Employers’ Corporate Wellness Incentives Climb to New Heights

Originally posted February 20, 2014 by Michael Giardina on http://ebn.benefitnews.com

With a reported 15% increase in wellness incentive spending within their health care plans, corporate employers have their sights set on improving their workforce’s overall health in 2014 through wellness programs for both employees and their significant others, according to a new survey from Fidelity Investments and the National Business Group on Health.

The fifth annual study finds that corporate employers expect to spend an average of $594 per employee on wellness-based incentives, an increase from 2013’s $521 average. For smaller employers with less than 5,000 employees, the employee average reached $595, a $151 increase from levels reported in 2013.

Approximately 95% of employers plan to offer some sort of health improvement program, highlighting that benefit plan sponsors have labeled wellness programs as an integral part of their benefits program in this post-Affordable Care Act world. Also, 74% note that they offer incentives for employee participation, which is a 12% dip from last year.

“While the use and measurement of corporate wellness programs continue to evolve, it has become clear that many employers understand the value of – and are committed to – wellness-based incentives in their company health plan,” says Robert Kennedy, health and welfare practice leader with Fidelity’s benefits consulting business.

The most popular programs include lifestyle management courses that focus on physical activity, weight and stress management. Disease and care management programs – which look to manage chronic health conditions – were also favored.

Doling out for spouses/HSAs

From the 2014 survey, Fidelity and NBGH found that nearly four out of 10 employers disclosed that their plan will include options for spouses or domestic partners. Last year, results highlighted that 54% set out plans to expand wellness-based incentives to include dependents and roughly half said they were including spouses and dependents in wellness communications.

Average payouts for spouse and domestic partners are expected to reach $530 in 2014. Employers with more than 20,000 employees expect to spend an average of $611 on this group.

Other incentives such as heath savings accounts and flexible spending accounts were expected to incentivize more employees use. Roughly 34% list that they plant to contribute to these accounts in order to bolster disease or care management engagement and 30% hope these deposits will add to weight management programs participation.

“Based on the feedback from this year’s survey respondents, it’s obvious that wellness programs not only play a key role in many corporate health care plans today, but they’ll continue to be an integral part of corporate benefit programs in the future,” says Helen Darling, the retiring president and CEO of NBGH.


To incent or not to incent

Originally posted October 18, 2013 by Rhonda Willingham on lifehealthpro.com

There is a lot of confusion and more than a few questions about the use of incentives in benefits these days.

What do the Health Insurance Portability and Accountability Act’s (HIPAA) new wellness regulations mean? How can we incentivize employees, without risking noncompliance with new regulations?

Incentives are an especially big question mark for employers because so many want to find ways to motivate, encourage and lower the health care costs for the 5 percent to 10 percent of their employee population that is driving 80 percent or more of their costs.

Often these are employees who have chronic conditions such as diabetes or heart disease, or who may be obese – a condition now classified by the American Medical Association as a disease. Often these are also valuable tenured employees who have the skills, knowledge and expertise a company may need; helping them helps the company.

Here’s what you can tell your group health employer clients about the complex issues surrounding incentives today:

1. Offer a health risk assessment
One of the first steps toward getting employees to improve their health is the health risk assessment (HRA), which is the entry point for most wellness programs. Employers frequently offer financial incentives, premium discounts, or even PTO to get people to take the HRA.

Yes, HRAs have come into question of late in benefits circles – but, despite the current controversy, they remain a very smart tool for employers. They provide important information about the health status of employees and what programs (based on aggregate, not individual data) could provide the most value to the organization.

But . . . and here’s where a lot of employers have gotten into trouble . . . you must fully explain their value, including how they work. Include the steps that need to be taken to protect privacy and ensure employees know they can opt out – preferably without penalties - if wanted.

2. Understand what new regulations do and don’t say
What employers can and can’t do with incentives is governed in part by the Patient Protection and Affordable Care Act (PPACA) and HIPAA.

One of the many provisions of PPACA is that it allows employers to link greater financial incentives to the achievement of predetermined health targets, such as smoking cessation or healthy weight. HIPAA also governs what group health plans can do with benefit programs.

Most importantly, HIPAA prohibits employers from charging different premiums based on health status. People can’t be penalized just because someone is overweight or has diabetes or heart disease.

