Promoting Wellness Engagement in the World of Reform


By David Anderson, StayWell Health Management March 23, 2011

The use of financial incentives to increase participation in workplace wellness programs has been gaining momentum over the past several years. A 2010 survey by Buck Consultants reported that 62 percent of U.S. employers were using financial incentives as a component of their wellness programs and another 25 percent planned to do so.

With the passage of the 2010 Patient Protection and Affordable Care Act (PPACA), employers are likely to expand the use of incentives in their programs. For example, the PPACA allows employers to tie incentives to improvements in “health status factors” known to significantly reduce costs. The financial incentive employers are allowed to offer will increase from the current Health Insurance Portability and Accountability Act (HIPAA) limit of 20 percent of the total cost of health coverage to 30 percent on Jan. 1, 2014, (see the HR News article "Wellness Programs Get a Boost in Health Reform Law").

Based on average health care costs now approaching $10,000 annually per U.S. employee, the total incentive amount could average nearly $3,000 annually per employee—more or less depending on whether the employee’s health plan coverage includes dependents eligible for the incentive and related programs.

Expectations and Implications

Health policy analysts anticipate that the impact of the health care reform law will be to:

Give employers more flexibility in structuring their incentive strategy and a stronger rationale for investing in health management.

The implication: By encouraging employers to integrate wellness incentives into their health plan design, the PPACA provides a mechanism to reallocate rather than add costs to their health plan budget.

Shift the priority in health carefrom diagnosis and treatmentto a primary focus on prevention and wellness.

The implication: Employers will need to educate their employees about their shared responsibility in controlling health care costs and provide them with the support they need to manage their health and use health care wisely.

Shine a bright light on the integration of incentives into the health plan design and, ultimately, clarify what employers can and cannot do with incentive strategies.

The implication: Employers will need to harness the power of workplace culture to drive employee engagement and population health outcomes. If corporate leadership does not actively support employee health, the enterprise will fail to realize the potential of its incentive strategy.

Give employers more incentive to invest in the health of the broader community in which their employees live.

The implication: A great strength of worksite health management is that most employees spend nearly half of their waking hours at work; a potential weakness is that they spend the other half in their communities where there may be much less support for their health. Employers with significant community presence can work within their communities to extend a culture of health beyond the worksite to the entire community.

• Encourate focused employee education efforts, as employers intensify their health management and incentive strategies.

The implication: These efforts will require an understanding of best practices communications.

Participation vs. Engagement

The old adage “You can lead a horse to water, but you can’t make it drink” captures the essence of the need to distinguish participation vs. engagement. An incentive will draw the horse to the stream, but it won’t drink unless it’s thirsty. Likewise, an incentive can get employees to participate in an employer-provided wellness program, but it won’t typically motivate a long-term behavior change.

The most effective way to drive both participation and engagement is to adopt best practices that include:

Active leadership.

A healthy workplace culture.

A clear and simple incentive design that rewards behavior change.

Ongoing communications.

Strategic use of health assessment data.

How Much Is Enough?

As employers increase their investment in health management, many will consider increasing the size of their incentives to try to drive health improvement more quickly. This might make sense if the culture has been prepared so employees embrace the concept of shared responsibility and have a good understanding of the program.

For example, if an employee chooses to smoke knowing this behavior damages their health and increases their employer’s costs, that employee recognizes that it’s reasonable for their employer to require them to take responsibility for this choice by paying more for their health benefit coverage up to an amount representing its cost to the employer. The PPACA's allowance of a financial incentive up to 30 percent of the cost of coverage is easily justified by research on the additional costs associated with the multiple behavior-related health risks.

However, the PPACA requires that employees be offered a waiver or a “reasonable alternative standard” to earn the incentive if it is unreasonably difficult due to a medical condition or medically inadvisable for them to satisfy the health standard during the incentive period. This requirement substantially increases the complexity of the situation.

As they consider this alternative standard, employers should keep incentives for each activity modest—just big enough to “nudge” those already contemplating a change to engage in the activity.

The challenge, then, is to design a “reasonable alternative standard” for those who can’t meet the health standard that fosters engagement rather than compliance. One solution is to combine a points system with a menu of program options personalized to the participant’s health needs, and offer the support of a health coach to guide participants through the process. Skillful health coaches can help participants discover the internal commitment needed to do the hard work of changing lifelong unhealthy behaviors.

Earning the incentive in this framework must be fair and reasonable, but it must require commitment throughout the year so employees can’t “game the system” and undermine the credibility and results of the program.

Lessons Learned and Guiding Principles

If an incentive strategy is structured to engage employees, the outcomes can be impressive. Here are three key tenets of effective incentive design that, if adhered to, are likely to yield success:

A healthy culture is your trump card.A workplace culture that supports healthy behaviors and encourages employees to improve their health status is the foundation for a successful wellness program. Take Affinia Group, an automotive parts manufacturer based in Ann Arbor, Mich. Affinia made culture the cornerstone of its wellness program by changing their corporate mission statement, asking employees to sign a “Partners in Health Covenant,” and offering a substantial premium reduction for participation in the company’s wellness program.

By signing the covenant, Affinia employees agree in writing to support the company’s two goals: to make smart use of their health care dollars and to take part in the prevention and wellness program. By combining the power of culture with well-designed incentives, this approach boosted Affinia’s wellness participation rate to 99 percent and decreased its health plan cost trend to less than 2 percent annually.

Ease employees into greater accountability.The best way to create a mindset of accountability among employees is to start small and then increase employees' accountability as they become successful in changing their behaviors.

Example: Alliance Data, which won the prestigious C. Everett Koop Award in 2009, implemented its health management program in 2004. At that time, Alliance Data offered a premium reduction as an incentive for simply completing a health risk assessment. The following year, they required employees to also complete two online learning modules. By 2009, employees needed to complete at least four meaningful activities, including the risk assessment, from a menu of options. This progressive approach helped Alliance Data increase the number of employees at “low risk” for adverse health conditions from 29 to 42 percent, with the number at high risk decreasing from 18 to 10 percent.

Alliance Data saw health care claims due to preventable illness decrease from 41 to 34 percent of total claims costs and health-related absences decrease by 10.3 percent.

Avoid the “sink or swim” approach.With the passage of health care reform, many employers are planning to implement outcomes-based incentives. When implementing a program that rewards employees for achieving or maintaining target biometric measures like blood pressure and body-mass index, it’s essential to educate employees about the rationale for the incentive, emphasizing shared responsibility, and what’s required to earn it.

Ideally, employers should begin this process at least a year before the incentive takes effect, or even several years before if more time is needed to prepare the culture. This gives employees time to make lifestyle changeslike losing weight or changing diet to reduce cholesterol levelsthat will enable them to achieve the targeted biometric measures when the incentive is initiated.

Focusing on these key principles greatly improves the odds of success. As the health management program and incentive strategy evolve, be sure to work with the health management program provider and legal counsel to ensure the initiative complies with HIPAA, the Americans with Disabilities Act (ADA) and other relevant laws and regulations.

Most importantly, remember that success does not come from compelling people to jump through hoops but from creating a culture of shared responsibility for health and using incentives judiciously to fuel individual change.

David Anderson, Ph.D., is senior vice president and chief health officer for StayWell Health Management and the architect of StayWell’s health assessment model and predictive modeling tool.

StayWell is a registered trademark of The StayWell Company.

All rights reserved.​

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