More employers turning to carrot-stick in health care

Roy Simmons, a nuclear power station plant manager Roy Simmons, a nuclear power station plant manager for Dominion Resources in Surry, Va., lost weight when the company offered a $400 premium credit. He talked about it on April 10, 2014. Photo Credit: AP / Steve Helber

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That little voice nagging you to put down the cake and lace up the running shoes is increasingly coming from your employer and is likely to grow louder with a looming change under the federal health care overhaul.

More companies are starting or expanding wellness programs that aim to reduce their medical costs by improving their employees' health. They're asking workers to take physical exams, complete detailed health assessments and focus on controlling conditions such as diabetes. Along with that, many companies are dangling the threat of higher monthly insurance premiums to prod workers into action.

The Affordable Care Act is one reason the programs are spreading. The federal law calls for a 40 percent tax on expensive benefit plans starting in 2018, and many companies that offer employer-based coverage have begun looking for ways to lower costs and avoid that tax.

"It is a very powerful . . . visible wake-up call to all employers," said Helen Darling, chief executive of the National Business Group on Health, a nonprofit organization that represents large employers on health care issues.

Businesses see wellness programs as a win for themselves and their workers. But studies have shown that the programs have a limited ability to reduce costs. They also raise concerns about privacy and discrimination against older workers or those who are more likely to have chronic conditions. Penalties also can hit lower-wage workers harder than they would executives because premiums already consume a larger portion of those workers' paychecks.

"The top-line concern is that it has a huge potential to be discriminatory," said Lydia Mitts, a health policy analyst with the nonprofit Families USA. Benefits consultants say federal regulations help guard against that.

For years, companies have offered gift cards, cash and other rewards to employees who agree to get physical exams, fill out health assessments or take other steps to monitor their health. The goal is to at least make workers more aware of their health, and it worked for Roy Simmons, a 55-year-old nuclear power plant manager for energy provider Dominion Resources Inc.

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Dominion started offering a $400 premium credit a couple years ago for employees who agreed to have a health assessment, so Simmons had basics such as his weight and cholesterol measured. He then forgot about the numbers until a reminder arrived last year. Another physical told him he had gained 40 pounds.

"That was a bit of a wake-up call for me," said Simmons, who manages a Dominion plant near Williamsburg, Va. "I didn't know it had happened to me. I know that sounds stupid, but I wasn't paying attention, and it just snuck up on me."

Simmons cut junk food from his diet and asked his college football-playing son to become a workout partner over the summer. He has since dropped the weight.

But companies haven't seen enough cases like Simmons', in which an incentive helps nudge an employee to participate in a wellness program, so some employers have started using penalties.

These penalties most often stick employees who do not participate with larger premiums or deductibles, but they also can come in the form of a straight monthly surcharge, deducted from paychecks.

A survey of nearly 600 large U.S. companies by benefits consultant Towers Watson found that 22 percent of companies that use financial incentives to encourage wellness program participation structured them as penalties. That's up from 18 percent last year.

"There's going to be more of your skin in the game," said Michael Wood, a Towers Watson senior consultant. "If you help us control costs, use the system wisely, you will be rewarded."

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