HIPAA’s new wellness regulations, introduced in June of this year, state that:

…a group health plan…may not require any individual (as a condition of enrollment or continued enrollment under the plan) to pay a premium or contribution which is greater than [that] for a similarly situated individual enrolled in the plan on the basis of any health status related factor…

The other major component for HIPAA is guidance on the dollar amount allowed for incentives.

Health plans and insurers will be able to offer higher financial rewards to participants achieving healthy behaviors such as quitting smoking or reducing cholesterol. Specifically, as of Jan. 1, up to 30 percent of the total cost of health plan coverage (employer and employee cost of coverage with no cap) may be tied to an incentive. Tobacco cessation and usage reduction programs allow rewards to be increased to 50 percent. Now, in reality very few employers will go up to that 30 percent, but it is an option.

The real trick to compliance with HIPAA’s wellness regulations is that wellness programs will have to ensure they do not discriminate against people based on health factors. For example, if an employee is extremely obese and unable to participate in a walking program that provides financial incentives, there must be an alternative program for that employee.

3. Determine if you will use a carrot or stick
Employers have developed a range of approaches to incentives over the past few years. Most incentives today are based either on participation, outcomes or progress. Participation-based programs are simple.

You participate, sign a sheet that you came to the stop-smoking class or joined a gym, and you qualify for the incentive. Outcome-based programs usually include financial incentives.

Employers have learned over time that money is a great motivator for participation in either the HRA or a wellness program. The threshold for motivating employees seems to be right around $300 to $500 annually.

The key characteristic of an outcome incentive is that the employee doesn’t get that incentive unless he or she achieves a pre-determined goal or health standard, such as quitting tobacco use, losing 10 percent of body weight within six months, or bringing cholesterol levels within normal limits, etc.

Progress-based incentives are viewed as a “kinder, gentler” approach. They reward employees based on incremental, individually-attainable goals rather than a singular goal for all. In other words, you may need to lose 50 pounds, but the employer says, “We know losing even five pounds helps you and helps us, so you will still get the incentive.” (Studies show even small reductions in risk lower health care costs.)

Here again is where the incentive question gets tough and complicated. A Towers Watson 2012 survey reports that 62 percent of employers plan on switching from incentives for participation – which employees like – to incentives for improvements – which employers like – because it holds employees more accountable and the thought/hope is it will produce more tangible and measurable outcomes.

So what’s an employer to do when it comes to incentives? As we are learning from recent high profile news stories, employees will push back hard if they don’t support a wellness program and its goals (which typically happens if there is poor communication), or if they think non-participation penalties are too punitive. We all understand the need for accountability, but if that comes at the price of an unhappy employee population, what have you really won?

Every organization is different; I think it’s difficult to mandate you must do X, Y or Z. As part of my job with a leading health and wellness company and as a member of a number of key organizations evaluating worksite wellness programs and incentives, my recommendation is to consider a developing and evolving plan with incentives that engage, motivate and encourage all employees.

Start with simply incentivizing participation. Then as the program becomes better accepted with employees experiencing success – and as you do more education and communication – you can always migrate to the incorporation of a program that incentivizes progress.

Again, there is no one-size fits all, but we do know that what truly motivates people are programs that build intrinsic motivation. Program designs with the best chance of fostering such intrinsic motivation are those that use extrinsic tools (e.g., a weight loss program for employees) in a way that doesn’t make employees feel pressured but creates a supportive and empowering environment that promotes individual choice.

The last word on incentives is that the ultimate goal is not to get people to engage in behaviors for a short period of time just to get dollars. The objective is for employees to internalize the goal and learn how to make and sustain better lifestyle choices themselves.


A faster, cheaper way to wellness programs that work

Originally posted September 6, 2013 by Vlad Gyster on http://ebn.benefitnews.com

The debate over whether wellness programs "work" is becoming increasingly heated. Many question the validity of research demonstrating that wellness programs reduce health care costs. At the same time, others swear by their wellness provider. So, who's the liar?

As with most things, the truth is in the eye of the beholder. Wellness is a business, and it would serve us well - no pun intended - to consider this business formula as we attempt to determine where the truth lies and understand why this debate is so heated: Value = Benefits/Cost.

