The COBRA Blog

PPACA Update: Are new wellness incentives and penalties a win-win?

Posted by Robert Meyers on Tue, Jun 11, 2013 @ 18:06 PM

Workplace wellness programs used to consist of a few wall posters encouraging healthy behavior or maybe even a gym at the office. But employers are increasingly turning to more incentives and penalties to encourage healthier choices. In fact, according to a recent survey from Fidelity Investments and the National Business Group on Health, almost 90% of employers offer some kind of wellness incentives to their employees.

And beginning in 2014, employers will have even more flexibility in doling out wellness program rewards and penalties under the Affordable Care Act (ACA). Under new guidelines recently released by the Obama administration, employers will be allowed to increase their employees’ financial stakes from 20 percent of the cost of their health premiums to 30 percent. Tobacco cessation programs carry a maximum reward or penalty of 50 percent of the cost of an employee’s health plan.

Do incentives produce real results?
The $64,000 question is – do they work? Proponents say yes – incentivized wellness programs encourage employees to make healthier choices and can reduce healthcare costs. But studies on whether these programs actually save money or change employees’ long-term behavior have produced mixed results.

While incentives can certainly contribute to positive results, incentives alone aren’t the “silver bullet,” according to Stephanie Pronk, health and wellness consultant with Aon Hewitt, the human-resources arm of Aon PLC. It’s important to consider a variety of wellness initiatives, and employers are experimenting with different models in an attempt to find that perfect balance of improving employees' health, lowering claims costs, and getting the best return on their wellness investment.

Here are some of your options:

Educational/Awareness Incentives
Rewards are offered for completing activities that include an assessment of personal health and risk factors, such as filling out a questionnaire about family medical history or taking a biometric screening for cholesterol, or blood pressure.

Action-Based Incentives
Employees are required to take some kind of action to improve their health, such as joining a weight management program or getting a preventive screening.

Outcome-Based Incentives
Incentives and penalties are tied to specific program goals, with employees paying more until they achieve the desired outcome.

Targeted Incentives
Some companies crunch their workers’ health risk, claims, and other data - or have the insurer or an analytics company do it – and offer personalized wellness programs and incentives.

While the new rules give employers more flexibility in designing their wellness programs, some employees and consumer advocate groups have voiced privacy and discrimination concerns. But the new rules have some built-in safeguards: 

  • For activity-based programs, employees must be offered alternatives to achieving the financial reward if they can’t participate because it would be “unreasonably difficult” or “medically inadvisable” to do so.
  • For outcomes-based programs, employees who initially fail to meet the goal must be offered an alternative way to get the reward to “ensure that the program is reasonably designed to improve health and is not a subterfuge for … reducing benefits based on health status.”

There’s no denying that healthy employees make a healthy workplace, but there is no one-size-fits-all solution. Like everything else in your business, your wellness program needs to fit your company culture, as well as your budget. So carefully weigh your options and choose your incentives and penalties wisely. With the right combination, you can get your employees on board and create a healthier and happier workplace. And that’s always healthy for your bottom line.

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Tags: ppaca, cobra, PPACA update, wellness incentives, cobra developments

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