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Putting the ‘cent’ in incentives

Original article https://ebn.benefitnews.com

By Kathleen Koster

In addition to popular incentives for participating in wellness program activities, employers and insurance carriers have turned to outcomes-based incentives hoping to lower plan costs and improve population health. While laws such as HIPAA, ERISA and, most recently, PPACA provide guidance for incentivizing employees to improve body metrics and sustain healthy behaviors, plan sponsors should tread cautiously around more aggressive incentives and premium surcharge strategies.

Employers’ focus on rewarding healthy results “has been fueled by regulation,” says Eric Herbek, vice president for consumer health product at Cigna. Specifically, the health care reform law increased the percentage employers can award as an incentive or disincentive from 20% of the individual health premium to 30% and up to a 50% differential if they include a smoking metric.

Activity-based incentives can spur participants to complete a health risk assessment or biometric screening, self-report physical activity, or join a pregnancy class or other program that requires action, but not necessarily achieve outcomes. “These can be highly effective tools to tailor action and identify risk for the individual and make a plan for a healthier lifestyle, but doesn’t necessarily translate into financial results,” says Herbek.

That’s why the wellness industry is moving toward an outcomes-based incentive model that measures health outcomes such as tobacco use, BMI, cholesterol, blood pressure or blood glucose levels. Penalizing smoking is most popular among wellness programs, with many employers applying a premium surcharge against smokers. But employers can reward or apply a penalty for each metric. According to Frank Hone, managing director of Healthcentric Partners, Inc., many employers are considering structuring incentives as a tiered health plan, similar to the auto insurance market.

In terms of implementation, Hone suggests determining how a wellness incentive structure fits in with the employer’s overall human capital approach and company culture. Another factor is whether the employer is more paternalistic or leans toward a model of accountability based on the insurance plan selected. A value-based plan or consumer-driven health plan would have accountability built into the overall structure. For example, employees could earn additional contributions into their health savings accounts by participating in a health coaching series or achieving a health goal.

“The employer wants to fund some aspect of the HSA, but also wants to ensure that there’s skin in the game by the participant” so that they take action, adds Hone.

To keep incentive structures compliant with health laws and regulations, employers should give all participants an equal opportunity to earn the reward and not design specific incentives for any particular segment. Legal experts recommend having an alternative available to help individuals achieve their goals and for those unable to reach a goal. For example, they advise employers with premium surcharges for smokers to offer smoking-cessation programs and tools through their wellness program. For BMI goals, employers should consider offering employees with penalized BMIs a chance to enroll in a weight loss program or to make improvements to earn the premium discount.

To comply with HIPAA nondiscrimination requirements, the employer doesn’t need to know the alternatives if an employee can’t reasonably achieve a lower BMI, for instance, but they should clearly state in their plan document and notices outlining the wellness program that such alternatives exist. They can determine the alternative standard, if an employee asks for an alternative, with possible input from their individual’s doctor, suggests Tiffany Downs, a partner with FordHarrison LLP.

“Our view is that employers don’t have to offer a weight management program as an alternative, but we advise that employers with an outcome-based incentive program offer some form of alternative for participants who don’t meet the optimal rates as a cultural shift [takes place],” advises Herbek. He suggests employers take a tempered approach and don’t move from zero incentives to a rigid incentive approach immediately.

Downs recommends employers implement wellness incentives as part of a group health plan to avoid litigation under discrimination of employment laws. She adds that employers should pay attention to state laws because some states allow for smokers’ rights.

The number one red flag she sees is prohibiting individuals from enrolling into a health plan until they lower their BMI or achieve another health outcome, which could violate HIPAA’s discrimination rule.

To avoid penalties, she suggests that “the more aggressive the wellness program, the more cautious the employer should be before implementing it and getting legal counsel before applying incentives.”

Cigna’s Herbek believes the next stage in incentive programs will be making metric reporting easier to monitor. Instead of self-reporting data or measuring health status in a lab, self-monitoring devices that are objective will measure the individual’s health.

Precise health testing by the participant will follow what auto insurance companies have started. The Progressive Snapshot program reports the speed of driving, through remote monitoring plugged into the car, and drivers can earn great rates if they drive safely.

Cigna already has teamed up with BodyMedia to measure health and fitness aspects with wearable devices. Eventually, these “can be used as a reinforcement mechanism to help people achieve healthy goals,” he says, adding that Cigna professionals are looking at how to apply results to a premium incentive plan.

Hone believes that as employers look to address stress and emotional health in the workplace, they will need to move away from incentives that typically work as a stick for physical improvements.

“I’m hopeful that as an industry we can move away from these pay- for-performance ideas for individuals towards a tiered insurance plan structure that will educate individuals and guide them toward better lifestyles,” Hone says.

“We’re missing the big picture: the strategy of promoting healthy living. The industry has fallen into the trap of paying people to change their behavior instead of really investing in education, information, motivation and other aspects that influence and give individuals the personal reasons why they should behave differently, adjust their lifestyle or be happier.”

He believes that incentives do play a role in promoting better health, but are best delivered in the context of a tiered health plan. Participants who pay more for premiums will be the same demographic that utilizes the health system at a higher rate because of the behavior they’ve chosen, not a genetic condition.

Employers report increased use of health incentives

A pair of recently released surveys from Aon Hewitt indicate that employers are increasingly turning to incentives to drive health programs and get employees to take actions to improve their well being. Eighty-three percent of 800 American employers use some form of incentive to get employees more aware of their health status, the consulting firm finds.

Out of the 83% that uses incentives, 79% offer rewards, 5% offer consequences, and 16% offer a mix of both. In terms of dollar amounts, 64% use monetary incentives of between $50 and $500, and 18% use incentives of more than $500.

“Employers recognize the first step in getting people on a path to good health is providing employees and their families with the opportunity to become informed and educated about their health risks and the modifiable behaviors that cause those risks,” says Jim Winkler, chief innovation officer for health and benefits at Aon Hewitt.

“HRQs and biometric screenings are the key tools in providing that important information and serve as the foundation that links behaviors to action. Motivating people to participate through the use of incentives is a best practice in the industry, and these strategies will continue to be a critical part of employers’ health care strategies in the future.”

A separate Aon Hewitt survey – conducted in partnership with the National Business Group on Health and the Futures Company – reports that 86% of employees who received suggested action steps based on their HRQ results took some action.

Further, more than half of employers who offered incentives saw improved health behaviors and/or an increase in employee engagement.

Of those employers who offer incentives, 24% say they offer them for progress toward, or attainment of ,acceptable ranges for biometric measures such as blood pressure, body mass index, blood sugar and cholesterol.

More than two-thirds say they are considering this approach in the next three to five years. Fifty-eight percent are planning, in the next few years, to impose consequences on participants who do not take appropriate actions for improving their health. -Tristan Lejeune