To begin with, we don't truly know the value of a wellness program. This formula helps quantify the importance of knowing value. When making a purchase, all of us have some understanding of a product's benefits, and in return we pay a cost. Together, those two factors create a value. If the benefits and costs are generally understood, then value is pretty predictable. But if there's a lack of agreement about the benefits, it's tough to come to consensus on value and cost. The result is very different calculations and a big debate about whether something is really worth it. This is what we're experiencing with wellness programs. The reality is that we don't really know all the benefits a wellness program provides, and, as a result, their value is up for debate.

This debate will eventually be resolved in one of two ways:

1. We come to a consensus that wellness programs deliver the stated benefits and continue to pay the current cost; or

2. We conclude the benefits are lower than initially thought, and adjust the cost accordingly.

I've got my money on option 2. Here's why:

Gartner - a research advisory firm that's been evaluating technology for more than 30 years - discovered a funny pattern: Every few years, a new technology emerges that gets a lot of people really excited. There's a lot of enthusiasm and promises, but, given limited use, no real data about the technology's actual benefits. This is the "peak of inflated expectations"; i.e., when we make statements like "This is going to change the world."

After a while, though, people realize that their perception of the technology's benefits are unrealistic; they feel they received bad value, get disgruntled and criticize the technology as worthless. This is the "trough of disillusionment." It occurs when the benefits are lower than originally assumed, and the cost is experienced as too high relative to the perceived lesser value.

It's reasonable to assume we are in the midst of a sober re-evaluation of the benefits of wellness programs, somewhere in the "trough of disillusionment." The good news is, as history has proven, that over time, the market comes to understand the technology's actual benefits, accepts them and broad adoption can occur. For this to happen, there needs to be a consensus about the benefits (aka ROI) and the price adjusted accordingly. This doesn't mean wellness programs are worthless, just that they may be worth less than the benefits declared during the "peak of inflated expectations."

Minimize cost

In a scenario where the value of something is unclear, it's wise to minimize - rather than wait for the market to drive down - cost, as cost is the variable you have control over. Traditional approaches to launching wellness initiatives come with huge overhead - strategy, vendor selection, implementation and vendor fees can easily run into the hundreds of thousands of dollars - and can take years before having any real impact on even a single employee. Cut as much of this overhead as possible. Vendor selections should come in the form of free trials with groups of employees. Vendor fees should be contract-free and have monthly options for easy exit. Strategy work should turn into small experiments with employees to identify what works and what doesn't.

In other words, spend less. But how do you drive a high level of engagement in wellness with limited resources? We suggest using the Lean Startup methodology used by startups to drive engagement in new products using limited resources. This approach advocates using small, inexpensive steps that lead to quick wins and continuous improvement. Its use could help HR quickly and cheaply differentiate what works from what doesn't, so HR can focus time and dollars on what's actually effective.

Four steps

Here's our version of the Lean Startup methodology adapted for HR:

Step 1: Think in terms of a "Minimum Viable Product". MVP is the smallest thing you can do to learn how to make progress toward your objective. For most employers, the objective of their wellness programs will be somehow tied to employee participation. Instead of spending limited resources on building business cases and other costly activities, pick something to do that is small and will help you learn what works to gain employee participation.

Step 2: Build something that's "good enough". Start with something easy, like an employee video testimonial about a benefit that's already available (but likely underappreciated), such as gym reimbursement. Upload the video to a video hosting tool for businesses so you can track how many people click the link and view your video. Send an email to employees inviting them to watch the video. Explain that this is a "beta" and you're testing concepts for a potential wellness initiative. Distribute it to a small group first to ensure everything is working.

Step 3: Measure. Measuring is essential. If you don't measure results you can't test your assumption about how a particular strategy will work or learn from it. Once the email is sent, you'll know how many people clicked the link and how many people viewed the video and for how long. These key performance indicators - KPIs - provide a baseline for identifying progress and future improvements.

Step 4: Learn. This is the most important step. By this point, you should have gained some idea of what's working well and what's not, and the data necessary to improve key metrics. These are the types of tangible outcomes necessary to propel any wellness initiative forward. What can you do to increase those numbers? The faster you can repeat this process and improve your KPIs, the more momentum you'll gain - and the sooner you can determine the potential effectiveness of wellness initiatives without a huge expenditure of scarce resources.

