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Companies Can Tie Worker Health Premium Cost to Wellness

Businesses in the U.S. won more freedom to charge higher insurance premiums to workers who don’t meet health goals, or reward those who shape up, under rules released by the Obama administration.

Three years in the making, the regulations also require employers to offer a “reasonable alternative” for workers who can’t meet standards on weight, cholesterol or other measures, the U.S. Department of Health and Human Services said today in a statement. That’s meant to protect employees from discrimination, although the agency rejected calls by consumer groups that companies provide medical evidence for claims that wellness programs improve health.

“The final rules support workplace health promotion and prevention,” the department said, “while ensuring that individuals are protected from unfair underwriting.”

Conditions such as obesity and diabetes account for three-quarters of U.S. health spending, and wellness programs have been gaining in popularity as businesses grapple with rising costs. The regulations, mandated by the 2010 health-care law, let employers charge workers as much as 30 percent of their medical-plan premiums if they fail to meet goals, an increase from the current 20 percent. The rules take effect Jan. 1.

Incentive Programs

Almost half of U.S. companies with more than 200 employees now have wellness programs, according to the Kaiser Family Foundation, a nonprofit health research group based in Menlo Park, California. The incentives can be tied to activities such as joining a gym or getting a blood-pressure test or specific targets such as body-mass index.

While the administration eased some proposals, the regulations will still complicate wellness efforts, said Helen Darling, president of the National Business Group on Health. The Washington-based nonprofit represents large employers including Dell Inc. (DELL), American Express Co. and PepsiCo Inc. (PEP)

The rules give workers more leeway to seek changes in wellness targets they can’t meet due to health conditions and to have their doctors suggest alternative measures. There’s a danger that could tie up employers in protracted negotiations over health goals, Darling said in a telephone interview.

“The more you put in terms of requirements and the more risk you make for employers, the more likely they are to say, ‘we don’t need this hassle,’” she said. “It’s making a lot more work for employers, and therefore, more expense.”

Consumer Protections

Families USA, a Washington-based consumer group, welcomed the consumer protections.

“These rules will help ensure that wellness programs are designed to actually promote wellness, and that they are not just used as a backdoor way to shift health care costs to those struggling with health problems,” said Ron Pollack, the group’s executive director, in a statement.

The health agency today also released a study of workplace wellness efforts, also mandated by the health-care law. The report by the Rand Corp. found small yet promising changes in worker behavior and costs from programs at 600 businesses.

The measures “can reduce risk factors, such as smoking and increase healthy behaviors, such as exercise,” the Santa Monica, California-based research institute said in the report. Its analysis “confirms that workplace wellness programs can help contain the current epidemic of lifestyle-related diseases.”

The move to tie workers’ costs to their health is being examined by the U.S. Equal Employment Opportunity Commission to see whether such programs violate anti-discrimination laws. And California’s legislature is considering a bill that would bar linking financial rewards to a worker’s health status.

While some studies suggest $3 or more is saved for every $1 spent on wellness programs, the gains may come from shifting costs to less-healthy employees rather than changing behavior, according to a March analysis in Health Affairs.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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