Employees' Poor Health Costs Billions

September 14, 2012 (PLANSPONSOR.com) –  Poor health costs the U.S. economy $576 billion.

The Integrated Benefits Institute (IBI) found that 39%, or $227 billion, of this annual cost is related to poor health’s impact on productivity in the workplace. Lost productivity includes absence due to illness, underperformance due to reduced health or “presenteeism.”

“There’s a reason that everyone in the U.S. is worried about the economy and health care,” said Thomas Parry, Ph.D., IBI president. “These are two fundamental issues that are tightly coupled through health’s impact on productivity, and shape our standards of living.”

Employers can save an average of $3 for every $1 they invest in improving their workers’ health, Sean Nicholson, Ph.D., Cornell University economist and a health and productivity researcher, observed. “There are opportunities for companies to increase profits and wages while they improve worker health.”

The estimate for U.S. health costs was calculated using the IBI Full Cost Estimator (FCE), a tool that calculates the full costs of health and productivity based on five large databases. For this calculation, the estimated costs, in billions, are categorized into three major areas:

  • Wage replacement (incidental absence due to illness, worker’s compensation and short- and long-term disability) – $117
  • Medical and pharmacy (workers’ compensation, employee group health medical treatments and employee group health pharmacy treatments) – $232
  • Lost productivity (absence due to illness and presenteeism) –  $227

IBI used the most recent data (2011) from the U.S. Bureau of Labor Statistics as input values (128.3 million workers in the national work force; total wages and benefits of $7,369 billion), as well as input values representing the latest 2011 IBI Benchmarking Data (based on 60,000 employers). The FCE tool also relies largely on data from employee self-reported information about chronic health and lost time at work.

For more information, visit the IBI website.

Kristen Heinzinger