Debate will continue

Whether the results achieved with wellness programs are worth their cost is a debate that will likely continue. That said, there's little doubt that a key ingredient to achieving ROI on wellness programs - or any HR initiative - is employee participation. The HR-adapted Lean Startup approach lets you know whether you've got this key ingredient - before you've spent a lot of time and money hoping to get it.

 


Companies can tie worker health premium cost to wellness

Original article from eba.benefitnews.com

By Alex Nussbaum

Businesses in the U.S. won more freedom to charge higher insurance premiums to workers who don’t meet health goals, or reward those who shape up, under rules released by the Obama administration.

Three years in the making, the regulations also require employers to offer a “reasonable alternative” for workers who can’t meet standards on weight, cholesterol or other measures, the U.S. Department of Health and Human Services said yesterday in a statement. That’s meant to protect employees from discrimination, although the agency rejected calls by consumer groups that companies provide medical evidence for claims that wellness programs improve health.

“The final rules support workplace health promotion and prevention,” the department said, “while ensuring that individuals are protected from unfair underwriting.”

Conditions such as obesity and diabetes account for three-quarters of U.S. health spending, and wellness programs have been gaining in popularity as businesses grapple with rising costs. The regulations, mandated by the Affordable Care Act, let employers charge workers as much as 30% of their medical-plan premiums if they fail to meet goals, an increase from the current 20%. The rules take effect Jan. 1.

Incentive programs

Almost half of U.S. companies with more than 200 employees now have wellness programs, according to the Kaiser Family Foundation, a nonprofit health research group based in Menlo Park, California. The incentives can be tied to activities such as joining a gym or getting a blood-pressure test or specific targets such as body-mass index.

While the administration eased some proposals, the regulations will still complicate wellness efforts, says Helen Darling, president of the National Business Group on Health. The Washington-based nonprofit represents large employers including Dell Inc., American Express Co. and PepsiCo Inc.

The rules give workers more leeway to seek changes in wellness targets they can’t meet due to health conditions and to have their doctors suggest alternative measures. There’s a danger that could tie up employers in protracted negotiations over health goals, Darling says.

“The more you put in terms of requirements and the more risk you make for employers, the more likely they are to say, ‘we don’t need this hassle,’” she says. “It’s making a lot more work for employers, and therefore, more expense.”

Consumer protections

Families USA, a Washington-based consumer group, welcomed the consumer protections.

“These rules will help ensure that wellness programs are designed to actually promote wellness, and that they are not just used as a backdoor way to shift health care costs to those struggling with health problems,” says Ron Pollack, the group’s executive director.

The health agency today also released a study of workplace wellness efforts, also mandated by the health care law. The report by the Rand Corp. found small yet promising changes in worker behavior and costs from programs at 600 businesses.

The measures “can reduce risk factors, such as smoking and increase healthy behaviors, such as exercise,” the Santa Monica, California-based research institute said in the report. Its analysis “confirms that workplace wellness programs can help contain the current epidemic of lifestyle-related diseases.”

The move to tie workers’ costs to their health is being examined by the U.S. Equal Employment Opportunity Commission to see whether such programs violate anti-discrimination laws. And California’s legislature is considering a bill that would bar linking financial rewards to a worker’s health status.

While some studies suggest $3 or more is saved for every $1 spent on wellness programs, the gains may come from shifting costs to less-healthy employees rather than changing behavior, according to a March analysis in Health Affairs.

 


Employers getting pushy in drive to better health

Original article from benefitspro.com

By Allen Greenberg

Short of bribery and potentially violating anti-discrimination laws by not hiring obese smokers, there’s little employers can do to improve the health of their workforce.

Or is there?

What looks to be a growing number of employers are, in fact, embracing outcomes-based disincentives to prod employees to achieve specific health outcomes, rather than merely enroll in their wellness programs.

Off the bat, I know that sounds like Big Brother. But I also think it sounds like a constructive and fairly non-intrusive way for employers to try to regain some control in the losing battle to reign in health care costs.

The Midwest Business Group of Health, a Chicago-based nonprofit group with more than 120 large, self-insured public and private employers, dug into this question in one of its latest surveys and came up with some interesting findings about the carrots and sticks employers rely on.

Let’s start with what everyone enjoys.

