How are your employees feeling these days?
It’s a question you might want to ask yourself in advance of new Obacamare rules that will give employers unprecedented leeway to use financial rewards and penalties to incentivize workers to get and stay healthy. Depending on the makeup of your workforce, that could have a big impact on your company’s healthcare costs in the short- and long-term.
Starting in January 2014, employers that offer workplace wellness programs will be allowed to offer their employees big discounts on their insurance premiums for doing things like joining a gym, getting their blood pressure checked regularly, or meeting weight-loss targets. Employers have been permitted to vary premiums based on employee participation in wellness programs since 2006. But the ACA significantly increases the incentives you can offer employees for taking part in them -- from 20 percent to 30 percent of the total cost of coverage for participating in general wellness programs, and up to a 50 percent discount if they enroll in programs designed to prevent or reduce tobacco use.
In the short term, the new rules should of particular interest to those who employ a large number of smokers. While the Affordable Care Act generally prohibits insurers and employer group health plans from tying rates to health status, tobacco use is a notable exception. Indeed, insurers are permitted to charge smokers premiums that are up to 50 percent more than those of non-smokers. Since employers pay the majority of their worker’s health-plan premiums, an increase in a smoker’s costs means an increase in the overall costs of your plan.
But the law says that employers can encourage smokers to quit -- by imposing a financial penalty on them if they don't take part in a smoking-cessation program. Here’s an example: Let’s say that the base monthly premium for employees is $100. Under the ACA, you can charge smokers who refuse to quit an additional $50 --which would help you recoup the additional costs of their more-expensive premiums.
The new law also lets you offer employees discounts on their premiums as an incentive to participate in general wellness programs, which can mean anything from subsidizing gym memberships to rewarding employees who undergo a health-risk assessment and meet or work toward targets for healthy blood pressure, cholesterol levels, and body mass.
The idea here is that workers who go the gym, aren’t obese, and regularly tend to troublesome conditions have fewer doctor visits and procedures, which over time reduces your bill for the employer’s share of medical copayments and other out-of-pocket costs. Numerous studies suggest that wellness programs also have a positive financial impact through a reduction in absenteeism and injuries, higher productivity, and fewer worker’s compensation and disability payments.
A review of 72 studies published in the American Journal of Health Promotion, for example, showed an average return on investment of $3.48 per $1 for corporate wellness programs when considering health care costs alone; $5.82 when examining absenteeism; and $4.30 when both outcomes are considered. An additional benefit: The new ACA rules allow you to use the lower, non-smoker’s premium as the baseline for determining whether your plan is affordable and provides “minimum value” as defined by the healthcare law. In other words, the non-smoking rate is your default. Be careful, though: this only applies to tobacco-related premiums.
If you offer employees reduced premiums for undergoing routine health screenings, for example, you must calculate affordability (premiums can't exceed 9.5 percent of a worker's W-2 income) and minimum value (the employer must pay at least 60 percent of total worker health costs) based on the non-discounted rates.
Using wellness incentives effectively -- and in a way that employees appreciate rather than resent -- is a challenge that requires flexibility, sensitivity to the makeup of your workforce and your company culture, and clear communication of the ultimate goal of a company wellness program, which is keeping your people healthy. But the benefits seem to outweigh the costs -- and don’t forget, if you don’t already have a wellness program in place, there are $200 million in federal grants available to help you start one.