Tighter Health Policies on Tap

Frustrated employers decide to trade carrots for sticks.

By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

October 2, 2008

Employers are taking a more aggressive approach to getting their workers healthy. Rather than offering workers incentives for filling out a health risk assessment and participating in wellness programs, employers are taking the opposite approach. Now they’re introducing disincentives to employees who aren’t engaged in wellness plans. Instead of giving $100 to fill out a health survey, employers are cutting reimbursements to 50% from 80% and increasing deductibles from $300 to $600, or even $900, says Blaine Bos, a senior consultant with Mercer, a benefits consulting firm.

The idea is to use financial pain to get the attention of workers who don’t participate in programs designed to improve their health. Employers are frustrated that participation rates in wellness programs are not higher, even though the programs are free. “So now the message from employers will be: Act responsibly and we will reimburse at the full level; otherwise, you will pay more,” says Bos.

Some firms will make wellness plan participation a prerequisite for company health insurance. According to a recent survey by Hewitt Associates, more than half of employers that responded are considering this approach. That’s probably because wellness programs promise big savings for employers. After all, one-fifth of employees, generally those with chronic diseases, account for four-fifths of health care costs at companies that offer health insurance to workers. With health care costs headed up 8% in 2009, firms are determined to take proactive steps to mitigate costs.

Federal law mandates that wellness programs must be participation oriented, not results oriented. Employers can require only that workers participate, otherwise they can run afoul of provisions in HIPAA, the Health Insurance Portability and Accountability Act, which protects against discrimination.

Rising health care costs mean employers are tightening the screws in other areas, too. For example, look for an increased focus on the cost of dependent care. More employers will shift a bigger portion of the cost of dependent coverage to workers, either through larger payroll deductions or by applying surcharges to encourage dependent spouses to take coverage under their own employer’s plans. Employers also will conduct dependent audits to identify those who don’t qualify for coverage under the worker’s plan.

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