Among employers offering incentives, 62 percent report they offer employees who follow their wellness programs reduced premiums. Another 38 percent use gift cards and 35 percent offer merchandise.

Not bad. Put down the Hershey’s Kisses between meals and get a nicely loaded Starbucks gift card at the end of the month.

Actually, in a lot of instances, we’re talking about something of much greater value. Twenty-two percent of the companies in the survey reported their incentives were worth $500-$1,000.

Seventy-one percent of the surveyed companies said they found their incentive strategy was “very successful” or “successful.”

So, how about the stick?

More than 37 percent said they have begun to rely on penalties in response to nonparticipation in their wellness rewards. Increased health care premiums and coverage plan limitations are among the more common sticks.

This is a new trend, to be sure, so there’s some measure of experimentation going on and certainly room for improvement. Just 45 percent of those surveyed viewed their disincentive strategy as “very successful” or “successful.”

That shouldn’t be taken to mean we won’t see more of this. As Cheryl Larson, vice president for the Midwest Business Group on Health, will tell you, employers are fairly desperate nowadays to find ways to save health care dollars.

Which is why more than 40 percent of those surveyed now expect their employees to kick in a higher share of their plan premiums if they don’t stay on track with the company’s wellness programs, while another 16 percent are considering doing so.

Wellness programs have been around for decades, but there’s still a lot for HR managers to learn about what works and what doesn’t, and there's naturally going to be squeamishness about pulling out disincentives.

One key lesson shared by an employer cited in the MBGH survey:

“Even though our employees were not happy about the implementation of the program, we have a very compliant population. We know they complain about it, but they end up participating to take advantage of the incentives.”

In other words, yes, incentives, are always going to be popular. But if they don’t work, you might try throwing a few disincentives into the mix, rather than tossing away millions more in benefits dollars.

 


Putting the 'cent' in incentives

Original article http://ebn.benefitnews.com

By Kathleen Koster

In addition to popular incentives for participating in wellness program activities, employers and insurance carriers have turned to outcomes-based incentives hoping to lower plan costs and improve population health. While laws such as HIPAA, ERISA and, most recently, PPACA provide guidance for incentivizing employees to improve body metrics and sustain healthy behaviors, plan sponsors should tread cautiously around more aggressive incentives and premium surcharge strategies.

Employers' focus on rewarding healthy results "has been fueled by regulation," says Eric Herbek, vice president for consumer health product at Cigna. Specifically, the health care reform law increased the percentage employers can award as an incentive or disincentive from 20% of the individual health premium to 30% and up to a 50% differential if they include a smoking metric.

Activity-based incentives can spur participants to complete a health risk assessment or biometric screening, self-report physical activity, or join a pregnancy class or other program that requires action, but not necessarily achieve outcomes. "These can be highly effective tools to tailor action and identify risk for the individual and make a plan for a healthier lifestyle, but doesn't necessarily translate into financial results," says Herbek.

That's why the wellness industry is moving toward an outcomes-based incentive model that measures health outcomes such as tobacco use, BMI, cholesterol, blood pressure or blood glucose levels. Penalizing smoking is most popular among wellness programs, with many employers applying a premium surcharge against smokers. But employers can reward or apply a penalty for each metric. According to Frank Hone, managing director of Healthcentric Partners, Inc., many employers are considering structuring incentives as a tiered health plan, similar to the auto insurance market.

In terms of implementation, Hone suggests determining how a wellness incentive structure fits in with the employer's overall human capital approach and company culture. Another factor is whether the employer is more paternalistic or leans toward a model of accountability based on the insurance plan selected. A value-based plan or consumer-driven health plan would have accountability built into the overall structure. For example, employees could earn additional contributions into their health savings accounts by participating in a health coaching series or achieving a health goal.

"The employer wants to fund some aspect of the HSA, but also wants to ensure that there's skin in the game by the participant" so that they take action, adds Hone.

To keep incentive structures compliant with health laws and regulations, employers should give all participants an equal opportunity to earn the reward and not design specific incentives for any particular segment. Legal experts recommend having an alternative available to help individuals achieve their goals and for those unable to reach a goal. For example, they advise employers with premium surcharges for smokers to offer smoking-cessation programs and tools through their wellness program. For BMI goals, employers should consider offering employees with penalized BMIs a chance to enroll in a weight loss program or to make improvements to earn the premium discount.

