Is Wellness a Healthy Way to Curb Healthcare Costs?

A trio of authors says wellness savings may be illusory and result from cost shifting, not creating healthier employees. Naturally, some experts disagree.

Monday, April 1, 2013
Write To The Editor Reprints

Among the trends gaining much traction in the employer drive to reduce healthcare costs, wellness currently sits at the top of the heap.

Employers large and small, desperately seeking ways to slow rising healthcare costs, are more and more trying wellness programs to create healthier workforces, with the idea that healthier employees will logically result in lower costs across the board.

After all, there is a growing body of research focused on wellness' positive impact on health, and workplace healthcare costs. Also, the Centers for Disease Control has reported that 75 percent of healthcare costs in the United States result from chronic conditions such as diabetes, cancer, heart disease and stroke, so reducing the risk factors associated with chronic diseases seems a slam dunk.

Finally, with the Affordable Care Act acting as a key driver (big proponent of wellness), it seems wellness programs have arrived as a bona fide win-win for employers and their workforces.

Not so fast, according to a research article published this month in Health Affairs, a journal of health policy thought and research.

The study, Wellness Incentives In The Workplace: Cost Savings Through Cost Shifting To Unhealthy Workers, makes the case that cost savings from wellness programs may not be the result of healthier workers, but are more likely the result of cost-shifting to employees who can least afford it. In addition, the article reports that wellness programs actually may run afoul of the ACA by being discriminatory against employees within lower socioeconomic groups.

"What we found is that more research is needed to know whether savings accrue from participation or cost shifting," says Jill Horwitz, a law professor at the UCLA School of Law, and one of the research paper's authors. The other authors are New York-based Brenna Kelly, an associate at Ropes and Gray, a law firm, and John DiNardo, a professor of economics and public policy at the University of Michigan, in Ann Arbor.

"We believe we need to understand more about who participates in wellness programs and why," Horwitz says. "In the meantime, it may be overly optimistic to assume that workplace wellness programs can lower costs through health improvement."

For their article, Horwitz and her colleagues reviewed "randomized controlled trials" and identified challenges for workplace wellness programs to function as the ACA intends. For example, she says, the available research raises doubts that employees with health-risk factors, such as obesity and tobacco use, actually spend more on medical care than others.

Horwitz also explains that those at-risk groups may not be especially promising targets for financial incentives meant to save costs through health improvement, and although there may be other valid reasons -- beyond lowering costs --  to offer workplace wellness programs, her group found little evidence that such programs can easily save costs through health improvement without being discriminatory.

The evidence suggests that savings to employers may come from cost shifting, with the most vulnerable employees probably bearing greater costs that, in effect, subsidize their healthier colleagues, Horwitz says.

"The main point is that it's believable that companies can save money through incentive-based programs, but our study left us skeptical that the money saved was win-win," she says. "Going through all these hundreds of papers, there is mixed evidence that working-age people in wellness incentive programs improve health and spend less on medical."

Of course, there are some who disagree with the findings of Horwitz and her colleagues about the effectiveness of a wellness strategy, not only in reducing costs but in them being discriminatory against lower-income workers.

Steven Noeldner, a partner in Mercer's total-health management practice in Irvine, Calif., says while there is the potential for cost shifting in programs tied to incentives for those who don't participate or do not meet the health standards to get either an incentive or a penalty, the broad statement that the Health Affairs paper suggests that this is happening on a regular basis or is the intention of the programs is "misguided."

"The paper does cite some prominent studies, but not accurately," Noeldner says. "For example, controlling risk factors is proven to lower healthcare costs savings. Anyone in the health management arena would say that is an undisputed fact. The authors don't come from the healthcare industry, and they may have somehow misinterpreted some of the data."

Noeldner adds that to make any statement about the potential for cost shifting, it's necessary to consider the research methodology used to gauge a wellness program's effectiveness. As such, he explains, the methodology with the greatest rigor, precision and credibility is a matched control design, which considers demographics, gender and various other factors to determine health risk status. Noeldner mentioned wellness experts such as Ron Goetzel, research professor at the Emory University Rollins School of Public Health's Institute for Health and Productivity Studies, as a prime example of someone whose work has established the fact that wellness can reduce healthcare costs and avoid unfair cost-shifting.

