The Board of Supervisors requested the Budget Analyst to conduct an evaluation of all the City's plans and programs to encourage and assist City employees to lead a healthy lifestyle, in a motion adopted in July 2007 (File 07-0847).

Potential Cost Savings to the City for Implementing Employee Health Promotion Programs

Many large private employers and some public employers have begun implementing employee health promotion programs to reduce their costs for health insurance premiums, sick leave use, and other costs related to poor employee health. Several academic studies of large employers who have implemented employee health promotion programs have shown that employees who participate in health promotion programs can reduce their health risk factors. These studies have also shown that reductions in health risk factors can reduce medical claims costs, workers' compensation costs, and lost work days due to sick leave or disability.

The City's Estimated Costs for Lost Productivity Due to Absenteeism and Potential Cost Savings from Implementing Employee Health Promotion Programs

Many health risks result from individual behaviors. For example, physical inactivity can cost the City an estimated $4,704 per employee per year for medical care, workers' compensation, and lost productivity. Lost productivity in the form of absenteeism and reduced job performance accounts for 95.6 percent of this cost.

Although City departments overall experienced a 6.7 percent reduction in lost work hours due to sick leave, disability leave, and workers' compensation leave between FY 2004-2005 and FY 2006-2007, the City still incurs high costs. In FY 2006-2007, lost work hours due to sick leave, disability leave, and workers' compensation leave cost the City an estimated $160 million in salary costs. This lost productivity was equivalent to 1,800 full time employees.

The City could experience cost benefits from successfully implementing a City-wide employee health promotion program through reductions in workers' compensation leave, sick leave, and disability leave. The Budget Analyst estimates that if the use of such leave were decreased by five percent, the City could realize annual savings of approximately $8.9 million, or savings of $4.0 million if such costs are reduced by just two percent.

Any benefits or savings resulting from implementation of a City-wide employee health promotion program would not be realized immediately, however. Based on the Budget Analyst's interviews with private and public employers and industry experts, improvements in employee health and resulting benefits or savings would begin to appear approximately three years after implementation of an employee health promotion program, and would not be fully realized until five years.

The City's Minimal Health Insurance Premium Cost Savings from Implementing Employee Health Promotion Programs

Studies conducted by the University of Michigan have directly linked improvements in employee health from participation in workplace health promotion programs to reductions in medical claims costs. According to one University of Michigan study, employees participating in workplace health promotion programs can have medical claims cost savings up to 44 percent compared to non-participants. Reductions in medical claims costs can contribute to reductions in monthly health insurance premium costs.

Widespread implementation of employee health promotion programs in San Francisco would have minimal impact on the City's costs for monthly health insurance premiums, however. 83.5 percent of City employees are members of Blue Shield or Kaiser health plans, in which the City and the health plans negotiate the monthly premium costs based largely on member profile and market conditions rather than utilization of health services. Consequently, even if employee health improves through participation in health promotion programs, potentially resulting in reduced utilization of services, such decreased utilization may have no impact on monthly premium costs.

The City could potentially achieve savings in the monthly premium costs for the City's self-insured plan, the City Health Plan, and the flexibly-funded plan, PacifiCare, that allows for reductions in monthly premium costs if utilization is less than anticipated. However, the relationship between employee health promotion programs, reduced utilization, and reduced monthly premium costs have not been well documented by employers who offer health promotion programs, especially in the short term.

Issues Facing the City's Health Promotion Programs

Insufficient Support for Health Promotion Programs Among City Managers

City departments have not placed a high priority on worksite programs promoting employee health. Although the April 2006 Mayor's directive establishing the Shape Up at Work Strategies instructed City departments to incorporate employee health promotion strategies into their mission statements, only 22 of 42 departments responding to the Budget Analyst's survey had done so.

Management support is essential in fostering a culture from top to bottom that is supportive of employee health promotion programs. However, when the Fire Department applied to the Federal Emergency Management Agency (FEMA) in 2007 for an approximately $1.2 million grant to fund wellness and physical fitness programs for Fire Department staff, the grant application was not accompanied by letters of support from elected officials, which according to the Fire Department is encouraged by grant experts in the field.

Decentralization of Health Promotion Programs and Funding

The City's departments are decentralized, with each department identifying the need and resource allocation for employee health promotion programs. Funding for health promotion programs, which is an estimated $814,577 Citywide in FY 2007-2008, is unevenly distributed among departments. Consequently, the knowledge of and access to health promotion programs by individual City employees are subject to the available funding within each department.

Inadequate Means to Track Participation and Outcomes in the City's Existing or Proposed Programs

Although the City tracks lost work hours due to sick leave, disability leave, and workers' compensation leave through SF Stat, the City's performance measurement program, the City has no existing mechanism to track participation in health promotion programs, and the impact on absenteeism. City programs to promote employee health do not collect and analyze data sufficiently to track program participation and outcomes.

For example, the Police Department tracks uniform employees' compliance with the Department's mandatory physical fitness program requirements but does not track overall participation trends or the impact of participation in physical fitness programs on sick leave, disability leave, and workers' compensation leave.

Also, in 2006 the Fire Department applied for the FEMA Assistance to Firefighters Grant that would have funded a comprehensive $1.5 million Employee wellness and fitness program. FEMA denied the grant, informing the Fire Department that the grant application was worthy of award but lacked compelling information on the costs and benefits of the proposed program. In 2007, the Fire Department submitted a new grant application, and in February 2008, the Fire Department received official notice that FEMA would award the Fire Department a $1.2 million one-time grant to implement an on-going wellness and fitness program.

