For Wellness Programs, Health Care Reform Means A New Day

The recently passed health care reform bill is the most expansive social legislation enacted in decades. As President Barack Obama signed the Patient Protection and Affordable Care Act into law on March 23, he said it enshrines “the core principle that everybody should have some basic security when it comes to their health care.”  

The passage of the bill ended a yearlong legislative roller-coaster ride.  Although Democrats are thrilled with the outcome, Republicans, who describe the measure as an example of big government run amok, are not. 

The health care and insurance industries are going to change—and drastically. In order to remain profitable, health insurers are going to have to redevelop their business models. Many feel that the number of health incentives will increase substantially.

Healthy Incentives

Boston-based Barry Hall, principal of clinical health care and global technology solutions for Buck Consultants, which specializes in human resource and benefits consulting for more than 1,500 professionals worldwide, says incentives are going to take on added importance as employers strive to improve the health of their workforces.

“The new health reform provisions support the growth of incentives,” he says. “Employers now have more latitude to increase the value of the incentives they use to motivate their employees to become healthier.”

Beginning in 2014, employers can offer greater incentives to employees for participating in corporate wellness programs or for meeting certain health targets.

Existing wellness regulations, developed under the Health Insurance Portability and Accountability Act (HIPAA), permit wellness incentives of up to 20 percent of the total premium for each person, explains Hall. The reform act increases this to 30 percent and also provides the opportunity for an increase to 50 percent, at the discretion of the Secretaries of Labor and  Health and Human Services. Existing wellness programs that are grandfathered under the health reform provisions will not be eligible for the limit increase, Hall adds. 

Last fall, the Incentive Federation led a delegation of incentive industry leaders to Washington, DC, to lobby for a provision in the HIPAA legislation that makes tangible, non-cash incentive awards worth up to $400—such as merchandise and gift cards—tax-free for employees participating in wellness programs. The goal was to spur more companies to use non-cash incentive awards to encourage participation in smoking cessation and weight loss programs, among other wellness campaigns. The efforts were unsuccessful, but the Incentive Federation is continuing to work on it. 

“Looking at all aspects of wellness programs, the incentives piece is the most rapidly growing around the world,” says Hall. “And although the majority of employer incentives today is based on activity, such as participation, the fastest-growing type of incentive reward is based on achievement, such as maintaining a healthy weight or blood pressure.” 

Safeway is one company that has embraced this type of incentive, and its CEO, Steven Burd, has been highly vocal about company health care plans that reward healthy behaviors. Employees at Safeway, as in most companies, pay a portion of their health care costs through premiums, copayments, and deductibles. 

The big difference between Safeway and most employers is that it has pronounced differences in premiums that reflect health levels. Safeway’s health care plan differentiates premiums based on things like tobacco usage, weight, blood pressure, and cholesterol levels. Employees are screened for these four measures and receive a discount off a “base-level” premium for each test they pass. The data is collected by outside parties and not shared with company management. 

“What’s significant about the new health reform provisions is that they support a direction that many employers are already headed,” says Hall. “They want to establish greater accountability among their employees, and this provision will enable them to more aggressively reward employees who achieve and maintain specific health outcomes.”

The financial benefit of wellness programs is what has caught the attention of most companies. “At the core of most employer wellness strategies is the desire to ‘bend the trend’ of unsustainable increases in health care [costs]. By encouraging employees to adopt healthier behaviors and lifestyles, they won’t have to go to the doctor as often, thus achieving this objective,” Hall notes. “Healthier employees are also a competitive advantage for an employer, because they’re absent from work less. And healthy employees are more productive, which helps the bottom line,” he adds.

The reform is not a slam dunk by any means, Hall admits: “It’s not without some controversy. Some advocacy groups are concerned that this type of incentive could jeopardize affordable coverage for individuals with conditions such as heart disease or cancer, forcing them to subsidize premiums for healthier employees.”

He continues: “In fact, the reality is the other way around. Even with a 30 percent difference, employees with healthier lifestyles will still be significantly subsidizing the health care costs of those employees who, for example, smoke or are obese. But ultimately, the intent of a wellness incentive is not to shift costs or penalize people based on their health or lifestyle decisions, but rather to encourage and motivate everyone to do something to reduce their risk of disease and improve their quality of life.” 

For the third consecutive year, Buck Consultants’ survey, “Working Well: A Global Survey of Health Promotion and Workplace Wellness Strategies,” investigated emerging trends in employer-sponsored health promotions and wellness programs. The research seeks insights into how employers around the world implement and evaluate strategic wellness initiatives.

Incentive rewards, popular primarily in the United States until recently, are increasingly offered by employers in all parts of the world, and a significant number of employers plan to offer them in the future.

The survey also states that 56 percent of organizations in the United States offer incentive rewards to encourage participation in wellness initiatives, while 26 percent plan to add them. 

Among the most commonly rewarded activities are health screenings—both health risk appraisals (health and lifestyle questionnaires) and biometric or medical screenings, which typically measure blood pressure, weight, and cholesterol levels.

In recent years, there has been a rise in the use of individual and team competitions to achieve weight loss and other health goals. This may signal a recognition by employers that tapping the natural spirit of competitiveness can make wellness fun, promote teambuilding, and build a healthy culture without requiring a significant financial investment. It may also reflect mimicry of popular television programming such as The Biggest Loser.

The majority of incentives today reward participation in or completion of certain wellness activities or screenings. However, some health promotion programs require more than participation. In order to receive a reward, an individual must demonstrate achievement of specific health-related goals, such as maintaining cholesterol levels or body weight within a healthy range.

Incentive rewards take on a variety of forms. Gifts or merchandise, raffles, and cash payments are among the most popular given out by employers. Also prevalent are discounts and subsidies for preventive health services, such as annual physical checkups and appropriate preventive screenings, and subsidized membership fees for fitness facilities or wellness classes, such as those for smoking cessation and weight loss. 

Growing rapidly is the practice of directing incentive dollars toward reducing health care premiums, or making cash contributions to health-care-related spending accounts. This emphasizes the strong connection between healthy living and employers’ objective of reducing employee health care costs.

For more information on Buck Consultants’ wellness research, visit  www.bucksurveys.com.

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