By Edward
M. Coates, Sr. Manager, Benefits & Compensation
Texas Mutual Insurance
According to the Kaiser Family Foundation 2007 Employer
Health Benefits Survey, the cost of healthcare has risen 78% since
2001. One of the contributing factors to this rise in healthcare
costs is the unhealthy habits of employees.
- Obesity costs employers $45 billion / year – Conference
Board
- Unhealthy habits account for 25% ($1 billion) of General
Motors’ healthcare
costs – SHRM article
To address these costs, employers have tried a variety of options
including: increasing employee premiums, increasing deductibles
and co-pays, modifying pharmacy benefits, and implementing consumer-driven
health plan options. In addition to these approaches, many employers
are also addressing unhealthy employee habits through wellness
programs. Wellness program many include any of the following:
- Health Risk Appraisals (HRA)
- Biometric Testing
- Fitness Programs
- Fitness Centers
- Weight Management Programs
- Nutritional Counseling
- Smoking Cessation
- Telephonic Wellness
Counseling
- Educational Programs
- Disease Management Programs
- Flu
Shots
- Wellness Incentives
A recent survey by PriceWatershouseCoopers indicated
that 69% of companies surveyed offer wellness programs to participants.
The overall participation rate of employees in companies surveyed
was 30%. The survey indicated that participation increases significantly
when incentives are provided to participants. Other surveys indicate
that the larger the incentive value, the higher the participation
rate.
PWC Health and Wellness Touchstone Survey Results, June 2008
One reason why employers have been slow to adopt wellness programs
with strong incentives to participate was an unclear regulatory
landscape. The interim HIPAA regulation released in 1996 contained
rules providing vague guidance as to what incentives could be offered
to encourage participation in wellness plans. The final HIPAA non-discrimination
rules, effective January 1, 2008, provide very specific guidelines
as to how a health plan can provide incentives for wellness plan
participation. The new rules allow for two types of wellness program
incentives -- ones that are not related to achieving a standard
based on a health factor, and ones where the incentives are based
on the individual satisfying a standard based on health factors.
The rules state wellness programs can provide incentives within
the following guidelines:
Incentive not based on achieving a standard
Wellness programs that do not require an individual to satisfy
a standard based on a health factor may supply an incentive if
the incentive is available to all similarly situated employees.
Examples include incentives to complete HRAs, getting specific
tests or exams, reimbursement for smoking cessation, reimbursement
for all or a portion of health club memberships. There is no
limit on the value of incentives for requirements not based on
satisfying a health factor-based standard.
Incentives based on achieving a health factor-based standard
If a wellness plan requires a participant to achieve a standard
based on a health factor to receive an incentive, the value of
the incentive may not exceed 20% of the cost of the employee-only
coverage under the group health plans. If the plan allows dependents
to participate, the 20% limit may be based on the cost of employee
and dependent coverage. The regulations state that the program
must have a reasonable chance of improving the health of the
participants, may not be overly burdensome or subterfuge for
discriminating based on a health factor, and may not be highly
suspect in the method chosen to promote health or prevent disease.
The program must give individuals the opportunity to qualify
for the incentive at least once a year and must be available
to all similarly situated individuals. The plan is required to
waive the standard or make available a reasonable alternative
standard if it is unreasonably difficult for an individual to
satisfy the otherwise applicable standard because of a medical
condition. A plan must disclose the availability of a reasonable
alternative standard in all plan materials that describe the
terms of the wellness program.
Examples of a health factor based incentive and alternatives are:
Charge 20% higher premium to individuals with Body Mass Index over
35, unless they enroll in a Weight Management program (this represents
a reasonable alternative).
Reduce medical premium for individuals with a total cholesterol
score less then 200. Those individuals with a score over 200 can
attend nutritional counseling to receive the incentive (this represents
a reasonable alternative).
Texas Mutual Insurance (TMI) Experience
Texas Mutual has a long history of wellness promotion. Since 2001,
TMI has required wellness plan participants to complete a Health
Risk Appraisal and biometric testing, be tobacco-free, complete
certain wellness exams, and participate in telephonic wellness
counseling. Employees meeting these requirements receive a 15%
reduction in their medical premiums. TMI received below trend
medical plan increases in the last 5 years, which has been partially
attributed to the wellness plan. As a result, TMI has increased
employee premiums only once in the last 4 years.
Despite this positive experience, the employee population still
showed significant health risks in 2007, including:
- Weight Management
66% are above their recommended weight range
- Improving Fitness
61% showed need for improved fitness levels
- Coronary Risk Reduction
45% have a moderate to high coronary risk
- Better Nutrition
42% showed need for making nutritional changes
To address these issues more directly, TMI took advantage of the
new HIPAA regulations to implement additional requirements to receive
incentives through the wellness plan for the 2008 plan year, including:
1. Requiring all medical plan participants to complete a HRA and
biometric testing
2. Requiring wellness plan participants to accumulate a certain
number of wellness points in our vendor’s tracking system
3. Requiring all medical plan participants with a BMI of >=
35to participate in Weight Watchers to receive the incentive
In conclusion:
Employers now have clear guidance about how they can provide incentives
to encourage participation in wellness plans. This gives employers
additional options in trying to control healthcare costs and
address the unhealthy habits of employees. When implementing
wellness plans, employers should work with their broker/consultants
and legal counsels to ensure the proposed incentive structure
meets the HIPAA guidelines.
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