Dallas Business Journal:
Paying for employees' health insurance is one of the biggest expenses many companies face. So, when employers hear of a way to cut insurance premium costs, they're eager to listen.
One of the biggest challenges in controlling costs can be the poor health habits of their employees.
Individuals who are not in the best of health tend to use their health insurance more often, which increases the cost to maintain that premium. For that reason, workplace wellness programs have become a popular way for companies to attempt to control health insurance expenses.
Some employers have chosen to "dangle a carrot" in the form of cash incentives or other perks to reward workers for improving their health, and thus reducing the cost of providing health insurance.
Other companies, however, have moved beyond incentive programs -- replacing the carrot with a stick -- and are penalizing employees who fail to improve their health.
That can include requiring workers who, for example, don't lose weight or don't stop smoking to pay higher insurance premiums than their slimmer or nonsmoking co-workers. Those actions help manage chronic conditions such as diabetes or heart disease.
About 31% of employers nationally offer rewards for workers who improve their health, while 6% penalize employees for poorly managing their health conditions, according to the 2008 National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care. Many of the companies surveyed reported that they may well consider implementing a punishment program in the next two years.
But as companies move from using the carrot approach to brandishing the stick, they run the risk of breaching company culture, alienating their work force or even running afoul of antidiscrimination laws.
Slippery slope
Companies typically consider punitive approaches after they've already taken other steps to handle costs, including shifting more of the premium cost to the employee.
"No employer wants to remove employee choice, but they do want to remove obstacles to healthy living," said LuAnn Heinen, vice president of the employer coalition National Business Group on Health. And with companies spending $7,211 per employee in 2007 on health care costs and no significant letup in the forecast, more businesses are exploring the difficult decision to institute penalties.
"After trying the carrot for a long time, they're starting to think about the stick," Heinen said.
The cost of health insurance premiums in the United States rose 87% between 1970 and 2006, according to research by the nonprofit Kaiser Family Foundation.
But, penalizing employees for making poor health choices is tricky business.
Dallas labor and employment lawyer Audrey E. Mross of Munck Carter PC in Dallas says she has noticed an uptick in the number of calls she receives from companies concerned about correctly handling the situation. That is a good sign, she says, because it means they understand that instituting certain wellness incentives is not a slam-dunk situation.
"There is definitely a right way to go about doing it," Mross said. To be safe, the company needs do its due diligence and carefully craft its message, and assure that any outside vendors offering wellness programs are also following the rules.
Some states have statutes in place that prohibit an employer from refusing to hire or take action against an employee for tobacco or alcohol use, for example, as long as it occurs after hours and not at the worksite. Texas has no such statute.
Some state statues do allow an employer to charge different medical insurance premiums for smokers, but they often require that the differential reflect the actual difference in costs of coverage between a smoker and a nonsmoker, not a random rate as an incentive for workers to stop smoking, Mross said.
A Texas-based company that employs workers in other states, she said, may deal with differing regulations for parts of its work force.
In addition, she said, the Americans With Disabilities Act limits an employer's ability to make medical inquiries about employees, with an exception for voluntary medical histories as part of an employee health program. But the Equal Employment Opportunity commission has said that sizable financial benefits such as reduction in premium costs or deductibles for employees who comply with wellness programs, or punitive measures such as higher premiums or deductibles for those who don't comply, might make the program seem less than voluntary.
It's a hot issue, but one where employers must balance a desire to cut costs and encourage healthy habits against the legal limitations that are designed to protect individual rights, Mross said.
Tougher measures
Some have instituted penalties for smokers, for example, and then stepped away from the practice or become embroiled in contentious dealings with workers as a result.
Yet the steps taken by employers have been shown to have a favorable impact on health care costs, at least in the long term.
Blue Cross and Blue Shield of Texas, like many of its large self-insured corporate customers, aimed to improve the bottom line by reducing medical costs.