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Final Rule Upholds Increased Rewards, Penalties For Wellness Participation

By Julie Appleby

May 29th, 2013, 2:39 PM

Employers will be able to increase rewards to workers who participate in wellness programs under final rules released Wednesday by the Obama administration.

The final rules, similar to those proposed in November as part of the Affordable Care Act, have raised concerns among advocates who represent people with chronic or severe illnesses, as well as among some employers. They allow employers to increase workers’ financial stakes from 20 percent of the cost of their health premiums to 30 percent, starting next year. Participating in tobacco cessation programs carries a maximum reward or penalty of 50 percent of the cost of  an employee’s health plan.

Such programs can have a big effect on workers’ and employers’ pocketbooks. Workers who participate could qualify for hundreds, even thousands of dollars’ worth of premium or deductible discounts. Those who don’t participate would pay much more toward their own coverage, thus lowering employer’s costs.

Proponents say wellness programs encourage people to make healthier choices and could slow health care costs related to obesity, high blood pressure and diabetes. But studies looking at whether such programs save money and change long-term behavior — or simply shift more of the cost of health insurance to workers — have produced mixed results.

A survey of 800 large and mid-sized employers released in March by consulting firm Aon Hewitt found that 83 percent offered employees some incentive for participating in such programs. While employers have embraced such programs for years, the federal health law increased the amount that workers can be rewarded or penalized and gave the Obama administration a way to refine the rules governing such programs.

More than 5,000 comments were received on the proposed rule, including concerns raised by some consumer groups that the programs could lead to discrimination against workers with medical problems or conditions such as pregnancy.  Employers sought maximum flexibility in designing the programs.

The final rules do give employers broad leeway, saying the programs must simply have a “reasonable chance” of improving health.

Two types of workplace wellness programs are outlined in the rules. The first includes those where all workers are eligible for the benefit simply by participating in something, such as filling out a health quiz or taking a wellness class. The second type has drawn more controversy, because rewards are contingent on workers meeting employer-determined goals, such as losing weight, lowering cholesterol or reducing blood pressure.

Under the second type, the final rules further divide programs into those that are activity-based, such as a walking program, and those that are “outcomes-based,” generally meaning workers much achieve some kind of health-related goal, like lowering cholesterol.

For activity-based programs, the rules say alternatives to achieving the financial reward must be offered to those workers who cannot participate because it would be “unreasonably difficult,” or “medically inadvisable” to do so.   Someone who could not do a running program, for example, might be offered a walking program instead. A worker who could not walk must be offered some other option to qualify for the reward.

For outcomes-based programs, all workers who initially fail to meet the goal must be offered an alternative way to get the reward to “ensure that the program is reasonably designed to improve health and is not a subterfuge for … reducing benefits based on health status.”

Workers can also ask their doctors to help their employers design an alternative goal more appropriate to their health status.

The rules say the administration aims to ensure that “every individual participating in the program should be able to receive the full amount of any reward or incentive, regardless of any health factor.”

9 Responses to “Final Rule Upholds Increased Rewards, Penalties For Wellness Participation”

  1. Brad says:

    It really very simple. 70% of all medical costs are due to poor life style choices ( Most wellness programs that have the feel good, feather approach to entice employees to change behaviors suffer from very low participation. Thus the high utilizers continue making poor choices and increase cost for everyone. Is that fair? If you drink and drive and get a DUI and only your car rates go up, is that fair? Of course it is and you wouldn’t want it any other way. Why should healthcare be any different? The penalty approach is the only proven way to make people change. Yes, that might seem a bit harsh but the reality is the present system is unsustainable and if people want to preserve their individual freedoms to make their own lifestyle choices then the also need to also take responsibility for their decisions.

  2. ken says:

    Ask any Republican and they will say these rewards and penalties are just more “Nanny State” measures to punish people who enjoy drinking whisky, smoking fine cigars and visiting with a prostitute from time to time. They will tell you that it’s none of the government’s business if they want to have a few beers while I’m driving their car. They will ask, who’s business is it how we live our life? They will ask, who’s business is it if we decide to get all of our healthcare services for free at my local hospital emergency room? They say, we have a right to all of our individual freedoms regardless of what it costs the rest of society. This is what the Republican Party has morphed into. All a result of tea party politicians.

  3. Michelle says:

    I have been considered “Obese” since my 20′s accornding to BMI charts. I walk 2 miles a day, have no diabetes, heart disease, my blood pressure is normal, my cholesterol is actually low, and I seldom even get sick. But becuase my BMI and waistline measurements don’t meet the criteria determined as “healthy” my employer is going to require that I pay $800.00 more per year towards my insurance. I can avoid that cost if I lose weight , but I like my curves and so does my fiance. If my doctor has no problem with my weight, why does my employer? I will also have to pay an additional $800.00 per year for my daughter, who at 6 ft and 200 lbs, is very curving but not in any way fat. Again, her BMI says she is “Obese”.As I don’t even make $28000/year, $1600.00 is a signifigant amount of money to me. Explain to me how this is a fair system?

