Sweat More, Pay Less

Companies have long married their health-care policies to wellness programs that encourage employees to lead a healthy lifestyle--to quit smoking, eat right, and exercise more often. Increasingly, these programs give workers' wallets a workout, too. On Oct. 11, Des Moines-based Principal Financial Group (PFG ) launched a product that asks participants with health risks to try to shape up or pay more. All employees start with Principal's "enhanced coverage," which has lower deductibles and co-pays than the "standard coverage." But then employees are asked to submit to a screening. Those who reach a score based on a set of criteria keep the lower-cost coverage. Those who don't will be urged to work with a plan-provided health coach to improve their scores. If they don't take the tests, won't work with a coach, or slack off on, say, an assigned exercise regimen, they'll get higher co-pays and deductibles. (Employees with valid medical excuses will get the discounts.) "We're out there," says Jerry Ripperger, Principal's director of consumer health. "But I think the industry's going in this direction."

Principal's offering, targeted at small and medium-size businesses in Michigan and Iowa, goes further than many programs by using results as a baseline for incentives. The more common approach is to dangle discounts for merely participating in, say, a weight-loss program. A study by human resources consultant Watson Wyatt (WW ) and the National Business Group on Health found that 46% of employers offer financial rewards for such "behaviors," or plan to in 2008. An additional 26% intend to add them in 2009.

It's the latest example of the small but growing list of insurers and companies taking what some call a "good driver's discount" approach. In July, UnitedHealthcare (UNH ), in partnership with BeniComp Group, launched a more aggressive product that gives employees a discount on their deductible for each of four measures that they meet. If, say, their cholesterol is too high, they won't receive that incentive until they retake the test the next year. (Employees can make one appeal, and can get the savings if they have a doctor's note.) UnitedHealthcare says the plan, now aimed at small employers in four states, will expand nationally and target larger employers in the next six months.

Principal's product is brand-new, and UnitedHealthcare has just two employers signed up. Many companies may be leery of the new offerings, since they haven't been tested in the courts. Attorneys warn employers to vet plans for compliance with the Health Insurance Portability & Accountability Act and the Americans with Disabilities Act. "The more aggressive the plans become," says Sharon Cohen, Watson Wyatt's group and health-care benefits counsel, "the greater the chance...for litigation."

Many employers also fear alienating workers with closely managed programs. A new study by the Employee Benefit Research Institute notes that employee acceptance of wellness programs "decreases sharply" as plans get more involved with health screenings. Still, employees aren't so uncomfortable with the idea that they'd turn down a deal. The same study found half would be extremely or very likely to take part in the programs if it meant a 10% cut in premiums.

By Jena McGregor

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