photo of Oliver Ryan, Editorial Advisory Board

Oliver Ryan, Editorial Advisory Board Contributor

Nearly all big U.S. businesses, and about half of all mid-market companies, offer some form of wellness benefits to their employees.

“Wellness” is a powerfully dull catchphrase for a number of different types of programs — smoking cessation, weight management, health fairs, fitness challenges, gym reimbursements, flu shots, etc.  Companies invest in these because the programs can help reduce their health insurance costs, and because they’re good for corporate culture. That is, they’re good for attracting good people, and keeping them. 

Since the programs can be complex to administer, and health cost reduction is difficult to achieve without scale, smaller companies tend to offer fewer, simpler programs, focusing more on culture-building efforts. Among the most popular of these are fitness challenges and gym reimbursement benefits. Historically, HR managers rely for these on DIY solutions, or low-tech “templated” offerings from health benefits brokers.  The results are, at best, mixed, and leave SMB managers exra frustrated.

“We want to do these things,” says a typical SMB HR manager. “But it’s a major headache. I’d love for someone to just take it off my plate.”

Now, while the enterprise market is glutted with venture-backed “health management solutions” helping ease the administrative pain and, in theory, improve employee engagement, the mid-market has mainly seen wellness start-ups crash and burn. No vendor has yet to crack the SMB market code: A compelling product, requiring minimal hand-holding, delivered at a rock bottom price.

At least until now. 

For a number of reasons, the long awaited time for a low cost SMB wellness platform may, in fact, be at hand.

First, a new generation of SaaS HR tools have hit the market, and HR managers at SMBs are eating them up. The first three quarters of 2016 saw 350 “HR tech” deals worth a total of $1.96 billion — both records for the sector. Venture-backed companies like Namely, JustWorks, and Zenefits are training managers and employees to rely on user-friendly, SaaS tools to deliver services like payroll and health benefits. Focused on higher value problems, however, the current crop of “HRIS” players have to date ignored wellness.

Second, the arrival of ubiquitous fitness trackers is transforming wellness. Nearly 50 million trackers have been sold in the U.S. to date. This number does not include smartwatches, or smartphones, or even conventional “dumb” watches, all of which will soon have pedometers built in. Soon, if not already, every American will be carrying a digital health tracker.

The arrival of SaaS software for SMBs, and the mainstreaming of trackers, not to mention the general ubiquity of mobile and social computing, has primed the SMB market for a low cost, reliably engaging, SaaS wellness platform.

OK then, how big is this new market, you might ask? 

Corporate wellness is currently an $8 billion industry in the US., expected to grow 8% per year through 2021. SMBs currently account for 33% of industry revenues, or $2.6 billion.

Based on our research, the typical SMB offering wellness might budget about $33 per employee per month across a range of programs. That is, by the way, a fraction of the $800 the same company might pay to cover an employee’s family health insurance.

We’ve believe — and have seen with our own clients — that companies are willing to pay at least $3 per employee per month in fees just to outsource challenges and gym reimbursement programming to a trusted brand.

If so, the “total addressable market” (TAM) in the U.S. for all of SMB wellness would be over $8 billion, with “service fees” related only to challenges and gym reimbursements accounting for around $727 million. If we add uptake by non-profits, the public sector, international markets, both numbers would be substantially larger.

In short, Wellness As A Platform may soon show up in your small business, and, if so, it’s likely to be a very big opportunity for a few smart companies. 

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