8/14/2019 Return on Fitness - Value of Employee Fitness

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Return on Fitness (ROF) Measuring the Value of Employer Fitness Investment

By Kwasi Fraser

As we all know the continued rising cost of healthcare is a clear threat to a companys bottom -line. Subsequently,

many companies often promote a healthy work/life balance to motivate employees to develop a fitness regimen.

With a more physically and mentally fit workforce, companies can directly tackle each of 5 chronic illnesses that are

the key contributors to the majority of health care costs. These 5 chronic illnesses, all of which are preventable, are

as follows:

1. Diabetes2. Stroke3. Heart disease4. Pulmonary conditions5. HypertensionEmployees that are not healthy, contributes to higher health care premiums for all other employees within acompany and ultimately within the nation. Much of America's $2.5 trillion annual health-care bill goes to treat Type

2 diabetes, heart disease, and obesity, ailments which are largely preventable with changes in diet and exercise. One

insurer estimates that an employee with a body-mass index [BMI] over 30 adds $2,500 annually to a company's

health-care bill on average. As stated by Humana CEO Michael McCallister, health care costs become premiums,

which are his companys revenues.

It can be proven that a workforce that is not healthy leads to lower productivity and higher absenteeism. As a result

of this threat to the bottom-line, many companies will need to increase efforts to promote measurable and reportable

health and fitness strategies for their workforce. However, to ensure measurability, accountability, and integrity of

these efforts, companies will need to embrace and implement a new financial ratio to tie a companys fitness efforts

to the overall financial health of the company. This new financial ratio is called the Return on Fitness or ROF Ratio,

and is a performance measure used to evaluate the efficiency of Fitness investments or to compare the efficiency ofa number of different fitness investments. It is one way of considering profits of a company in relation to fitness

investments.

The ROF is calculated by dividing the (Gains from Fitness Investments minus the Cost of Fitness) by the (Cost of

Fitness). The Gains from Fitness investments is dollar savings on insurance premiums paid by the employer plus

dollar value realized in productivity from lower employee absenteeism. As more employees quit smoking, lose

weight, and join fitness programs the Gains from Fitness will increase, and hence the ROF.

The ROF will not only be used by a company to internally gauge and monitor the fitness of its workforce, but it will

also be used by health insurance vendors to identify the risks of insuring one company from the next. Using the

ROF ratio health insurers will be expected to ensure the healthcare cost commensurat e the health of a companys

workforce. So, a company with a high ROF will be expected to have the lowest healthcare costs in the industry.

To mechanize the ROF ratio, companies will agree on an audit and oversight strategy, along with authentic means to

support validating, tracking, monitoring, and communicating the Gains from Fitness and Cost of Fitness.

Companies that are currently responsible for gathering data on employees health during annual enrollment periods

and beyond can play an instrumental role in providing input for the ROF Ratio calculation. The urgency for lower

healthcare cost is becoming critical for companies and our nation, and merely moving benefits around is not a

sustainable strategy. Due to the necessity, I anticipate within the next year many companies and investors will

embrace the ROF or some variation of it.