Employee wellness has always been an important issue to businesses and the passage of the Affordable Care Act (ACA) has sharpened that focus. The ACA, also known as ObamaCare, includes provisions that require insurance plans to offer many preventive benefits free of charge. The access to these tests and treatments, along with employer-sponsored health incentives, has businesses hoping they can improve attendance, performance, and keep health costs low.

How Health Incentives Work

Employers and insurance providers can offer a variety of health incentives. The specifics depending on the health insurance plan and employer involved. Under one type of incentive, if you agree to certain commitments and health measurements, your monthly contribution to your health plan is reduced. This type of plan uses an honor system, and relies on the idea that being aware of your health issues will help you change them.

Another incentive offered by some workplaces is reimbursement of gym memberships. Employers believe that active employees will get sick less often and have a lower instance of high-cost health issues. Most work environments are very sedentary, so employers offer to pay the cost of gym memberships to help employees stay active. The company hopes that this will boost attendance and help save money on high-cost illnesses through insurance.

Employers can also reward employees for attending a monthly, no-cost health seminar. Employers provide this education in order to encourage staff to think about their health, habits, and lifestyle. They hope that by educating employees about health and wellness, staff will change their habits and become healthier.

Finally, there are health-contingent wellness programs, which require employees to meet a specific standard related to their health to obtain a reward. One of the most common is abstaining from or decreasing use of tobacco. Programs can also be set up for obtaining a specified cholesterol level or weight, with the same reward going to those who miss the measures but take certain additional actions.

In order to protect themselves from unfair practice claims, employers have to stick to specific guidelines. Programs have to have to be reasonably designed to prevent disease or promote better health. They cannot be unreasonably burdensome for employees. They must be available to all employees that are similarly situated. Finally, reasonable alternatives to get the same incentive have to be provided for staff who cannot meet the original standard due to medical or other limitations.

The Effect of Health Incentives on Costs and Attendance

While health-based incentives should logically make a big difference in costs and attendance, the actual results have been somewhat mixed. Much of this is due to the simple fact that you cannot force employees to make lifestyle changes — and many who attempt to make changes will revert to old patterns due to habit. Making a long-lasting change in behavior is very difficult for anyone to accomplish.

On the positive side, wellness incentives at Johnson and Johnson decreased the number of smokers and dramatically increased employee activity over a period of 15 years. The company’s leaders estimate that the programs have saved Johnson and Johnson $250 million on health care costs between 2000 and 2010. Statistics show that healthy employees are much more productive, cost businesses less money in health care, and stay employed at the company longer. However, creating a culture of health and activity takes a great deal of time at any company.

On the other side, many employees are not interested in participating in the programs. Some staffers see the programs and incentives as coercive and an invasion of their personal privacy. Lawsuits have been filed against employers who charge non-participating employees extra for health insurance or deductibles. However, employers are fighting back, citing incentives within the ACA for wellness programs. With programs that are within ACA and HIPAA guidelines, they object to their programs being defined as illegal or coercive.

Employers who sponsor wellness programs may well find improvements in employees’ health profiles, but the savings may not offset the cost of the programs in the short term. Examples from UPMC and PepsiCo show that over a 5 – 6 year span, savings do not outpace the costs of wellness incentives. The one exception was in disease management, such as helping people with diabetes or chronic illnesses. However, employees are less likely to participate in disease management programs, and results are difficult to sustain over time. The health and wellness portions of a program reduce costs, but the results take a longer time to yield a positive ROI.

Overall, health and wellness cannot be ignored by either insurers or employers. However, it’s important for everyone involved to take a long view and realize that true positive ROI comes over a long period of time. In the short term, helping those with chronic diseases can dramatically reduce costs if incentives exist to encourage long-term participation.