Smart Benefits: Wellness Plans Weigh In On Obesity
Monday, June 23, 2014
Amy Gallagher, GoLocalProv Business/Health Expert
For employers, the cost impacts of obesity continue to rise – from healthcare expenses and workers’ comp claims to lost productivity and employee time off for doctor visits and sick days. Some companies have attempted to tackle the issue with wellness programs that include screenings for Body Mass Index, counseling on health risks from high weight, and healthy lifestyle activities. Other organizations have taken a more direct approach to encourage weight loss: weight management programs.
But employees haven’t participated in the programs at the levels needed to impact costs. In fact, in a 2013 report issued by RAND Health and sponsored by the U.S. Labor Department (DOL) and the U.S. Department of Health and Human Services, almost 90% of employers offering a weight reduction program reported participation rates of 20% or less. In an effort to boost interest, some employers are making participation more attractive with financial incentives.
Money Talks
Called Health Contingent Wellness Programs, these plans are designed to encourage employees to reach or maintain a healthy weight with rewards or incentives such as discounts on health plan premiums or contributions, waivers of all or part of a cost-sharing mechanism, a cash payment, or any financial or other incentive. The programs may also penalize those who fall short with premium surcharges or other financial disincentives.
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Two Types of Programs
Companies can offer two types of Health Contingent Wellness Programs: activity-based or outcome-based.
- Activity-based. With these programs, employees earn a reward if they perform or complete an activity related to a particular health factor, like improving their diet or exercising. The regulations require that these programs offer a reasonable alternative method for obtaining the reward for any individual medically incapable of participating.
- Outcome-based. These programs take participation up a notch by requiring employees to attain or maintain a specific health outcome to get the reward. Outcome-based wellness programs generally must have two tiers: 1. a measurement, test, or screening that sets the initial healthy standard, which employees must meet to receive the reward and 2. an alternative for meeting obtaining the reward for those individuals who didn’t meet the initial standard, like educational classes.
HIPAA Compliance Critical
Both types of programs are subject to HIPAA requirements, and must meet the following five criteria:
- individuals must be provided with the opportunity to qualify for the reward under the program at least once per year
- the program must be reasonably designed to promote health or prevent disease
- the amount of the reward available if a health standard is satisfied by a participant cannot exceed more than 30% of the cost of employee-only coverage
- the program must permit individuals to achieve the reward through a reasonable alternative standard
- the program must provide notice of availability of a reasonable alternative standard or of a waiver of that requirement in all plan materials describing the wellness program. This notice must also include plan contact information and a statement that the recommendation of an individual's personal physician will be accommodated.
And violation of the requirements isn’t taken lightly, putting employers at risk of litigation and statutory penalties – up to $100/day of noncompliance for each affected individual.
Amy Gallagher has over 21 years of healthcare industry experience guiding employers and employees. As Vice President at Cornerstone Group, she advises large employers on all aspects of healthcare reform, benefit solutions, cost-containment strategies and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, and is often quoted by national publications on the subject matter. Locally, Amy is a member of SHRM-RI, the Rhode Island Business Group on Health, and the Rhode Island Business Healthcare Advisory Council.
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