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Employee Wellness Programs: Money Saver or Money Pit?

by EINSURANCE

The premise of workplace wellness programs is sound: insuring healthy people is cheaper because they use fewer healthcare resources. That’s the rationale behind one of the more popular provisions of the Affordable Care Act. According to a fact sheet, the ACA “creates new incentives and builds on existing wellness program policies to promote employer wellness programs and encourage opportunities to support healthier workplaces…for plan years starting on or after January 1, 2014.”[1]

The new rules support participatory wellness programs available without regard for an individual’s health status, including reimbursement for the cost of fitness memberships and rewards for completing a health risk assessment, regardless of whether any further action ensued as a result. But new in 2014 were amended standards for health-contingent wellness programs, “which generally require individuals to meet a specific standard related to their health to obtain a reward.”[2] Examples of rewards can include not using or quitting the use of tobacco, and meeting specified cholesterol or weight levels.  The maximum permissible reward was also increased, from 20% to 30% of the cost of health coverage, with as much as 50% allowed for tobacco prevention or cessation programs.

The reality is, that many companies already had wellness programs in place long before the ACA sweetened the incentives. According to Chrt.org, “the percentage of firms of any size offering at least one wellness program grew from 58 percent in 2009 to 77 percent in 2013.”[3] Indeed, the same source reports that employers with 200 or more employees have historically offered wellness programs at a fairly high rate, and growth among smaller firms has accelerated in recent years. Wellness programs are, in fact, a $6 billion industry, run by specialist firms and sold with the promise that they will help businesses reduce healthcare spending.

But, are they effective in helping employers contain health care costs? Are employees any healthier? In short, do wellness programs work? It depends on who you ask.

Employers love wellness programs. A lot. When asked in a Kaiser Family Foundation annual survey which programs were most effective at reducing healthcare costs, wellness programs beat out every other approach including greater employee cost sharing and tighter networks.[4]

Employee response, however, is less enthusiastic. Recent research by Gallup shows that only 60% of U.S. employees are even aware that their company offers a wellness program; and of those who are aware, only 24% are participating.[5] How come? Well, another study conducted by the Employee Benefit Research Institute found employees chose not to participate in wellness programs because:

  • 70% thought they could make changes on their own
  • 56% lacked time
  • 53% felt they were already healthy
  • 43% felt the programs weren’t conveniently located
  • 43% didn’t know enough about the program
  • 33% didn’t want their employer to know about their personal health information[6]

There is some evidence that the programs are effective at cost savings, although they tend to be based on studies done by the wellness industry, and are of poor quality, according to an article on NYTimes.com. “More rigorous studies,” the article notes, “tend to find that wellness programs don’t save money and, with few exceptions, do not appreciably improve health…Wellness programs can achieve cost savings -- for employers -- by shifting higher costs of care onto the worker.”[7]

Increasing participation, and thereby enhancing the desired outcomes, will probably require a combination of efforts. Better rewards might be the answer, according to Employee Benefit Research Institute research, which found that “those with coverage through CDHPS [consumer-driven health plans] and high-deductible plans were more likely than traditional plan enrollees to say they would probably participate if they were offered a $250 cash incentive, a discounted premium, reduced drug-cost-sharing or reduced office-visit cost-sharing.”[8] At bare minimum, employers could do a better job of informing employees about available programs.

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[1] “Fact Sheet: The Affordable Care Act and Wellness Programs,” http://www.dol.gov/ebsa/newsroom/fswellnessprogram.html

[2] Ibid

[4] Austin Frakt and Aaron E. Carroll, “Do Workplace Wellness Programs Work? Usually Not.” http://www.nytimes.com/2014/09/12/upshot/do-workplace-wellness-programs-work-usually-not.html?_r=0&abt=0002&abg=0

[5] “Why Your Workplace Wellness Program Isn’t Working,” http://businessjournal.gallup.com/content/168995/why-workplace-wellness-program-isn-working.aspx

[6] Stephen Miller, “Why Employees Participate -- or Don’t -- in Wellness Programs,” http://www.shrm.org/hrdisciplines/benefits/articles/pages/participate-wellness-programs.aspx

[7] Austin Frakt and Aaron E. Carroll, “Do Workplace Wellness Programs Work? Usually Not.” http://www.nytimes.com/2014/09/12/upshot/do-workplace-wellness-programs-work-usually-not.html?_r=0&abt=0002&abg=0

[8] Stephen Miller, “Why Employees Participate -- or Don’t -- in Wellness Programs,” http://www.shrm.org/hrdisciplines/benefits/articles/pages/participate-wellness-programs.aspx

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