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Why Wellness Incentives Belong In The Workplace



January 19th, 2010

Editor’s Note: For a response to Jaan Sidorov’s post below, see Workplace Wellness Programs: The Real Issues, by Alan Balch.

The health care reform debate has stirred up strong sentiments on both sides of an important issue that, on its face, doesn’t seem all that complicated: Should employers that offer wellness and prevention programs offer employees monetary rewards for their participation? Should the rewards be linked to attainment of wellness goals?

The Agency for Healthcare Research and Quality tells us leading employers, state Medicaid agencies and health plans recognize the potential power of financial incentives in attaining quality goals. Others are not so sure. Writing in a recent issue of the New England Journal of Medicine, Harald Schmidt and colleagues distinguish between incentives that reward “participation” versus those for “attainment.” They argue the latter might be fundamentally unfair because they might be only technically voluntary, out of reach for the socioeconomically disadvantaged, a burden on the doctor-patient relationship and, ultimately, a source of higher out-of-pocket insurance premium costs for the very people who can least afford them.

Current health reform legislation being considered by Congress ups the financial stakes of employer and wellness incentives by allowing insurance plans to increase them from the currently allowed level of 20 percent to at least 30 percent of the total premium. Opponents, including many unions and health advocacy groups, fear this could turn out to be an underwriting “Trojan Horse” ultimately intended to charge sicker people more for their health coverage. Worse, they’ve used the debate to plant seeds of doubt about wellness and prevention generally, a regrettable tactic and a claim with no merit based on years of experience with these valuable programs.

In a meta-analysis of the literature on costs and savings associated with workplace disease prevention and wellness programs, Harvard researchers led by Katherine Baicker recently found in Health Affairs that medical costs fall by about $3.27 for every dollar spent on wellness programs and that absenteeism costs fall by about $2.73 for every dollar spent. See also Aldana, SG, “Financial Impact Of Health Promotion Programs: A Comprehensive Review Of The Literature,” in the American Journal of Health Promotion; Musich SA, Adams L, and Edington D, “Effectiveness Of Health Promotion Programs In Moderating Medical Costs In The USA, in Health Promotion International; and Keller PA, Lehmann DR, and Milligan KJ, Effectiveness Of Corporate Well-Being Programs: A Meta-Analysis, in the Journal of Macromarketing.

Advocates for incentives point out that worksite-based health promotion programs have been long known to improve the health status of populations. Furthermore, while employers have a stake in maintaining a healthy workforce and restraining health care costs, they also feel responsible for their employees’ well-being. This is often not lost on the employees themselves, the majority of whom not only help design and support their companies’ wellness initiatives, but welcome the accompanying financial incentives. While the problems cited in the New England Journal article mentioned above are certainly theoretically possible, their occurrence in the real world of employer-sponsored, evidence-based health promotion is practically unheard of.

Recently, opponents of financial incentives pointed to a State of North Carolina program that has attacked tobacco abuse and morbid obesity with 10 percent out-of-pocket cost differential for affected state employees. The local Service Employees International Union has charged that this is not only an infringement of privacy, but represents a costly financial burden for those unable to comply. Yet, closer inspection reveals the North Carolina State Health Plan generously covers smoking cessation counseling and multiple medications to help individuals quit tobacco, as well as diet instruction, other medications and, if necessary, bariatric surgery. It is also important to note that participation alone qualifies employees for the lower differential and that exemptions are readily available. Finally, this was hardly an undemocratic process, since it was ultimately the state legislature that triggered the plan.

So, what can we conclude? I would suggest this:

  • Wellness and prevention programs have proved their value in the workplace, enjoy broad support among employers and employees and are an important policy option in the fight against costly chronic conditions. Policy makers should view the largely theoretical arguments and anecdotes against incentives with a healthy dose of skepticism.
  • Worksite health promotion rarely comes from the top down without the input of the employees themselves (or in the case of North Carolina, the voters’ representatives). Engaged employers typically listen to their workforce and use their insights to develop programs that reflect local needs and preferences. They deserve greater flexibility when it comes to creating locally meaningful incentives.
  • While obesity and tobacco abuse disproportionately affect persons who are socioeconomically disadvantaged, it can also be argued that the greater marginal utility of wellness incentives brings a disproportionately higher benefit to lower income families compared with more affluent workers.

Finally, there is an important political dimension to this issue. An “anti-incentive” position among academics, health advocates and unions may fall not only on the wrong side of the rank and file union members, but of the American electorate: Passage of legislation that promotes heightened personal responsibility may be more likely to dampen criticism from opponents and, in turn, be welcomed as a viable expansion of health and wellness opportunities for American workers.

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