Wellness: Even the word sounds soothing. For the past decade, "wellness benefits" such as gym memberships, fitness programs and weight-loss classes have become a commonplace of work life, an easy way for employers to offer a wholesome perk to their cubicle rats.
Most big employers provide wellness programs now, and the Affordable Care Act gave the idea a boost in 2010 by letting companies offer employees financial incentives— such as lower health insurance premiums, gift cards or prizes—worth up to 30 percent of the cost of their health insurance.
It seems like a win-win: Employees get a deal, and employers get a chance to rein in the escalating cost of health care by helping their workers lose weight, quit smoking or start exercising. And indeed, after the programs started up more than a decade ago, studies showed they reduced corporate health care costs and workplace absenteeism. Bosses assumed there were less easily measured benefits, too—lower employee stress levels, higher morale and loyalty.
But as the wellness industry has grown, questions have started to arise about just how effective these programs really are—and how fair. It’s not clear the programs financially benefit employers, and evidence is also mixed on whether they make employees healthier. And now, some employees have begun to bristle at the omnipresence of wellness in corporate culture and see the requirement to share personal health data with their employer as an intrusion on their privacy.
The programs have come under fire from disability and privacy advocates, who argue that the size of the incentives attached to “voluntary” wellness programs really amounts to punishing workers who don’t participate, in effect shunting more of the company’s overall health insurance bill onto their shoulders.
The Obama administration is preparing to issue final rules next week that will clarify when wellness programs go too far by establishing how much employees can be penalized for not participating in a program. Employer groups say the rule is badly needed, since it’s not clear whether companies that follow the rules in the ACA might at the same time be violating the Americans with Disabilities Act, which for privacy reasons requires any wellness programs to be legitimately voluntary.
If the administration does what many expect—aligns the existing federal health-privacy laws to comport with the goals of the Affordable Care Act—it will amount to codifying exactly the system disability advocates are worried about. And employees, increasingly, will find themselves drafted into an industry whose benefits are anything but clear.
Obamacare might have given it a push, but the wellness boom has been a long time in the making. The 1996 Health Insurance Portability and Accountability Act allowed employers to offer financial incentives for participation in wellness programs. The Bush administration issued regulations 10 years later specifying that the maximum incentive for participating could not exceed 20 percent of the cost of a group health plan.
The ACA hiked that incentive limit to 30 percent—with an upper limit of 50 percent—at the discretion of the secretary of Health and Human Services—for companies with wellness programs designed to prevent or limit tobacco use. This was partly the result of of lobbying by the employee benefits industry, and partly because President Barack Obama was a fan, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation.
In a 2009 speech before the American Medical Association, Obama touted Safeway’s wellness program, which he said cut the company’s health care spending by 13 percent. “We’re open to doing more to help employers adopt and expand programs like this one,” he said.
Politically, wellness is a feel-good health care reform. The programs tend to enjoy bipartisan support, and both employers and employees generally like them, according to a recent survey from Deloitte. Not surprisingly, some 91 percent of consumers in the survey viewed wellness programs as an effort to improve employee health.
As a result, they've become almost ubiquitous at large companies. According to the Kaiser Family Foundation, half of all firms offering health benefits provided wellness programs in 2015; more than 80 percent of firms with 200 or more employees did so. The industry last year had grown to $7.3 billion in revenue.
It's clear wellness has caught on. What's far less clear, though, is how well-spent that money is.
Wellness proponents say the programs more than pay for themselves by reducing medical costs down the line; they cite a 2010 Harvard Business Review article finding that Johnson & Johnson’s wellness program saved $250 million in health care over a decade, offering a $2.71 return for every dollar spent from 2002 to 2008. They also tout a separate2010 study by Harvard professor Katherine Baicker indicating that medical costs fall by about $3.27, and absenteeism costs by $2.73, for every dollar spent on wellness programs.
Baicker, however, has acknowledged that her study might have been an outlier. In an interview, she said her study was “based on the literature at the time” but because of “what we know today … there’s some reason to be cautious in using [the study’s] estimates.”
“Better evidence is needed to support the amount of money we’re spending on this,” Baicker said. However, she thinks the programs are the obvious place to make a dent in health habits. People spend so many hours at work, Baicker said, that work “might be a good place to change health behaviors.”
More recent research suggests that skepticism is warranted. A 2014 RAND Corporation research brief reported that wellness programs were “having little if any immediate effects on the amount employers spend on health care.” A study published in Health Affairs in January found employees in wellness programs that provided money for weight loss lost no more weight than employees who had no incentive. The 2014 Rand analysis and a recent study by the Employee Benefit Research Institute found that the programs saved money not primarily by preventing employees from getting sick or needing medical care, but through disease management programs for employees who already had chronic conditions like diabetes.
RAND’s lead author on the subject, Soeren Mattke, says financial returns from encouraging healthier lifestyles are largely an illusion. Companies embraced wellness programs because they badly wanted to do something that would please employees while saving them a buck, he said. The savings aren’t there, but the programs have become a standard offering that employers are afraid to give up, he says.
To put a positive spin on it, proponents say the programs offer more than just lower costs, pointing to evidence about some softer outcomes. A2008 study from the American Psychological Association, for instance, found that participation was linked to decreased absenteeism and increased job satisfaction.
