UBP blog

10/16/2009

Premium discounts for meeting wellness goals: Great incentive or employee relations nightmare?

If employees had the opportunity to get a 20% premium discount for achieving certain health goals do you think they’d want it to end there? What if they were offered a 30 or 50% discount, would that be better?

Congress is considering provisions in the health care reform legislation that would allow employers and insurers both to offer employees who meet specific health targets (i.e. keeping body mass index, cholesterol, blood pressure, etc. within the healthy range) premium discounts up to 50%. Under the current law, these discounts are allowable but can be no greater than 20%.

The Senate Finance Committee recently passed an amendment that would raise the maximum premium discount to 30% and allow the secretaries of Health and Human Services, Labor and Treasury to up the cap to 50% at their discretion.

What does this mean for employers?

Many employers have already designed and implemented workplace wellness programs with goals of keeping employees’ weight, cholesterol and blood pressure within a healthy range, encouraging workers to quit smoking, etc.

In light of the fact that nearly 40% of deaths annually can be attributed to preventable causes (i.e. smoking, lack of exercise and poor nutrition) and health care cost growth significantly outpaces both wage and inflation growth, workplace wellness programs are rapidly growing in popularity.

This year’s Kaiser Family Foundation “Employer Health Benefits Survey” revealed that:

  • 58% of companies offering employee health benefits had wellness programs
  • 93% of companies offering employee health benefits with 200+ employees had wellness programs

However, not all wellness programs are created (and designed) equally and this proposed legislation could significantly add to the number of employers that tie wellness programs to premium discounts. The Kaiser Family Foundation reports that just 4 percent of employers offering wellness programs do this.

Following the lead of this 4% may sound wonderful in theory but in practice, employers can run into some issues.

The issues are…

In any given workplace, keeping weight, cholesterol and/or blood pressure within the levels deemed healthy by the medical community might not be within everyone’s control. For instance, some employees may have a genetic predisposition towards obesity. These employees could be enrolled in your company’s wellness program and could be working just as hard, if not harder, than the others who are able to reach the “normal weight”.

Should these employees be penalized by having to pay more for health insurance just because they can’t reach a target “normal weight” or is there a way that they can be rewarded for their hard work?

What about employees who live in lower-income neighborhoods where only convenience stores and fast food restaurants are readily accessible? They might not be able to eat as nutritiously as others and may have a harder time reaching the employer’s health targets as a result. Should they be penalized just because of where they live?

 What employers can do:

In order to avoid having wellness program incentives perceived as discriminatory or unfair to certain employee groups, employers should prepare themselves to change the rules of the game a bit.

Let’s go back to the example of employees who are genetically predisposed towards obesity and may have a harder time reaching “normal weight” than others do. One thing employers can consider doing is giving incentives for efforts and not meaningful outcomes. For instance, they could give incentives based on the amount of weight these employees lost or for being consistent in their weight loss, as apposed to giving incentives for whether or not these employees are able to reach a target weight in a given time frame.

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