Work-Site Health Promotion: An Economic Model

Despite a burgeoning interest in and acceptance of corporate health promotion, the overall economic effects of these programs are not clear. Although ultimate resolution of this question awaits detailed empiric research, a theoretical approach can be useful in structuring the problem and understanding the critical issues. The financial model presented views the firm as a value-maximizing enterprise and evaluates health promotion as a use of corporate assets. The model projects the benefits and costs to the firm of a 7-year health promotion program under a variety of assumptions regarding the employee mix and the effects of the health promotion program on health and productivity. The analysis reveals that the base case assumptions result in a program that creates value for the firm when the cost is less than 193 per participating employee per year. Firms with a highly productive, difficult to replace, and older employee group are most likely to find health promotion to be a good investment. Productivity gains produce the majority of the economic benefits of the program. Effects on health care expense alone are projected to be relatively small. Gains from reduction in employee mortality or retiree health expense are found to be insignificant in this model.