Pressured to Reduce Costs, Employers Raise the Bar on Incentives

Pressured to Reduce Costs, Employers Raise the Bar on Incentives

By Rhonda Willingham, RN, BSN

EVP Health Improvement, Alere Health

More than 70 percent of the nation’s employers have put their faith in wellness initiatives to improve health and reduce costs, yet they continue to be challenged with disappointing participation rates in their worksite wellness programs. This belief in improving wellness has been so strong that many employers are willing to pay their employees to participate.  Consider the following:

  • According to the 2011/2012 Staying@Work survey, the use of financial rewards increased by 50 percent between 2009 and 2011.
  • Use of penalties more than doubled from 8 percent to 19 percent from 2009 to 2011, and it is expected to double again to 38 percent by 2012.
  • The National Business Group on Health reported that one-third of their members will reward or penalize in 2012, up from 7 percent in 2011.
  • Of 563 employers completing The HERO EHM Best Practice Scorecard through August of 2011, 61 percent offered incentives for specific behavior modifications.

Traditionally, employers have offered incentives for participation and avoided penalties, but as healthcare costs continue to escalate, many feel pressured to implement stricter measures.  Increasing numbers of employers are moving from simply rewarding participation to rewarding progress in specific behaviors or clinical measures. Outcomes-based incentives are appealing as they demonstrate a tangible, real result and allow individuals to choose their own means of achieving goals. Many employers are also willing to implement penalties for non-participation and/or unhealthy behaviors.

At Alere, we are seeing more of our customers move toward developing and expanding their programs to include individual accountability for health improvement through the use of outcomes-based incentives.  In 2012, Alere is incorporating incentives for its own employees that have maintained or achieved specific health outcomes and to those that commit to making progress in specific behaviors known to improve health.

Carrot v. Stick Debate

The growing movement to outcomes-based incentives has resulted in an industry-wide debate on the merits and disadvantages of using this approach to drive engagement. Those in support contend that penalizing individuals for not at least attempting to meet minimum health measures is appropriate and fair. As 85 percent of healthcare policies in the United States are group-based, health coverage premiums are uniquely set compared to other insurance coverage, such as auto and life. How an individual behaves has no bearing on healthcare premiums, thus encouraging poor lifestyle behaviors to continue. Those opposed say there is a danger of discrimination against people with hereditary illnesses or other legitimate reasons for not being able to achieve certain health outcomes.

Recent statutes have supported incentives in wellness programs. The Patient Protection and Affordable Care Act (PPACA) will increase the maximum incentive reward from 20 percent to 30 percent of premium cost by 2014. If the higher incentive is found to be effective, the reward will increase to 50 percent by 2017.Wellness in general is also included in the American Recovery & Reinvestment Act (ARRA) which offers a $1 billion prevention and wellness fund. And the Genetic Information Non-Discrimination Act (GINA) preserves employer-sponsored wellness programs.

In the September/October 2011 issue of the American Journal of Health Promotion, the American Cancer Society, the American Diabetes Association and the American Heart Association jointly stated they are supportive of financial rewards linked to participation, but not “incentive programs based on an individual satisfying a standard that is related to a health status factor.”  They oppose what they call medical underwriting – the act of using health status factors to determine a person’s health insurance costs.  But they did not comment on the value of changing controllable, lifestyle behaviors that are known to increase an individual’s likelihood of developing diseases.

These issues are why Alere and other organizations within the industry are encouraging a compromise via the use of progress-based incentives. In this approach, incentives are tied to small, realistic changes that are impactful, rather than higher-reach outcomes that may not be possible for some people.

It is important for the health of the United States that healthcare organizations compromise and avoid conflict and opposition. It is critical that the healthcare industry presents an aligned and experience-based perspective to guide and direct employers as they make decisions on supporting worksite wellness for their employees.  Recent discussions are demonstrating a movement toward working together to identify various ways to accomplish common goals.  Time will tell.

Incentives Not a Magic Bullet

As employers continue to evaluate this issue, it is important that they keep in mind that incentives alone are not the magic bullet to increase participation and health. Incentives are effective when they are a strong component of an integrated strategy with a focus on building   an overall culture of health, including corporate leadership, clear and consistent program marketing and communications, online health information, social media, wellness champions and a program with engaging and compelling components.

Each employer’s incentives strategy will be different based on their needs and culture. They would be wise to consider the following:

  • What kind of culture do they have? Is it a second home for employees or the kind of atmosphere where there is high turnover or the employees clock in and clock out?
  • What is their business? How can a healthier workforce improve their bottom line?
  • Is the purpose of the wellness program to save money or retain employees?
  • Is there trust between the employer and the employees? If not, it may be necessary to implement incentives slowly.
  • How will outcomes-based incentives fit within their overall culture?
  • Do leaders live what they preach?
  • How have other successful employee programs been communicated and deployed?
  • What are the legal ramifications of incentives? They should work with their legal departments and be familiar with the PPACA, GINA and Americans with Disabilities Act.

Since this is a recent and evolving topic in the industry, it remains to be seen how the issue will unfold in the coming years, how outcomes incentives will be implemented and how employees will manage them, or if they will even be effective.

AP Benefit Advisors Links

HRAs and GINA and the ADA

/complianceChronicles/HRAS_Oct_2009.pdf

Employee Health Improvement Strategies

/employee-benefits-news/employee-health-improvement-strategies

Healthcare Strategies

/what-we-do/healthcare-analytics