insurance

Wellness programs push more health incentives

American companies are pumping up their employee wellness programs in the hope that healthier workers will provide the heavy lifting necessary to control health insurance costs.

Workforce fitness and health initiatives have been around for decades, from off-site gym memberships to on-site basketball courts and softball fields. A wellness component has grown up to address such employee lifestyle risks as tobacco, alcohol and drug use, as well as chronic health risks such as cancer, diabetes, high blood pressure and heart disease.

However, a recent report from the RAND Corp. found that wellness programs to date have failed to significantly improve the health of employees or the balance sheets of their employers.

Undeterred, employers are sweetening their offerings by adding cash incentives and/or disincentives (read: penalties) to encourage workers to actually meet health and fitness goals.

Carrots and sticks

A February 2013 study from Fidelity Investments and the National Business Group on Health, or NBGH, found that nearly 9 out of 10 midsize to large employers (86 percent) now offer some measure of carrots and sticks in their wellness programs, up from 57 percent in 2009. The employers who were surveyed expect to spend an average $521 per employee next year to keep their workers on the road to Wellville -- and off their insurance claims list.

The programs and objectives are evolving, says Jerry Noyce, president and CEO of the Health Enhancement Research Organization, or HERO, a nonprofit employee health management research firm based in Edina, Minn.

"Back in 2005, 2006, when we were getting big bumps in health care costs, incentives were used as a cost-neutralizer strategy," he says. "But now it's about improving employee performance and productivity as well as recruitment and retention."

How do these "shape up or pay up" programs work? Do they work for the employee as well as the boss?

Rewards for the reaping

According to HERO, incentive programs -- the "carrots" -- come in three basic flavors:

  • Participation-based incentives are the starter program. They reward employees with cash or a health insurance premium reduction simply for participating in, say, an annual health risk assessment or biometric screening.
  • Outcome-based incentives take it a step further and reward employees who achieve and maintain specific health goals for things such as body mass index and cholesterol and blood pressure levels.
  • Progress-based incentives represent a new approach in which employees are rewarded for the progress they make toward specific health goals, whether they reach them or not.

What's the most an employee could save through workplace health incentives? This year, under federal rules, the maximum reward is 20 percent of the worker's health insurance premium. That means an employee whose coverage costs the 2012 average of $5,615 could save up to $1,123, while those with the average family coverage of $15,745 could save $3,149.

Health insurance exchange state chart

Most employers offer discounts of 3 percent to 11 percent, well below the 20 percent cap, according to Stand Up for Health Care, part of the consumer group Families USA.

J.D. Piro, a health and benefits expert with consulting firm Aon Hewitt, says the stakes will soon increase under Obamacare. The Affordable Care Act encourages wellness programs.

"Next year, there will be a maximum (reward) of 30 percent of the cost of coverage for wellness programs generally and 50 percent of the cost of coverage for participation in a tobacco cessation program," he says.

Penalties and concerns

Disincentives are typically meted out in the form of payroll reductions, premium surcharges or denial of access to a better health plan. A survey by research firm Towers Watson and the National Business Group on Health found that up to 22 percent of employers planned to use the "stick" approach during 2013.

There's no "shape up or pay up -- or else." Employers are prevented by law from forcing you to participate, but Piro says doing so is a win-win for everybody. "People are searching for ways to reduce costs, and certainly maintaining a healthy and productive workforce is one of the ways to reduce costs," he says.

But Dania Palanker, senior counsel for the Washington, D.C.-based National Women's Law Center, says she's worried that incentive programs may adversely affect women, minorities and low-income workers because they have a higher incidence of the targeted health conditions and more socioeconomic obstacles to overcome to meet program goals.

Wellness programs becoming standard

"While the plan by law has to provide a reasonable (incentive) alternative if there is a health status reason, they don't have to provide one if an employee can't participate in a program because she's working two jobs, has to care for her child, has elder care duties, can't afford a gym or doesn't live where it's safe to walk at night," Palanker says.

But Noyce says health incentives are here to stay.

"For employers, their wellness program does more than just address cost; it's really about improving health to improve (worker) performance," he says. "It's very likely that even if they drop health insurance altogether, they would keep their wellness programs for a much different reason."

 

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To help hold down health insurance costs, employers are increasingly telling workers they'd better shape up -- or pay up.

Companies are using carrots and sticks in their wellness programs so employees will live healthier lives and stay off the sick list. Employees can enjoy cuts in their health plan contributions or even be rewarded with cash if they keep indicators such as cholesterol, blood pressure or body mass index within goal levels.

Federal law allows health premiums for healthy employees to be reduced by up to 20 percent, increasing to 30 percent next year. But the discounts tend to be in a range of 3 percent to 11 percent, according to Stand Up for Health Care, part of the consumer group Families USA. Workers who don't hit the targets or who smoke can be whacked with penalties. They can face surcharges tacked on to their health premiums, or they can be denied access to better health plans.

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