Hershey's newest nonfat product: wellness - Hershey Foods Corp. introduced a pilot program that rewards employees who pass established health risk requirements with lower insurance premiums each month

Business & Health, Nov, 1991 by Joyce Frieden

As health care costs continue to rise, employers -- especially those that are self-insured -- are diving ever deeper into wellness programs, hoping that they will improve employee health and thereby reduce health care costs.

Many of these programs have been strictly reward-oriented: for instance, at Southern California Edison Inc., workers get a cash credit toward a health risk assessment and other health promotion activities. Other programs are strictly punitive: at electronics manufacturer, Texas Instruments, smokers must pay more for their health insurance premiums than nonsmokers.

All indications are the number of such programs is on the rise. In a recent survey by New York-based consulting firm TPF&C, 12 percent of 135 large employers (with more than 500 employees) said they either offer a discount or impose a surcharge on employee contributions to life or health insurance plans based on certain behaviors. Six percent said they plan to adopt such policies within two years, and 19 percent are considering doing so.

Most of these programs are clearly well-intended efforts by employers concerned not only with the bottom line but also with their employees' well-being. Nonetheless, adjusting insurance premiums based on various lifestyle factors, such as smoking or weight, raises questions about paternalism, discrimination, and fairness.

The Hershey plan

Into this rather tricky game jumps Hershey Foods Corp., the chocolate and pasta manufacturer in Hershey, Pa. Earlier this year, Hershey introduced a pilot program for 600 of its management employees. If it's successful, the program will be expanded companywide. Under the program, the insurance premium these employees pay is adjusted according to how well they fare on the following risk factors:

Tobacco use. Hershey uses the honor system to determine whether employees smoke. Nonsmokers pay $11 less per month in health insurance premiums; smokers pay an extra $32 per month.

Blood pressure. Employees whose blood pressure is 140/90 or lower pay $5 less per month; those who don't make the cutoff pay an extra $35.

Exercise. Like smoking, this is based on the honor system. Employees who do a cardiovascular workout for one-half hour at least three times per week pay $8 less per month; those who don't pay an extra $8.

Weight. Employees who weigh less than 120 percent of their ideal weight as defined by Metropolitan Life Insurance Co. tables pay $4 less per month; those over the threshold pay an extra $32.

Cholesterol. Employees with a serum cholesterol reading of 240 or lower pay $2 a month less; those over the limit pay $10 per month more.

"We tried to make every opportunity available for employees to pass," explains Richard Dreyfuss, Hershey's director of executive compensation and employee benefits. The testing for employees ended in late August, but "if someone was scheduled early in August and planned to lose a couple of pounds or thought his or her blood pressure was unusually high that day, that person could come back again and be retested," says Dreyfuss. "Some people came back a couple of times."

Employees who do well in all five categories will save $30 per month on their premiums, while those who "fail" all five will pay an extra $117 per month. However, during the pilot program, the "downside" risk is limited to $50 per month, Dreyfuss says.

In addition, employees are not penalized if they are under a doctor's care in any of the five categories. "For example, if you have high cholesterol and are in a treatment plan, you will not be penalized or rewarded, because you are doing the right thing as far as we're concerned in having your condition managed by a professional," says Dreyfuss. "It works similarly with blood pressure and obesity."

Mixed reviews

Employee responses have fallen into one of three categories, says Dreyfuss. "Certain employees are very pleased," he says. "They feel it was inequitable that they were subsidizing smokers and people not concerned with their overall health. They see it as an employee equity issue. The second category is still trying to understand the program. That includes people in the pilot as well as some of those not involved. The third group consists of employees who are not pleased with lifestyle management for a variety of reasons, not the least of which is that some of them will pay more for health insurance. These employees feel it's basically unfair."

Among those who believe it's unfair is Earl Light Jr., business manager for Local 464 of the Bakery, Confectionary, and Tobacco Workers' International Union, which represents 2,300 Hershey chocolate factory employees. "There's no way our union is going to agree to a program that penalizes people for their lifestyles outside of work," says Light. "We don't have a problem negotiating incentives for people to participate in wellness programs, but we do for programs that say 'you have to be healthy or you're going to be penalized.'"

Instead of expanding the pilot program--which does not affect union members--Light would like to see positive incentives given to employees who try to improve their health, possibly funneled through Hershey's flexible benefits program. "For example, if I keep a close watch on my blood pressure, the company would give me extra flex credits to purchase additional benefits," says Light. "But it wouldn't take away my basic health care credits because I may be overweight or I may desire to smoke, or may do something the company thinks is not in my, and ultimately its, best interest. This is where it gets real scary. The company is determining what your best interests are."