Some employers use punitive incentives to push participation in wellness programs, but critics argue the pushback can defeat the purpose.
By Carol Patton
No matter how big the carrot is, not everyone is going to bite.
That's the challenge employers face when offering incentives for wellness-program participation. In short, not everyone participates. Human behavior is hard to change. For some employees, it's next to impossible.
Still, some employers are taking a tough stance against those who don't board the wellness train. While 42 percent of large employers (with more than 500 workers) offer financial rewards as an incentive, 15 percent impose a penalty, based on results from Mercer's latest poll, the National Survey of Employer-Sponsored Health Plans.
Recent headlines have focused on two employers -- Penn State University and CVS Caremark Corp. As of January 2014, the school has been penalizing tobacco users $75 each month and other employees $100 a month if they and their spouse don't complete a health questionnaire and biometric screening. After a staff uproar, those penalties were suspended. CVS employees are also being asked to share health information, such as biometric screenings, or pay a $50 monthly penalty. Despite employee outcry and bad publicity, these tactics are controversial, perfectly legal and appear to be a growing trend among employers struggling to manage soaring healthcare costs.
According to the Washington-based National Business Group on Health, almost four in 10 (36 percent) U.S. companies will apply penalties next year, such as raising premiums and deductibles for employees who don't complete health-management activities. More plan to do so in 2015 and 2016 (61 percent). Likewise, outcomes-based incentives, such as those that reward or penalize workers based on their tobacco use, is expected to grow from 54 percent next year to 71 percent in 2015 and 2016. So are rewards or penalties for reporting biometric outcomes, which are predicted to increase from 26 percent in 2014 to 68 percent by 2015 or 2016.
While more employers are shifting to this approach, the question on everyone's mind is whether punitive incentives are effective. Can they change employee behavior and reduce healthcare costs?
It all depends on who you ask.
Stepping Up to Engagement
This year, Worthington Industries introduced a "Say No to Wellness" surcharge that kicks in next year for its 6,000 U.S. employees, says Terry Dyer, vice president of HR at the global diversified-metal-processing company in Columbus, Ohio.
Up to now, only 32 percent of employees had participated in wellness activities. This year, covered employees were offered a choice: Earn at least 10 points in 2013 by participating in health screenings and other wellness activities or pay a $25 monthly surcharge beginning in 2014. The same holds true for covered spouses.
Although employee reaction to the surcharge was mixed, Dyer says, participation jumped to 63 percent.
"We decided to try a different route," he says, adding that Worthington's 40 HR managers, medical director, dietician and fitness coordinator collaborate on ways to engage employees in healthy lifestyles.
According to results from a benchmark study by the Kaiser Family Foundation, employer family health premiums across the United States rose by a modest 4 percent in 2013. But Worthington's premiums were flat, says Dyer, partially crediting the surcharge.
While pleased with the increased participation, he says, HR is now focused on "nailing the engagement piece," whereby employees take ownership of their health with or without incentives. However, if participation levels drop or remain the same in the future, he says, it's back to the drawing board.
"We won't beat our heads against the wall and say we did the best we could," says Dyer. "We will back up and take another look at it. We'll see what fits our culture ... but at the end of the day, it all comes down to employee engagement."
PricewaterhouseCoopers conducted an internal survey in 2010 that explored why 30 percent of its nearly 39,000 employees weren't involved in the firm's wellness activities. Roughly 15 percent were not enrolled in its medical plan. Some were unaware of the incentives while others didn't want to be bothered with reporting test results. Only a small percentage responded that their health status was none of their employer's business, says Marjorie Mayerson, managing director of national benefits for PwC in New York.
Still, HR hasn't given up on them. In addition to consistently promoting such programs, Mayerson says, PwC's HR leaders will test alternative approaches. Recently, PwC launched a mobile app to make it more convenient for employees to log in and redeem wellness points. Its medical-plan vendor also works with network doctors to encourage employees with chronic conditions to adopt healthy behaviors and better manage their health.
"Everyone is looking for new strategies," she says, adding that grass-roots efforts may be the most promising in that individual employees model healthy behaviors, then encourage their staff or peers to do the same or unite toward a common goal. "Nobody has found that magic bullet, magic pill or magic wand. What it comes back to is, behavior change is really hard."
Some employers have no choice but to use disincentives. With 23,000 employees at five hospitals in the Detroit metro area, Henry Ford Health System adopted a "tobacco-free workday, every day" corporate policy last year. It no longer hires smokers or allows people to smoke at anytime throughout their workday. Employees who even smell of smoke are not tolerated, since it can exacerbate patients with respiratory conditions, says Dr. Kimberlydawn Wisdom, senior vice president of community health and equity, and chief wellness officer at Henry Ford.
She says tobacco zero tolerance was a very gradual process. In 2007, the company adopted a smoke-free campus, but still allowed employees to smoke 30 feet away from the hospital's doors. Then the state of Michigan passed the Dr. Ron Davis Smoke Free Air Law, which banned smoking in certain public places such as hotels and restaurants. Next came an aggressive push to enroll smokers in tobacco-cessation courses.
Wisdom says employees saw "the handwriting on the wall" and weren't surprised by the company's latest policy. The backlash was minimal.
In fact, she says, there are fewer complaints now than in the past when employees grumbled about cigarette butts strewn across the grass or sidewalk, or walking past smokers near the hospital's entrance.