“It’s a cultural thing within an organization,” said Tami Simon, managing director Buck Consultants, said. “It … sends the message that the employer is making long-term investments in people. This is not one of those short-lived things.”
In Washington, the debate over wellness has come to center on incentives—a crucial part of the wellness industry. Employees, it turns out, usually ignore wellness programs, even if they offer a payoff. According to Mattke’s work, wellness programs that offered no financial incentive had a median participation rate of 20 percent. That percentage doubled with financial incentives, however. Wellness vendors, not surprisingly, encourage the financial incentives, and half of all large firms offer them.
Employers can offer incentives that include wearables like Fitbits, or lower health premiums or deductibles. Some offer rewards for meeting targets like weight loss or lowered cholesterol.
Some employers, however, impose penalties on those who don’t participate in wellness programs as a way to offset increasing health care costs. In other words, instead of simply getting a lower premium for participating, employees must pay the employer additional money for choosing not to participate.
That’s where the trouble starts. In some of the wellness programs, penalties—or incentives, depending on how one looks at them—are significant. In 2015, the average annual cost of group health plan coverage for an individual was $6,251 and $17,545 for a family, according to the Kaiser Family Foundation.
Allowing for a maximum penalty of 30 percent for each of these plans would amount to $1,875 and $5,264 respectively—employers could theoretically charge an employee that additional money for choosing not to participate. Some companies have pushed the limits. In 2014, the EEOC alleged that Honeywell International charged employees up to $4,000 if they did not submit to medical testing. Flambeau Inc., a Wisconsin-based plastics manufacturer, allegedly shifted the entire health care premium cost onto an employee because he refused to undergo biometric testing and fill out a health risk assessment.
“These are massive incentives,” said Pollitz. “They’re not just a Starbucks gift card.”
The financial payoff from the health care cost savings, if there are any, is not immediate, since employees rarely stay on the same job for life, Pollitz says. The savings in health care insurance payments, however, are “realized immediately” because employers may take the money they get from nonparticipating employees and use it to cover some of their health care costs.
“That saves the employer money,” she said. “That doesn’t save money for the [health care] system.”
Few employers have been accused of using incentives to penalize non-participation—to date, at least. “When you look at the implementation, usually it’s not done from a punitive perspective,” said Daniel Newton, staff vice president of product development and behavioral economics at RHI, an Anthem subsidiary.
Yet as health care data become more ubiquitous, the programs are also running afoul of privacy defenders, who fear that sharing information on medical or genetic conditions could set up workers for discrimination. Federal anti-discrimination laws prohibit employers from asking their employees for medical information unless that information is job-related and consistent with business necessity. However, there is an exception for “voluntary wellness programs.” Disability and privacy advocates fear that allowing employers to charge thousands of dollars in penalties will no longer make those programs “voluntary.”
Although wellness programs are administered through health insurance programs or third-party vendors, there are reasons to fear that an employee’s data will get back to the employer or be used in marketing or advertising, said Pollitz.
“The vendors who run these programs, they absolutely pick through your data and they seem to be sharing it pretty broadly with their other partners,” she said.
If effects on employee health and health care costs aren’t guaranteed, there is one clear beneficiary: the wellness industry itself.
Despite the mixed record of success, the industry has grown leaps and bounds. A recent market research report from IBISWorld found that in the past five years, wellness programs have seen an annual growth rate of 4.8 percent. An estimated $8 billion in projected 2016 revenue is expected to grow to $11.3 billion by 2021, according to IBISWorld.
About the only thing standing in the way of further growth was the Equal Employment Opportunity Community, which in 2014 sued three companies, including Honeywell and Flambeau Inc. The suit alleged their wellness programs violated the Americans with Disabilities Act because their financial incentives were too high to be “voluntary,” amounting instead to a form of financial coercion that forced employees to share sensitive medical or genetic information otherwise protected under the ADA or the Genetic Information Nondiscrimination Act.
The ADA prohibits employers from asking employees about their medical history if it is not “job-related or consistent with business necessity,” but has an exception for voluntary workplace wellness programs. GINA prohibits bosses from seeking information about an employee’s spouse—but again makes an exception for wellness.
In December, employee advocates were dealt a setback when a Wisconsin federal judge ruled that Flambeau Inc. could require employees to participate in a wellness program in order to receive health insurance.
But after an outcry from the business community—and the White House—the EEOC signaled it would back off, and it issued two proposed rules, one
for GINA and one for ADA.
The ADA regulation clarified that employee wellness programs are ADA-compliant as long as the reward or penalty for participation does not exceed 30 percent of the cost of an employee health plan. (The business community and health policy experts want EEOC to clarify whether the 30 percent limit applies to coverage for individuals only, or to family members as well; the GINA regulation clearly refers to family plans).
The proposed GINA rule went too far for Sen. Elizabeth Warren and Rep. Bobby Scott, who told the EEOC in a letter that it was a "departure from current regulations, which hold that no financial inducements can be offered in exchange for genetic information.” Under the proposal, they wrote, “an individual could be under significant financial pressure to provide this information to his or her spouse’s employer.”
Pollitz said it remained unclear whether the administration will make substantial changes to the regulations, given public comments voicing concern about their effects on employee privacy. However, one thing is certain. By issuing the regulations, the administration will cast wellness in regulatory stone, regardless of whether the programs actually work. For now, wellness is here to stay.
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