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Do the Corporate Wellness PEPM & PMPM Models Support Meaningful Utilization of Corporate Wellness Programs?

Many corporate wellness programs are charged through a per-employee-per-month (PEPM) or per-member-per-month (PMPM) model. These subscription-based business models work by employers paying a set price to get access to a particular workplace wellness service. Critics of PEPM and PMPM models have highlighted that while the arrangement brings predictable and constant revenue to the vendor, it does not necessarily benefit the costumer as employers often pay for services they do not utilize (Cheng, 2015).

Shortcomings of the PEPM Model in Corporate Wellness

When employers pay PEPM fees, they are essentially paying for services that will almost never be fully utilized or found valuable by the entirety of their workforce. This is because PEPM fees are collected regardless of how many employees use the service. James Powell (2014) articulated this situation well when he compared it to inviting 250 people to a party just to get one to attend. In other words, employers assume much of the engagement risk — which is neither in their interest, nor compels the vendor charged with fostering employee well-being to have a vested interest in program engagement.

Furthermore, subscription fees make it harder to generate positive return-on-investment (ROI). Many companies are now looking for a return on their corporate wellness programs to justify their existence (“Doctors on Demand,” 2015). In Powell’s post cited above, the author presents an example of a client with 40,000 employees who had access to a second opinion program. Out of all employees, only 140 used the service in one year, which means the utilization rate was less than 0.4 percent. Services with low utilization are not cost-effective, so it is somewhat startling they are not questioned more rigorously by our industry.

Alternative to the PEPM Model

An alternative to the PEPM model has been suggested by those who argue that a non-subscription model is better suited to the health and wellness needs of businesses. They propose a pay-as-you-go model, which places the financial risk upon the vendor. This suggests the vendor needs to take initiatives and offer services the client will actually use.

Furthermore, a no-PEPM model will likely offer better ROI that can be realized from Day 1 of usage. With this model, a consistent utilization rate of 1.5 to 3 percent has been reported; and in some complex cases it increased to up to 20 percent (Powell, 2014).

Overall, the non-subscription model probably offers a more meaningful utilization of wellness initiatives and ensures that employee wellness services represent the client, which should be considered a major goal for a progressive vendor that is truly interested in providing quality workplace wellness programs.

Examples of a no-PEPM Model in Corporate Wellness

Fortunately there are progressive providers that are starting to successfully implement a pay-as-you-go model of business. A shining example is Doctor on Demand, the country’s leading video telemedicine company. Its unique business model supports the next-generation telemedicine services, which are becoming a very popular benefit as showed by a survey among U.S. employers (Towers Watson, 2014).

Doctor on Demand regards its model of work as a no-risk model that allows for the employer to offer its services to everyone, including non-benefit-eligible and non-benefit-enrolled employees (Cheng, 2015). In this way, access to high-quality, low-cost health care is becoming a reality, which resonates with the values of the wellness industry.