Informal Tracking of City Departments' Participation in Shape Up at Work

The Mayor's Shape Up at Work initiative, which is largely unfunded, is the first City-wide effort to begin developing a culture where value is placed on employees taking an active role in improving their health and associating wellness with the workplace. Thirty-three departments responding to the Budget Analyst survey reported participating in the Shape Up at Work initiative in 2007 by organizing teams to participate in the Walking Challenge, set measurable distance goals, and track distance walked as a group.

According to the Shape Up at Work Steering Committee members, the initiative has experienced growing participation. However, departments' tracking of and reporting participation in Shape Up at Work is informal. Shape Up at Work does not have means to track employee participation in health promotion activities or evaluate the impact of employee participation, such as reductions in absenteeism.

The City's Need for Coordination of Employee Health Promotion Programs

To implement an effective employee health promotion program the City would have to take several actions.

• The City's employee health promotion programs should be centrally coordinated. Local governments with effective employee health promotion programs, including King County (Washington), Stanislaus County, and San Mateo County, all have centrally coordinated their employee health promotion programs. Central coordination can increase efficiency by reducing program redundancies and gaps. Because the Health Service System has begun working with the City's health plans to develop the health plans' existing health promotion programs, including data collection through the Dashboard Project, the Health Service System is the logical home for a coordinated City health promotion program.
  
  
• The Health Service System needs to develop and track performance measures. The Health Service System is currently working with its consultant, Mercer, to develop a Wellness Project. It is the role of the consultant to identify how the Health Service System can better use health plans' existing health promotion programs, including health risk assessments, coaching, and incentives, to meet the needs of the Wellness Project. The Health Service System should also work with its consultant to develop a system that allows for tracking of individual employees through the program, using anonymous identifier numbers, tracking the employee's risk assessment, intervention plan and medical claims experience, in the same manner as King County, Washington. Potentially, if the Health Service System is able to develop better health plan data collection and tracking, the Health Service System could use the health plans' health promotion program participation and outcomes to negotiate lower monthly premium costs.
  
  
• The Health Service System should work with the Fire Department as a pilot project for developing and implementing best practices. With the recent FEMA grant award to the Fire Department to develop a comprehensive wellness and fitness program for the Department, the Health Service System should coordinate a plan for the Fire Department to serve as a multi-year pilot for developing and implementing best practices in tracking employee program participation and measuring the program impacts on absenteeism and workplace injury.
  
  
• Responsibility for coordinating Shape Up at Work should be transferred to the Health Service System. Prior to the proposed transfer, the Health Service System should work with Department of Public Health and Department of Human Resources staff currently responsible for the City's broader Shape Up San Francisco initiative for all City residents, to identify what is included in the transfer and integration of Shape Up at Work into the Health Service System, and a reasonable timeframe for transfer of Shape Up at Work to the Health Service System.
  
  
• Health risk assessments need to be incorporated into worksite program planning. Transferring Shape Up at Work to the Health Service System can help achieve this objective. Currently, the City lacks information on the health risks of its employees. The Health Service System would need to work with the City's health plans to provide aggregate health risk assessment data, allowing the City to identify its major categories of health risks and plan worksite programs through Shape Up at Work that address these risks.
  
  
• The Health Service System should maintain the communication and outreach network set up through the Shape Up at Work Steering Committee. This requires a commitment to work openly with City departments, exchanging information and ideas.
  
  
• The City's Employee Assistance Program, which is currently managed by the Department of Human Resources, should be transferred to the Health Service System. This would facilitate integration of the Employee Assistance Program into a general employee health promotion program combining mental and physical health programs, as well as better link the Employee Assistance Program to mental and behavioral health services provided by the health plans. According to the Department of Human Resources, the Department would not oppose such a transfer. However, Employee Assistance Program services would need to be provided to all City employees and not limited to only City employees covered by the Health Service System.
  
  
• The Health Service System would need to develop and meet programs goals. Goals should include: (a) providing the program at a low cost, (b) developing performance measures and tracking performance, (c) developing systems to measure productivity, (d) achieving high levels of participation through communication, outreach, and City department involvement, (e) keeping members informed of their health plan benefits, and (f) keeping policy makers informed.

Employee Health Promotion Program Costs and Savings

The Budget Analyst estimates that the City departments' existing programs to promote employee health are approximately $1,248,315 per year. These costs include $814,577 for City department programs, $338,814 for the Employee Assistance Program, $76,924 for the Department of Public Works health fair, and $18,000 for the Department of Human Resource's temporary part time intern to coordinate Shape Up at Work. The Health Service System refused the Budget Analyst's request to provide information on the one-time costs to implement the Health Service System's Dashboard Project and Wellness Project, which are General Fund costs.

This report has not proposed any new direct costs in FY 2007-2008. The proposed City-wide employee health promotion program coordinated by the Health Service System could incur new costs over time for data analysis and performance measurement, program outreach, and program services. The Budget Analyst has not quantified these potential costs. To identify program needs and potential costs, the Health Service System will need to evaluate and develop a program plan for the Shape Up at Work program, Employee Assistance Program, health plans' wellness programs, and availability of program and health plan data.

As noted above, implementation of employee health promotion programs in San Francisco would have minimal impact on the City's costs for monthly health insurance premiums, because most City employees are members of Blue Shield or Kaiser health plans, in which the City and the health plans negotiate the monthly premium costs based on member profile and market conditions rather than utilization of health services.

The City could experience cost benefits from successfully implementing a City-wide employee health promotion program through reductions in workers' compensation leave, sick leave, and disability leave. The Budget Analyst estimates cost benefits to range from $4.0 million annually, resulting from a two percent reduction in such leave, to $8.9 million annually, resulting from a five percent reduction in such leave. Improvements in employee health and resulting benefits or savings would not begin to appear until approximately three years after implementation of an employee health promotion program, and would not be fully realized until five years.