  4. Maggie says:

    I’d like to know the BMI of some of those NFL players!

  5. KP says:

    Carrot incentives, rather than sticks, are the way to go. Anyone who’s ever paid attention to these health programs knows that they get a bunch of very unqualified people to give you the same pablum advice you can get from any supermarket magazine. (And guess what? That advice doesn’t work. If it were simple to be thin, people would in this very discriminatory society work to be thin.) Also, there is a growing body of evidence that the cholesterol obsession we’ve had for 50 years is profoundly misguided – yet these programs can try to make you meet a cholesterol goal – and even take a pill that has numerous potential side effects, including muscle pain, fatigue, and mental confusion or other cognitive problems.

    These programs COULD do positive things that have strong evidence behind them – provide free testing supplies to diabetes, and you get better blood sugar control, or free BP meds to people who need them, filling the prescriptions regularly – and you’d get lots of bang for the buck – without medically unqualified people coercing employees into ill-guided actions.

    The other problem: If you pay a penalty in your health care coverage, your employer – who is not supposed to be making employment decisions based on a person’s health, under disability law, etc. – knows you’ve got a problem. Guess who might be the first one to get laid off?


  6. Don Levit says:

    The general point the wellness incentives are trying to make is that healthy people should be rewarded for lower claims.
    Those who have higher claims will already be getting a break on the premium due to the modified community rating laws of the ACA.
    To keep low claimants in the pool is absolutely vital for the pool to remain viable.
    On the other hand, those with higher claims need a break on their premiums, too, for they have enough problems without being charged through the roof due to illnesses or accidents.
    Through our patented health insurance product, we intend to provide discounts, over time, not through wellness incentives, but through mathematical incentives.
    With no or low claims, our unique paid-up benefits rider allows people to build paid-up underlying coverage, which translates into higher deductibles and lower premiums.
    Don Levit

  7. Lena Conway, Group Health Insurance Underwriter says:

    Firstly, as a group health insurance underwriter for close to 20 years, I found that although wellness programs encouraged employees to live a healthier lifestyle and better disease management, such programs did not reduce medical cost significantly. In fact for some employer groups, it didn’t make any difference at all.

    Secondly, to allow employer to decide who and how to reward and penalize employees under the wellness program can lead to discrimination. How can you tell whether the employer will treat everyone fairly? Discrimination already exists now. The reward and penalty will increase the chances of an employer sticking it to people they dislike due to race, or illness or just plain favoritism.

    Thirdly, remember HIPAA? This wellness program reward and penalty will definitely violate the HIPAA rule. I have had employers who asked for individual paid claims report to see who has the highest medical expense over a certain period of time. Under HIPPA, I could only provide a list without individual identifications. This rule was set up not only to protect the privacy of each individual health history, it also served as a way to prevent employees being fired because they had health issues. So the leeway given to employers on the wellness program participation would be like doing away with the right to privacy protection. That makes no sense. Making employees filing out forms to disclose their health issues and habits is not a fair policy.

    Lastly, what next if employers have leeway on the wellness program? Find out if a prospective employee had any health issues to determine whether to hire them or not? How far will employers go? Are we eventually going to treat group insurance plan as an individual medically underwritten plan – and the premium and plan design will be determined by an employer, and not an underwriter? Besides, the insurers will be administering various plan designs for each client group. That will increase the premium. Is that what we want? I thought the Affordable Care Act was for the people, not against them.

  8. randy says:

    Statistics show that obesity leads to health problems. Statistics show that using tobacco leads to health problems. Statistics show that excessive alcohol use and drug use leads to health problems. These are scientific facts. As much as you wish to refute them and deny them, the facts simply will not go away. The rewards and penalties are based upon these scientific facts. As much as you think you look good and feel good being “fat”, the facts show that being “fat” is unhealthy and costs employers more to pay for the eventual illnesses related to your obesity. The more employers pay to care for their obese employees, the less they have to pay for employees that work hard to stay within the specified health guidelines. Hence, they need to use incentives to force employees to stay healthy. It is basic common sense. The employees that are obese, that use tobacco, that use illicit drugs or that drink heavily should pay more if statistics show that they will eventually cost more due to eventual poor health. Healthy employees should pay less if statistics show that they will eventually cost less. Fact is, healthy people are tired of paying more to subsidize the costs of the unhealthy freeloaders.

  9. Gil says:

    Insurance cost per person.
    $1.00/lb for everyone.
    $2.00/lb if you are obese and have one additional risk factor as determined by your physician.
    $3.00/lb if you are obese and smoke and have one additional risk factor.

    $.50 discount if your work attendance rate is excellent and you meet performance goals.
    $.25 discount if you achieve wellness goals established by your physician.
    Other incemtives….