"You have to measure healthcare costs from a time before the matched control design study until after the study, and the resulting difference between healthcare costs are attributable to wellness," he says. "They are called quasi-experimental designs and they are accurate."

"This type of measurement is essential," Noeldner says. "Most employers will see positive healthcare ROI within three to five years."

Noeldner concedes that with poor wellness plan design cost shifting is possible, but in any credible research studies cost shifting is a non-issue. He says that regarding the Health Affairs paper, there are some interpretations made that conflict with those coming from someone who knows the wellness research literature or methodologies.

"There is always a possibility that can lead to discrimination, in terms of people paying higher or lower premiums," he says. "But there is no evidence that health and wellness programs are causing that cost shifting when best practices have been demonstrated."

He adds that cost shifting to unhealthy workers is "not the intention" of employers or wellness strategies.

"Employers truly desire to lower costs and help employees at the same time," he says, citing the work of entities such as the Health Enhancement Research Organization, a Mercer partner and non-profit that helps employers avoid the risk of cost shifting and discriminatory wellness plans.

"Also, you have to remember that the ACA and HIPPA require that reasonable alternatives be put in place for any wellness program as a way to avoid discrimination," he says. "There really is no evidence to suggest a nefarious plot to penalize unhealthy workers. Employers want to save on healthcare costs, but they also truly want to improve health of employees for benefit of the business as well."

Newsletter Sign-Up:

HR Technology
Talent Management
HR Leadership
Inside HR Tech
Special Offers

Email Address

Privacy Policy

LuAnn Heinen, vice president at the National Business Group on Health, a Washington-based non-profit association of large employers, says the NBGH sees research evidence and believes that employees with risk factors such as obesity and smoking do have higher levels of healthcare spending. Not only that, she adds, the data clearly is beginning to paint a picture of how wellness can help staunch the flow of healthcare dollars, while at the same time benefit employees who want to participate.

"Of course, there is no guarantee a specific wellness program will be effective, but if they are done properly, they will improve health and save money," Heinen says, adding that employers report that their employees heavily support wellness programs.

"Employee surveys say employers should reward them for good health outcomes," she says.

Heinen adds that financial incentives (or penalties) as part of a wellness program are only a piece of the puzzle, as most large employers at least deploy many strategies in the battle to control healthcare costs.

"One size doesn't fit all, and some employers won't try anything," she says. "But if you offer a variety of wellness activities, such as 'lunch and learn' programs, gym memberships and fitness challenges, and get leadership buy-in, wellness can have a definite cost-savings impact. But it's an arrow in the quiver, not the only solution."

As for potential cost-shifting to any one subset of employees, she says, the concept of insurance is about spreading risk, so those spending less on healthcare subsidize those who spend more.

"It's sort of like splitting a check no matter what anyone ordered, which may not be fair," she says. "If applied fairly, financial incentives, in a small and partial way, may redress some of that imbalance within healthcare.

"We are talking about working populations, and in many cases everyone within an organization has health insurance," she adds.

Horwitz remains skeptical. She says that after looking at incentive programs, if companies are saving money and not doing it via improving health, they are doing it by shifting costs. She adds that from an economic perspective, there is no real difference between a reward or penalty.

"The person who takes the assessments and has no risks pays a lower health insurance premium, but another person takes it and has several health risks, they pay a higher premium unless they can address those health risks," she says. "Whether people can improve their situations through a wellness program has mixed results at best."

Horwitz says HR executives and decision-makers should have a general awareness, if not skepticism, that these are win-win strategies.

"Employers might want to think more about programs that give access to opportunities that improve health, but have no penalties or rewards attached," she says. "As it stands, there is limited understanding among decision makers about what the costs are to lower income workers."

Horwitz also questions why wellness programs choose health risks such as smoking or obesity, which tend to be more prevalent among lower-paid workers.

"If I were designing a wellness plan, I would focus on where is most of my medical spending is going and where is it adjustable," she says. "All we are saying is there needs to be more investigating on the wellness front. It may be worth it, but we are skeptical that they are truly a win-win."


Copyright 2017© LRP Publications