‘Wellness or else’ boosts the bottom line
Employers are carrying a major burden of healthcare in the US and are trying to do the right thing
US COMPANIES are increasingly penalising workers who decline to join “wellness” programmes, embracing an element of President Barack Obama’s healthcare law that has raised questions about fairness in the workplace.
Beginning last year, the law known as Obamacare raised the financial incentives that employers are allowed to offer staff for participating in workplace wellness programmes and achieving results. The incentives, which big business lobbied for, can be rewards or penalties — up to 30% of health insurance premiums, deductibles, and other costs, and more if the programmes target smoking.
Among the two-thirds of large companies using such incentives to encourage participation, almost a quarter are imposing financial penalties on those who opt out, according to a survey by the National Business Group on Health and the benefits consultancy Towers Watson.
For some companies, however, just signing up for a wellness programme is not enough. They are linking financial incentives to specific goals such as losing weight, reducing cholesterol, or keeping blood glucose under control. The number of businesses imposing such outcomes-based wellness plans is expected to double this year to 46%, the survey found.
“Wellness or else is the trend,” says workplace consultant Jon Robison of Salveo Partners.
Incentives typically take the form of cash payments or reductions in employee deductibles. Penalties include higher premiums and lower company contributions for out-of-pocket health costs.
Financial incentives, many companies say, are critical to encouraging workers to participate in wellness programmes, which executives believe will save money in the long run.
“Employers are carrying a major burden of healthcare in this country and are trying to do the right thing,” says Stephanie Pronk, a vicepresident at benefits consultant Aon Hewitt.
“They need to improve employees’ health so they can lead productive lives at home and at work, but also to control their healthcare costs.”
But there is almost no evidence that workplace wellness programmes significantly reduce those costs. That is why the financial penalties are so important to companies, critics and researchers say. They boost corporate profits by levying fines that outweigh any savings from wellness programmes.
“There seems little question that you can make wellness programmes save money with high enough penalties that essentially shift more healthcare costs to workers,” says health policy expert Larry Levitt of the Kaiser Family Foundation.
AT HONEYWELL International, for instance, employees who decline company-specified medical screenings pay $500 more a year in premiums and lose out on a company contribution of $250 to $1,500 a year (depending on salary and spousal coverage) to defray out-of-pocket costs.
Kevin Covert, deputy general counsel for human resources, acknowledges it is too soon to tell if Honeywell’s wellness and incentive programmes reduce medical spending. But it is clear the company is benefiting financially from the penalties.
Slightly more than 10% of the company’s US employees, about 5,000, did not take part, resulting in savings of hundreds of thousands of dollars.
Last year, Honeywell was sued over its wellness programme by the Equal Employment Opportunity
Commission. The commission argued that requiring workers to answer personal questions in the health questionnaire — including if they ever feel depressed and whether they have been diagnosed with a long list of illnesses — can violate federal law if they involve disabilities, as these examples do. And, if answering is not voluntary.
“Financial incentives and disincentives may make the programmes involuntary” and thus illegal, says Chris Kuczynski, an assistant legal counsel at the commission.
Some vendors that run workplace wellness for large employers promote their programmes by promising to shift costs to “higher utilisers” of healthcare services, according to a recent analysis by Lorin Volk and Sabrina Corlette of Georgetown University Health Policy Institute — and by making workers “earn” contributions to their healthcare plans that were once automatic.
CONSIDER
Jill, who asked that her name not be used for fear of retaliation from the company. A few years ago, her employer, Lockheed Martin, provided hundreds of dollars a year to each worker to help defray insurance deductibles.
Since it implemented its new wellness programme, workers must now earn that contribution by, among other things, quitting smoking (something nonsmokers cannot do) and racking up steps on a company-supplied pedometer.
“Basically, if you don’t participate in these programmes, you have to pay something like $1,000 out of pocket for healthcare before insurance kicks in,” says Jill.
Companies insist the penalties are not intended to be money-makers, but to encourage workers to improve their health and thereby avoid serious, and expensive, illness.
As evidence of that, says Mr Covert, Honeywell offers employees “easy ways to get out of” some of the wellness requirements, such as certifying that they do not smoke, rather than submitting to a blood test.
Most large employers are self-insured, meaning they pay medical claims out of revenue. As a result, wellness penalties accrue to the bottom line.
About 95% of large US employers offer workplace wellness programmes. These cost about $100 to $300 per worker each year, but generally save far less than that in medical costs.
A 2013 analysis by the Rand think-tank commissioned by the US Congress found that annual healthcare spending for participants was $25 to $40 lower than for nonparticipants over five years.
Yet at most large companies that impose penalties for not participating in workplace wellness, the amount is $500 or more, according to a 2014 survey by the Kaiser Foundation.
“For economic reasons, most employers would prefer collecting the penalties,” says Al Lewis, a wellness-outcomes consultant and co-author of the 2014 book, Surviving Workplace Wellness.
Lori, for instance, an employee at Pittsburgh-based health insurer Highmark, is paying $4,200 a year more for her family benefits because she declined to answer a health questionnaire or submit to company-run screenings for smoking, blood glucose, cholesterol and blood pressure.
She is concerned about the privacy of the online questionnaire, she says, and resents being told by her employer how to stay healthy.
Highmark vice-president Anna Silberman, though, does not see it that way.
She says the premium reductions that participants get “are a very powerful incentive for driving behaviour” and that “people deserve to be rewarded for both effort and outcomes”.
If you don’t participate in these programmes, you pay something like $1,000 out of pocket for healthcare