Wellness Program In order to implement a helpful, yet cost effective wellness program, Puget Electronics will have to create an incentive to participate in the health program. Rewarding those enrolled with lower rates or discounts will be much more beneficial in the long-term. We strongly do not recommend a penalty for not enrolling (i.e. a higher premium), as many respondents were furious after Chicago mayor, Rahm Emanuel announced an extra $50-a-month insurance premium for those who didnt enroll in a similar program (Westneat, Well, well: Sims healthcare plan works out, The Seattle Times, September 2011). Resources and Timeline Building a successful health and wellness program will require the hiring of new staff to facilitate the new program, as well as supplying resources to aid the program (i.e. money to subsidize and encourage healthy eating habits, etc.). According to the Wellness Council of America, the average cost per employee in a medium program with several activities is $16$35 per year, which would should yield a return on the investment. We estimate that a moderately sized company, such as Puget Electronics, with a staff of five working 15-20 hours per week, will be able to launch a worksite wellness program in 2-3 months (detailed below in Figure 2). Wellness Program Can Be Instituted by May 2012

3/1/12 Research Successful Programs Figure 2

3/22/12 Hire New Program Staff

4/1/12-4/28/12 3-Week Training Period

5/1/12 Begin Worksite Program

We estimate that we will need a total of 5 staff members to fill the following program roles: Program Manager Program Coordinator Nutritionist Mental Health Counselors Projected Savings & Benefits In 2004, research by Ipsos-Reid Company Health and Wellness Program indicated that the three main causes of staff absenteeism are mental health (anxiety and/or depression), stress and a bad relation ship with a supervisor, all of which are preventable (Company Wellness Programs, June 2009). 1 1 1 2

Health and Wellness programs specifically target these three areas, which accounts for the recent success of such programs in many corporations. In 1996, it was estimated that for every $1 that U.S. corporations running Corporate Health Promotion Incentives spent on Wellness Programs, on average, recognized savings between $2.30 and $10.10 per dollar spent. At the Coors Brewing Co., Company Health and Wellness Program Statistics illuminate a savings of $5.50 per $1 spent on fitness, with a positive sideeffect of member absenteeism dropping by 18% (Company Wellness Programs, June 2009). Being that Puget Sound Electronics is a medium-sized company (500 employees), our goal for 2012 is to obtain 60% enrollment and break-even, because of program start-up costs. As illustrated in Figure 3 below, following 2012, we can expect an average savings of $3 for every $1 spent on the Employee Wellness Program, as well as an increase in enrollment.

Projected Total Financial Savings

Note: Savings in US Dollars

Figure 3 Challenges Enrollment is the biggest challenge. If no one enrolls in the program, we will not save any money and, in fact, we will suffer a net loss. That being said, our team strongly believes that the employees will react positively to this program. Research continues to indicate that when rewarded with lower premiums for participating in Corporate Health and Wellness Programs, employees do enroll in such programs. Recommendation and Next Steps Approximately 40% of all deaths in the United States are premature (at least 900,000 deaths each year) and are due to unhealthy lifestyle choices (Company Wellness Programs, June

2009). Implementing a Corporate Health and Wellness Program presents the company with an opportunity, to not only save financially, but also to save lives. Encouraging and supporting: the cessation of use of tobacco, the implementation of a healthy diet, regular exercise, sufficient rest, lower levels of stress and an active lifestyle can reduce absenteeism, control increasing health care costs, improve productivity, reduce injuries and improve employee morale. Past experience shows that one of the most important elements to the success of such a program is the amount of support it receives from the CEO and upper management. We ask for your support to move forward with the creation and implementation of the Wellness Program as soon as possible, with the goal of improving the performance, financial stability and employee health of Puget Electronics. We look forward to receiving any feedback you may have regarding this proposal, and taking this project to the next level.