Groups Issue Guidance for Outcomes-Based Wellness Incentives

Recommendations promote fair and effective rewards for meeting wellness goals

By Stephen Miller, CEBS July 23, 2012

A coalition of health care organizations has produced new guidance for the use of outcomes-based incentives in employer-sponsored wellness programs.

Outcomes-based incentives provide employees with a financial reward for meeting a specific health target—or a penalty may be imposed for failure to meet a health standard—rather than simply providing an incentive to participate in the program. Outcomes-based incentives are expected to become more common in the workplace as a result of provisions in the Patient Protection and Affordable Care Act that encourage their use.

"Guidance for a Reasonably Designed Employer-Sponsored Wellness Program Using Outcomes-based Incentives," published in the July 13, 2012, issue of the Journal of Occupational and Environmental Medicine, is intended to help ensure that worksite wellness programs' use of such incentives is effective and fair to all employees, and improves health results. For employers that choose to implement outcomes-based incentives, the guidance provides direction on two key questions:

What are the elements of a reasonably designed wellness program that incorporates outcomes-based incentives?

How can employers who use outcomes-based incentives be sure that their programs comply with the Health Insurance Portability and Accountability Act (HIPAA) guidelines for a “reasonable alternative standard” to those who cannot meet the health standard?

10 Recommendations for Employers

The new guidance includes the following 10 suggestions for employers using outcome-based incentives:

1. Consider using the four biometric target categories of weight, cholesterol, blood pressure and tobacco use. These align with the guidance provided in a 2008 Field Assistance Bulletin issued by the U.S. Department of Labor and are the most commonly used targets by employers.

2. Factor in potential financial and time burdens for employees when determining the specific standard you are asking them to meet.

3. Consider whether the incentive design is likely to place a greater economic burden on one race, ethnic group or other category of employees.

4. Consider incentive designs that are reasonable goals (preferably individualized to the employee) rather than ideal targets applied rigidly to all employees.

5. Offer (as required by law) a reasonable alternative standard to employees for whom it would be unreasonably difficult to achieve a health standard due to a medical condition, or who have a medical reason that makes it inadvisable for them to do so within the allotted time.

6. For employees with a medical condition that makes it unreasonably difficult to achieve the health standard, or medically inadvisable to do so, consider deferring to the views of the employee’s health care provider for setting and achieving a reasonable alternative standard or providing a waiver.

7. Consider providing all employees with options for attaining the incentive, rather than only offering an alternative standard to those with a medical circumstance. This can be particularly important for employees who have legitimate hardships, outside of medical circumstances, that make it difficult for them to meet a rigid health standard.

8. Avoid using a reward or penalty that is so large it discourages health plan enrollment, denies coverage, or creates too heavy a financial penalty on individuals who do not satisfy an initial wellness standard. Some industry experts suggest, based on extensive real­world experience administering such programs, that amounts in the range of $40 to $60 per month are capable of generating behavior changes by many participants, at least in the short run.

9. Consider an incentive design that rewards for progress toward the standard targets, instead of just rewarding employees who meet the goal. This acknowledges the effort and behavior change that is at play, rather than focusing only on the outcome.

10. Consider strategies that help employees integrate healthy behaviors into their personal value framework by promoting individual choice, so they are more likely to sustain healthy behavior changes over time. For example, encourage autonomy and personalization by using a health coach or other qualified health professional to tailor a standard to an individual’s circumstances or to provide follow-up support in pursuit of a standard.

Promoting Best Practices

The guidance represents the collaborative thinking of six health care organizations: the Health Enhancement Research Organization, the American College of Occupational and Environmental Medicine, the American Cancer Society, the American Cancer Society Cancer Action Network (ACS CAN), the American Diabetes Association and the American Heart Association. To develop the joint guidance, the collaborative reviewed existing research related to incentives and best practices, regulations, case studies and other resources, and created a set of parameters that reflect best practices and do not discriminate based on employee health status or make coverage unaffordable for any employee population.

“Employers play a significant role in influencing the health behaviors of their workforce, and increasingly, they realize that a healthy workforce can reduce health care costs, disability and absenteeism, while increasing productivity,” said Jerry Noyce, president and CEO of the Health Enhancement Research Organization. “As employers seek new ways to engage employees in programs that change health behaviors, their interest in outcomes-based incentives has grown considerably.”

“Workplace wellness programs can provide the tools and opportunities to improve health and wellness, but they should not be used in ways that undermine an employee’s ability to obtain adequate and affordable health insurance coverage,” said Nancy Brown, CEO of the American Heart Association. “By following this guidance, these unintended consequences can be avoided.”

Stephen Miller, CEBS, is an online editor/manager for SHRM.​

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