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Healthcare Payers Face Wellness Conundrum

 |  By Margaret@example.com  
   June 05, 2013

New federal rules on wellness programs are branded as "incentives," but will do little to rally employer support.

The final rules released last week by the Department of Health and Human Services for employment-based wellness programs bring some welcome news for health plans hoping to reach new markets. But they shouldn't hold their collective breath.

Currently there is an undercurrent of grumbling by employers who are not enamored with the government-defined process of offering these programs and rewarding participants. So HHS is trying mightily to advance health awareness and disease prevention by creating incentives for employers to offer wellness programs to their employees.

Two surveys released within a few days of one another shed some light on a wellness conundrum. In a survey conducted by Virgin HealthMiles, only 25% of companies responding said they planned to implement any wellness provisions from the Patient Protection and Affordable Care Act. Employers revealed that they struggle with finding a tangible way to directly correlate wellness programs to bottom-line benefits.

On the employee side, the same survey confirms that employees love wellness programs. Eighty-seven percent of respondents said that they consider health and wellness offerings when choosing an employer. And incentives play a big role in employee motivation—61% of employees credit the incentive as the key reason for participating. Another 78% said they are interested in participating in incentive-based programs while at work.

Rand Corp. meanwhile released a sobering report on workplace wellness programs last week that is sure to give even the most committed and wellness-savvy executive heartburn. Over five years the average healthcare cost savings for an employee participating in a wellness program is $157.

That's bad news for employers who contribute thousands of dollars annually to employee healthcare benefits.

Note that the government's final rules put some big bucks in play for employees. The maximum permissible reward for some wellness programs will increase from 20% of the average annual cost of premiums to 30%. And the maximum reward for smoking cessation tops out at 50%.

Are the new incentives enough to bring more employers into the wellness fold?

That's the question health plans will ponder as they look at this potential market. And there's no easy answer. Maybe that's why the health insurers I contacted, including Blue plans, Humana, and WellPoint either didn't respond or declined to respond with much more than "it's under review."

The 123-page rule addresses two types of wellness programs, participatory and health-contingent, and prescribes a reward system for each. For participatory programs employers, through their health plans, typically reward employees for belonging to a gym or completing a health risk assessment.

The catch, at least for employers, is that the employee doesn't have to provide proof of that he uses the gym or has made lifestyle changes based on the HRA. Still, employers are usually happy to offer this type of wellness program.

Health-contingent wellness programs defined in the rule are outcome-based, so receiving a reward is contingent on an employee achievement such as losing weight, lowering cholesterol levels, or giving up tobacco products.

But the final rule requires outcome-based wellness programs to also offer a "reasonable alternative standard" to all employees who initially fail to meet their goals to "ensure that the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status."

That's a sticking point for some employers and could make these programs too onerous, says Steve Wojcik, vice president of public policy for the National Business Group on Health, a Washington, DC-based group that represents almost 400 companies, including 66 of the Fortune 100 companies.

It remains to be seen how the new requirements "will affect wellness program costs, the ability for wellness programs to move the needle on health, and the willingness of employers to continue to offer outcomes-based wellness programs," says Wojcik.

Many employers, he says, are already expanding the alternatives for outcomes-based wellness programs to provide employees with multiple options to improve their health. "In some ways, the broader alternatives are being built into the programs and hopefully this new requirement won't add to that."

So where does this leave health plans? According to Rand, employers overwhelmingly expressed confidence that workplace wellness programs reduce medical cost, absenteeism, and health-related productivity losses.

The problem is that employers aren't quite sure how to make formal evaluations. Health plans have a treasure trove of healthcare data at their disposal that could be used to develop analytical tools for wellness programs to provide the financial confidence employers need to implement the complicated outcome-based wellness programs.

Building those tools and making them easily accessible would be a win-win for health plans and employers.

HHS Final Rule: Incentives for Wellness Programs in Group Health Plans

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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