April 2010


There are many different methods to reward healthy behavior change.  One method gaining in popularity is linking incentives to benefit programs.   David Hunnicutt, President of Wellness Council of America (WELCOA) states “Perhaps the best approach in increasing wellness participation levels is formally linking your benefit program to your wellness plan design.”

There is sometimes hesitation on the part of organizations to take that route as they are concerned with employee reaction.  The times are a changing. According to the Wall Street Journal/Harris Interactive Poll, 53% of U.S. adults think it is fair to ask those with unhealthy lifestyles to pay more for their health insurance (up from 37% only three years ago).  According to a  Washington Post article, 56% of employers plan to hold employees more responsible for the cost of health benefits.

There are important HIPAA factors to keep in mind when designing benefit based incentives. HIPAA stipulates: If an incentive is contingent upon the satisfaction of a health standard, the following guidelines must be observed.

  1. It must be re-assessed at least once per year.
  2. It must be designed to promote health and wellness.
  3. It may not exceed 20% of the total cost of coverage offered (raised to 30% effective Jan. 2014)
  4. It must be available to all “similarly situated individuals”, appeals and “responsible alternatives” must be offered.
  5. The availability of the appeal must be disclosed in all plan materials.

Other factors to consider:

  • How will the incentives be awarded and administered, what technology is needed?
  • Will it be a reduced payroll contribution, a better health plan, a deductible credit, or a Health Savings Account deposit?
  • How will appeals be handled?
  • Will supporting programs be offered to help employees reach the incentive goals?

While this approach may seem daunting the rewards can be significant.

In one case study involving a manufacturing company with a little less than 2,000 employees,  one year savings were over $200,000.  This was done by choosing four areas – blood pressure,  body mass index, cholesterol and tobacco use.  If an employee fell within the acceptable parameter for each item the employee contribution to their medical plan was less; if they did not meet the criteria, they paid more. All four areas improved for that employee population.

Valorie Bender

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