By Dorsey Kinder | Sacramento Business Journal
Regulations recently released by the Obama administration could make it more difficult for companies to offer wellness programs that financially reward employees for meeting specified health goals such as quitting smoking or losing weight.
Beginning Jan. 1, employers are required to offer alternative ways employees can earn the incentive if they feel they can’t meet the goal.
For example, an employee who cannot reach a goal for lowering her cholesterol but is managing it correctly with a doctor’s guidance could still be eligible for incentives through an alternative program.
The new regulations, issued under the Affordable Care Act by the U.S. departments of Health and Human Services, Labor and Treasury, clarify what can and can’t be done with “outcome-based” wellness programs. So-called participation-based programs that offer health seminars or fitness-club memberships aren’t affected.
The goal of requiring employers to provide a “reasonable alternative standard” for earning an incentive is to ensure the program is not simply a subterfuge to reduce benefits based on health status. But some are asking if it goes too far.
“You have this really interesting dichotomy where the Obama administration is saying they believe in wellness programs and want to encourage their use,” said [Sacramento]-based insurance consultant Craig Gottwals, who also works as a broker for San Jose-based BB&T/Liberty Benefits Insurance Services.
“But then on the other hand they just came out with these new regulations that make it really hard for an employer to actually enforce a wellness program,” he said. “If an employee is asked to lose ‘X’ amount of weight, they can simply say they can’t or don’t want to. And you have to provide them with an alternative method to achieve that discount.”
Other, less controversial changes under the new regulations give employers more freedom to offer fiscal incentives. The maximum permissible employee discount for health behavior rises from 20 percent of an employee’s health insurance cost to 30 percent. That rises to 50 percent for programs that seek to reduce tobacco use.
All the changes considered, some people involved in the wellness program space are tepidly in favor of the new regulations.
“I applaud the Obama administration for wanting to focus on work-site wellness,” said Henry Loubet, chief strategy officer for Torrance-based Keenan, the largest privately held insurance brokerage and consulting firm in California. “By and large we look at them favorably.”
Perhaps because outcome-based programs are far less common than participation-based wellness efforts, the new regulations are stirring little concern among Sacramento-area employers.
Rancho Cordova-based Bloodsource Inc., for example, isn’t much affected by the new regulations because its reward — $20 per pay period for participating in regular biometric screenings and other health risk assessments — doesn’t require attaining a health goal.
“We don’t currently dock employees for smoking or other unhealthy behaviors,” said benefits administrator Madelyn Kalstein, who runs the program for the nonprofit, which has just under 500 employees.
The company is “still evaluating as to whether we’re going to do the ‘carrot or the stick’ approach with our employees,” she said — and the new regulations are playing a part in that discussion.
One Sacramento company that already decided against an outcome-based approach is Lionakis, a Sacramento-based architecture firm with 150 local employees and an established wellness program.
“Our wellness program is primarily a grassroots effort,” said director of human resources Susan Essaf. “We provide information and resources — we’ve never tied outcome to benefits.”
The company was influenced in part, Essaf said, by a RAND Corp. study that suggested wellness programs in general provide little benefit.
“And culture is another reason,” she said. “Given the size of our company, it didn’t balance out to administrate employee behavior to how and what they pay for benefits.”
The study in question was a Congressionally mandated report first delivered by RAND to the U.S. Department of Labor and the U.S. Department of Health and Human Services last fall.
The study found that while participation in wellness programs could be boosted by offering financial incentives, the bottom-line benefit to employers was insignificant — about $378 in direct medical costs per participating employee per year. That, the study concluded, was generally not enough to offset the cost of putting a program in place.
The federal government is not the only source of pressure on outcome-based wellness programs. California State Sen. Bill Monning, a Democrat from Monterey, is looking to put further restrictions on incentive-based programs. He is author of Senate Bill 189, which would have limited companies even further in terms of what they can and can’t do to incentivize healthy behavior. The bill was tabled in the Senate Appropriates Committee earlier this year.
“The main effort there,” he said, “was to put in some guard rails to avoid cost-shifting to employees with unhealthy behaviors and pre-existing conditions.”
The bill would not have allowed reward or penalty for wellness programs based on specific health outcomes. But it would have allowed for rewards based on participation.
Gottwals, the [Sacramento] insurance consultant, said he comes at the issue from a practical standpoint: If the latest regulations make outcome-based programs difficult and the RAND study suggests wellness programs produce little savings, why offer them at all?
The answer, he said: “In practice, employees do tend to appreciate informational programs,” he said. “But when you start bringing out the fat calipers and asking people to ride exercise bikes, they generally don’t appreciate it.”
Puget Sound Business Journal staff writer Valerie Bauman contributed to this story.
Full text and original source: The Sacramento Business Journal.
