Rising healthcare costs are a national crisis. Healthcare costs have jumped from $634 billion in 1980 to over $3 trillion in 2014.
In an effort to reduce healthcare costs and improve outcomes, Obamacare, aka the Affordable Care Act (ACA), which went into effect in March of 2010, included regulations for employers who choose to offer workplace wellness programs like discounted gym membership, free flu shots or biometric screening for healthcare risk factors.
The language of these regulations was quite vague and unfortunately had the unintended consequence of incentivizing some bad programs. For example, the original language actually made it okay for companies to set different health insurance pricing based on wellness program participation, weight and smoker status.
“While group health plans and health insurance issuers in the group and individual market are generally prohibited from discriminating against participants, beneficiaries, and individuals in eligibility, benefits, or premiums based on a health factor. An exception to this general prohibition allows premium discounts, rebates, or modification of otherwise applicable cost sharing (including copayments, deductibles, or coinsurance) in return for adherence to certain programs of health promotion and disease prevention, commonly referred to as wellness programs.” — (FAQS ABOUT AFFORDABLE CARE ACT IMPLEMENTATION (PART XXV) April 16, 2015
Yikes! And an extremely vague definition of what a wellness program actually is only added to the confusion
“Under section 2705 of the PHS Act and the wellness program regulations, a health-contingent wellness program must be reasonably designed to promote health or prevent disease. A program complies with this requirement if it (1) has a reasonable chance of improving the health of, or preventing disease in, participating individuals; (2) is not overly burdensome; (3) is not a subterfuge for discrimination based on a health factor; and (4) is not highly suspect in the method chosen to promote health or prevent disease.6
“The determination of whether a health-contingent wellness program is reasonably designed is based on all the relevant facts and circumstances.”
This circular language was not super helpful for any benefits administrator looking to follow the law. Unsurprisingly, an industry of “wellness experts” quickly boomed, offering companies a one-stop shop for wellness programs and promising lofty financial returns like $3 in savings for every $1 invested. Many companies jumped in whole hog, offering things like discounted premiums for participation and specific health outcomes like achieving a certain BMI – which were unpopular and discriminatory.
EEOC enforces the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). EEOC actually had to get involved and reel companies in. The more extreme programs weren’t exactly legal, and companies like Honeywell were even sued by the EEOC over discriminatory practices.
In 2016, EEOC issued new regulations to fix this wild west of wellness programs. The goal was to modify ADA requirements for workplace wellness programs “in a manner that reflects both the ADA’s goal of limiting employer access to medical information … and the ACA’s provisions promoting wellness programs.” (LINK)
These clarified a lot of the confusion around how these programs are supposed to operate.
While most of the gross privacy violations and demeaning program requirements have now disappeared, two big questions remain.
- Do these programs make people healthier?
- Do they save companies money?
Unfortunately, there are no quick fixes when it comes to health or money. But independent, third-party research demonstrates modest returns on both fronts – for folks who are willing to wait.
Larry Boress, president of the Chicago-based Midwest Business Group on Health, explained to the Chicago Tribune: “We’ve learned that ROI is not the correct measurement approach. Based on research and experience, the value of investment is a better approach. Some initiatives reduce costs in the short term, but there are lagging indicators that you won’t see a difference for three to five years.”
He said that when employees learn how to better manage their health, they experience greater satisfaction and eventually their employers will save on healthcare costs. “But it may take years.”
Wellness programs are certainly popular, especially among larger companies. RAND found in a 2012 study: “About half of employers with at least 50 employees, and more than 90 percent of those with more than 50,000 employees, offered a wellness program in 2012.” Researchers also found that employee participation varied highly with incentives: “Employers that did not use incentives reported lower participation rates and framing incentives as penalties was associated with higher participation rates. In the absence of incentives, employers reported a median participation rate of only 20 percent.”
Given that the new EEOC guidelines, released two years after this study, set stricter guidelines on incentives, perhaps we will see reduced participation rates in the coming years.
Do workplace health programs reduce costs?
RAND also found that these programs were not particularly effective at reducing costs or healthcare utilization: “Participation in lifestyle management programs was not associated with significant changes in overall [healthcare] cost or utilization.”
The RAND report did find improved health outcomes from employees who utilized telephone counseling, but noted it was quite expensive.
In short, wellness programs are not going to offer a quarterly return on investment, and they may even cost money over time. But cost may not be the best way to look at the impact of these programs. The Health Enhancement Research Organization (HERO) and Population Health Alliance (PHA) recently released a guide for measuring impact in a wellness program, and while the path to financial improvements is there, it’s no quick hop, skip and jump — as the graphic at right aptly highlights.
The guide emphasizes that the ROI for wellness programs doesn’t come from revenue; it comes from avoided costs. By casting a broader net to include not only direct cost reductions but also items like “monetized improvements in healthcare service utilization” (i.e., choosing an urgent care center over an ER for immediate care) and “monetized improvement or prevention of lifestyle-related health risks,” like an improved diet or exercise regime, companies can accurately measure those cost savings and prove a return on the program.
Because these calculations are quite complicated, and detailed, they will be most useful to organizations where the financial return needs to be proven before a program can continue.
Many organizations understand intuitively that treating employees as whole people and offering benefits will reduce turnover and absenteeism and improve employee morale, and for them, detailed accounting won’t be necessary.
Johnson & Johnson has long been a leader in offering workplace wellness programs – since long before ACA went into effect, it should be noted. Harvard Business Review reported in 2010 that Johnson & Johnson’s workplace health programs achieved a two-thirds drop in the number of employees who smoke since 1995. The number of Johnson & Johnson work associates reporting high blood pressure fell by half.
Johnson & Johnson estimates that every $1 spent on its workplace wellness program has generated $2.71 in health cost savings. The company estimates $250 million in health cost savings between 2002 and 2008 achieved through its workplace health program.
We spoke to Lisa Blair Davis, vice president of international total rewards and global benefits for Johnson & Johnson, to better understand how the workplace wellness program has been so effective among a sea of mixed results. Blair Davis has been with Johnson & Johnson for over 24 years, and she was quick to point out that the company was not interested in a quick return.
“Workplace wellness starts with our credo,” she explained. In addition to putting customers first, the credo includes a special shout-out to employees:
“We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.”
In that light, the worker wellness program becomes a means of fulfilling a larger mission, not simply a way to reduce costs. In fact, she underscored that it really wasn’t about costs at all:
“The biggest thing overall is that there is no overnight success. We look for long-term wins. That’s not just in worker wellness; it’s throughout the company. When you get hired, we look not just at how you’ll perform a role, but if we are a place where you can grow your career. We make long-term investments. My 24 years [of] employment is not unusual. While many companies want quick wins, short-term results – benefit comes over the longer term.”
Worker wellness simply becomes a part of being a good employer. Over the years, Johnson & Johnson’s worker wellness program shifted based on the needs employees raise in an annual survey. Recent additions include a focus on stress-reduction, work/life balance and community engagement. “It’s holistic,” she explained.
To go back to the original question that kicked this article off: Is ACA succeeding at promoting workplace wellness? The answer is not really — unless one subscribes to the “all press is good press” approach to crisis management. At least the controversies around ACA have gotten the word out about the fact that worker wellness programs can make for happier employees, if implemented correctly.
Image credit: Pixabay