"It's not what you do but how you do it," says Wisdom. "With any health-related effort, we've got to make the tough calls but try to do so in the most supportive way."
Temporary Fix or Cure?
While punitive incentives can alter behavior, they're really a short-term versus long-term strategy, says Dee Edington, a former researcher at the University of Michigan who now oversees his own consulting firm, Edington Associates, in Ann Arbor, Mich.
"I think this is a trend, unfortunately," he says. "[Employers] do get higher participation rates but I think as soon as the incentives go away ... almost everyone says they'll go right back to where they were."
He says the real issue employers should focus on is employee performance. Does the worker meet expectations? That's what counts, he says. It's also important to create a culture that emphasizes wellness. For example, consider how much and how often HR stresses workplace safety. Send the same type of message with wellness. "It's not OK not to be healthy," he says. "Pretty soon, people [will take wellness seriously and change behaviors] without thinking about it. It's expected."
Apparently, many U.S. companies share that opinion. Seven in 10 believe it's necessary to develop a workplace culture in which employees are responsible for their own health, which is a top priority of their health and productivity programs, states the NBGH.
HR can kick-start the process by conducting an environmental survey, he says. What type of food is served in the cafeteria? Do employees have opportunities to exercise during work? How are employees treated? What factors contribute to employee stress? He says stress reduction will be HR's next big challenge, since stress impacts everyone, every day.
Until then, Edington says, HR needs to change its outcome measures.
"We've been measuring the wrong thing," he says. "Employees represent about 40 percent to 50 percent of healthcare costs. You're not working with spouses and dependents ... there's not much of a chance to lower their healthcare costs. Performance will give you so much more return to shareholder value ... . The most you can save in healthcare is $200 to $300 a year per employee."
Frustrated but Determined
At some companies, punitive measures may do more harm than good.
"The punitive approach is not effective," says Gwen Scott, manager of benefits and work/life programs at Bendix Commercial Vehicle System, a supplier of commercial air-brake and filtration systems in Elyria, Ohio. "I don't think people respond and they're not engaged. We've been doing positive incentives in a more formal way tied to our insurance [since] 2008. It's really become a way of life for us that, if we tried to introduce something punitive, it would backfire."
With 2,700 employees across North America, 75 percent of Bendix's workforce participates in its point-based wellness programs. By doing so, employees lower their healthcare premiums and double the company's annual contribution to their health-savings accounts.
The remaining 25 percent don't participate for several reasons. Approximately 15 percent are covered under their spouse's health plan. To receive incentives, participating employees must also be tobacco-free for 12 months. That's usually not the case with smokers, she says, who tend not to participate since they won't receive incentives.
And that's the challenge, says Scott. How do you persuade smokers to engage in otherwise healthy behaviors?
This year, she says, the company created additional opportunities for smokers and other employees to earn points such as getting preventive exams or taking children for wellness visits.
So far, there is no perfect solution. Scott says HR has discussed prorating incentives so that smokers can still receive partial rewards.
"If they don't know their health status because they're tobacco users and not participating, then they will be our most critical population down the road in terms of [healthcare] use, absenteeism and productivity," she says. "If we can get them to take that first step, maybe tobacco cessation will be step three, five or seven in their journey to better health."
That said, Bendix did recently share good news with employees -- healthcare premiums will not be raised for the second year in a row, says Scott. HR is also exploring ways to interact with 50 percent of the covered members it never sees -- the families of employees, adds Ed Casper, the company's group health and safety leader.
"[Family members] are a huge opportunity," he says. "We always hope that our employees are taking the message home, but that's not always consistent. We are making efforts to better engage family members."
So is Key Bank, a regional community bank based in Cleveland.
"We want to engage those who want to change and keep those who are low risk at low risk," says Sandy Rosenberg, vice president of health and security benefits and absence manager at Key Bank. "Those at high risk may not want to change, and we would never force them because it's not worth our money or their time if they're not ready."
However, HR did make one noticeable change to its wellness program. It no longer supports the honor system that allowed its 15,000 employees to self-report health assessments. Rosenberg says health screenings must either be performed on-site when its healthcare provider visits large corporate sites or employees can submit forms completed by their medical provider before receiving rewards. Those who comply receive a $500 annual contribution to their HSA. The contribution is doubled if the employee's covered spouse also participates.
But if their screenings reveal health issues, such as high cholesterol, they can still earn the incentive if they participate in other wellness activities such as online coaching or physical activity challenges.
For years, participation has been high, in the 80s, even 90s, percentile range. But Rosenberg believes those numbers were inflated due to self-reporting. Although HR is still gathering 2013 data, she suspects roughly half of the bank's employees actually participate. HR's participation goal is 60 percent.
Even at that level, the wellness program has made a difference. In the past, she says, the number of incidences related to short-term medical leave was always higher than the industry's benchmark. But five years ago, HR started requiring medical-plan members to complete health assessments and screenings. Although Rosenberg can't reveal current results, she says, "Now we're at benchmark."
While some companies may be frustrated with low or average employee participation rates, Rosenberg says, HR should seek opportunities for best practices, make them fun and, above all, give them time to work.
"You're not going to get 100-percent participation and engagement," she says. "Look at it more holistically. Look at your medical-plan costs, productivity, incidences of absences. That may be something that you start to see come more in line with benchmark."