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Employers: Higher Wellness Incentive Is Reform's 'Most Beneficial' Element

By SHRM Online staff  7/28/2011

The eventual increase in allowable employee wellness incentives was viewed as the most beneficial element of the Patient Protection and Affordable Care Act (PPACA), according to a 2011 survey of U.S. employers by Lockton Benefit Group, a provider of insurance, benefits and risk management services.

Under the PPACA, in 2014 employers will be able to offer an incentive of up to 30 percent of an employee's total health care premium if the employee is doing everything asked to improve his or her health and reduce medical costs. This is an increase from the 20 percent incentive currently permitted.

Employers "like the opportunity to reward employees that make healthy lifestyle choices," said Dr. Ian Chuang, Lockton's medical director and a member of the firm's health reform advisory practice. "The difference in cost for health insurance for an employee with this incentive can be thousands of dollars annually, depending on the total premium cost. So for the employer, this is a true benefit of the health reform law."

Savvy employers realize that ultimately they will reduce their health insurance costs by addressing the risks leading to illnesses and claims, Chuang noted. In addition, studies have tied improved employee health to increased productivity. However, "The incentive program has to be designed to promote health and prevent disease," Chuang advised. "Incentives like this are often key components in overall health risk management strategies."

"We expect to see further guidance under health reform that could allow employers to raise the incentive to 50 percent in special circumstances, added Edward Fensholt, director of Lockton's compliance services division and a member of the firm's health reform advisory practice.

Related Articles:

Wellness Program with Nonparticipation Penalty Upheld, SHRM Online Legal Issues, April 2011

Promoting Wellness Engagement in the World of Reform, SHRM Online Benefits Discipline, March 2011

Wellness Programs Get a Boost in Health Reform Law, HR News, March 2010

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