To comply with HIPAA nondiscrimination requirements, the employer doesn't need to know the alternatives if an employee can't reasonably achieve a lower BMI, for instance, but they should clearly state in their plan document and notices outlining the wellness program that such alternatives exist. They can determine the alternative standard, if an employee asks for an alternative, with possible input from their individual's doctor, suggests Tiffany Downs, a partner with FordHarrison LLP.

"Our view is that employers don't have to offer a weight management program as an alternative, but we advise that employers with an outcome-based incentive program offer some form of alternative for participants who don't meet the optimal rates as a cultural shift [takes place]," advises Herbek. He suggests employers take a tempered approach and don't move from zero incentives to a rigid incentive approach immediately.

Downs recommends employers implement wellness incentives as part of a group health plan to avoid litigation under discrimination of employment laws. She adds that employers should pay attention to state laws because some states allow for smokers' rights.

The number one red flag she sees is prohibiting individuals from enrolling into a health plan until they lower their BMI or achieve another health outcome, which could violate HIPAA's discrimination rule.

To avoid penalties, she suggests that "the more aggressive the wellness program, the more cautious the employer should be before implementing it and getting legal counsel before applying incentives."

Cigna's Herbek believes the next stage in incentive programs will be making metric reporting easier to monitor. Instead of self-reporting data or measuring health status in a lab, self-monitoring devices that are objective will measure the individual's health.

Precise health testing by the participant will follow what auto insurance companies have started. The Progressive Snapshot program reports the speed of driving, through remote monitoring plugged into the car, and drivers can earn great rates if they drive safely.

Cigna already has teamed up with BodyMedia to measure health and fitness aspects with wearable devices. Eventually, these "can be used as a reinforcement mechanism to help people achieve healthy goals," he says, adding that Cigna professionals are looking at how to apply results to a premium incentive plan.

Hone believes that as employers look to address stress and emotional health in the workplace, they will need to move away from incentives that typically work as a stick for physical improvements.

"I'm hopeful that as an industry we can move away from these pay- for-performance ideas for individuals towards a tiered insurance plan structure that will educate individuals and guide them toward better lifestyles," Hone says.

"We're missing the big picture: the strategy of promoting healthy living. The industry has fallen into the trap of paying people to change their behavior instead of really investing in education, information, motivation and other aspects that influence and give individuals the personal reasons why they should behave differently, adjust their lifestyle or be happier."

He believes that incentives do play a role in promoting better health, but are best delivered in the context of a tiered health plan. Participants who pay more for premiums will be the same demographic that utilizes the health system at a higher rate because of the behavior they've chosen, not a genetic condition.

Employers report increased use of health incentives

A pair of recently released surveys from Aon Hewitt indicate that employers are increasingly turning to incentives to drive health programs and get employees to take actions to improve their well being. Eighty-three percent of 800 American employers use some form of incentive to get employees more aware of their health status, the consulting firm finds.

Out of the 83% that uses incentives, 79% offer rewards, 5% offer consequences, and 16% offer a mix of both. In terms of dollar amounts, 64% use monetary incentives of between $50 and $500, and 18% use incentives of more than $500.

"Employers recognize the first step in getting people on a path to good health is providing employees and their families with the opportunity to become informed and educated about their health risks and the modifiable behaviors that cause those risks," says Jim Winkler, chief innovation officer for health and benefits at Aon Hewitt.

"HRQs and biometric screenings are the key tools in providing that important information and serve as the foundation that links behaviors to action. Motivating people to participate through the use of incentives is a best practice in the industry, and these strategies will continue to be a critical part of employers' health care strategies in the future."

A separate Aon Hewitt survey - conducted in partnership with the National Business Group on Health and the Futures Company - reports that 86% of employees who received suggested action steps based on their HRQ results took some action.

Further, more than half of employers who offered incentives saw improved health behaviors and/or an increase in employee engagement.

Of those employers who offer incentives, 24% say they offer them for progress toward, or attainment of ,acceptable ranges for biometric measures such as blood pressure, body mass index, blood sugar and cholesterol.

More than two-thirds say they are considering this approach in the next three to five years. Fifty-eight percent are planning, in the next few years, to impose consequences on participants who do not take appropriate actions for improving their health. -Tristan Lejeune