Paybacks are healthy - human resource benefits - Focus on HR Benefits

HR Magazine, August, 1998 by Phaedra Brotherton

Good health is its own reward - but money isn't bad either. A new breed of wellness programs uses financial incentives to encourage healthy behavior.

You've been creative in developing ways to get your employees to take charge of their health. You've sponsored brown-bag lunches on how to use nutrition guidelines in meal planning and the benefits of exercising regularly and drinking lots of water. But the employees who attend these sessions are the ones who already have healthy habits.

How can you inspire those employees who most need to do something about their health and more companies are finding that a carrot works better than a stick at motivating employees to be health conscious.

In addition, penalizing employees for less-than-healthy habits could violate federal law.

"Offering incentives helps people who are on the fence - the ones who have thought about changing their lifestyle but haven't chosen to act," says Larry Chapman, chairman and senior consultant for the Summex Group, a health management services company in Seattle, and the author of several books on wellness incentive programs, "We are just giving them the incentive to act."

Paying for healthy habits

Since 1992, the number of employers using incentives to entice employees to adopt healthier habits has increased from 14 percent to 39 percent, according to Hewitt Associates. Incentives include bonuses, reimbursement of health-related expenses and discounts on health insurance premiums. Cutting-edge wellness programs are providing programs directed to specific health concerns.

"Health care costs have become one of the employer's most expensive outlays," says Camille Haltom, who is involved in health promotion at Hewitt Associates. "By helping keep employees healthy and productive, managed health initiatives are designed to reduce health care costs in the long term. And the best part is that employees benefit as well."

Getting concrete results

Providence Health Systems in Everett, Wash., sponsors a Wellness Challenge incentive program that rewards employees for meeting specific health and lifestyle criteria. Since the program was implemented in 1992, Providence's monthly medical claims are 27 percent lower on average than the claims of similar hospitals in the area. Over a four-year period, participants in the Wellness Challenge program used an average of 15 fewer hours of sick time annually than nonparticipants.

The Wellness Challenge criteria were based on national data about health risk factors and health care workers and on the correlation between excess health care cost and worker behavior. With this information - and approval from administration and human resources - Ron Burt, manager of business health services, developed criteria to account for lifestyle, behaviors and cost-containment issues.

The "administration was supportive and didn't feel it was wasting money because you only pay out to those employees who are meeting specific criteria," says Burt. He adds that management realized that the company would save money down the road in lower health care costs, fewer sick days and improved morale.

Over the past six years, the hospital has modified criteria to reflect changes in employee needs, as well as ensure that criteria were fair and addressed issues such as the Americans With Disabilities Act. Criteria include:

* Completing a health risk assessment.

* Agreeing to wear seat belts.

* Having blood pressure checked two times during the program period.

* Obtaining a certain number of exercise points.

* Having fewer than $250 in medical claims (excluding preventive care).

* Limiting sick time (excluding care of a sick child or parent).

Employees who meet eight out of 10 criteria earn a $250 bonus in the first year, $275 in the second year and $325 in the third year. Providence also awards a $50 cash bonus to recognize and encourage employees who meet four of the 10 criteria.

Responding to HIPAA

While Providence's program is not tied directly to the health insurance plan, many incentive programs are linked directly to a health plan and reward employees who don't smoke or use tobacco. Rewards are OK; penalties are not, according to nondiscrimination guidelines issued in April 1997 under the Health Insurance Portability and Accountability Act (HIPAA).

These guidelines have prompted many employers to revamp their wellness programs to eliminate or rework rewards for meeting specific health guidelines, such as weight requirements and "passing" a health risk assessment.

The nondiscrimination provision in HIPAA says that "individuals may not be excluded from coverage under the terms of the plan, or charged more for benefits offered by a plan or issuer, based on specified factors related to health status."

Debate continues about whether weight is related to lifestyle and/or is a health-status factor. As for health risk assessment, certain medical conditions could prevent an employee from passing a health risk assessment that requires meeting certain criteria.

Synovus Financial Corp., in Columbus, Ga., named one of Fortune magazine's "100 Best Companies to Work for in America" in January, recently changed its wellness program to increase its focus on disease management in an effort to comply with HIPAA.