Changes to Wellness Programs Suggest Employers are Rethinking Health Promotion

By Karen Davenport

January can feel like a time for new beginnings—after holiday festivities, many people resolve to exercise more, eat better, reduce stress, take care of a nagging health concern, or otherwise take better care of themselves. In recent years, many employers have provided workplace wellness programs that may help employees stick with these resolutions, such as benefits, services, or financial incentives that encourage workers to improve their health. CHIR experts have previously written about these wellness programs, but the recent publication of KFF’s 2021 Employer Health Benefit Survey, which found some notable changes in workplace wellness programs, has prompted us to take a fresh look.

What are “Wellness Programs”?

Workplace wellness programs offer a range of health-promoting services and activities, such as nutrition counseling, exercise classes, biometric screenings, lifestyle coaching, flu shots, and other activities intended to encourage employees to change their health-related behaviors and reduce their health risks. In many cases, employers go beyond offering these services and activities and use financial incentives such as cash rewards, gift cards, and discounts on health plan premiums or cost-sharing to boost employee engagement. Employers can deploy these incentives via participatory wellness programs, rewarding employees for engaging in activities such as attending a class or completing a screening, as well as “health-contingent” wellness programs, which link financial rewards to achievement of specified health targets, such as Body Mass Index (BMI), cholesterol, and blood pressure. These financial incentives can total up to 30 percent of the cost of individual coverage, or up to 50 percent if the incentive is tied to a tobacco cessation program. Employers who offer these programs often purchase their wellness programs through an independent vendor or through their insurance company, to the tune of $8 billion annually.

Wellness Programs in the COVID Era

In the initial months of the COVID-19 pandemic, workplaces and gyms closed their doors, group health education and nutrition classes pivoted to virtual platforms, and utilization of preventive services fell significantly. Given this upheaval, it follows that employers reconsidered key elements of their workplace wellness programs for 2021, including their use of financial incentives and the wellness program components they support. To understand these dynamics, KFF’s 2021 survey specifically probed employers’ use of biometric screenings and health promotion activities. On biometric screenings, they found that 38 percent of large firms (more than 200 workers) offered employees the opportunity to complete a screening in 2021, compared to 50 percent of large firms offering this service in 2020, while small and large firms reduced or eliminated financial incentives for completing the screening. Similarly, 15 percent of large firms and 5 percent of small firms reduced their standards for receiving a financial incentive in health-contingent programs. And while the proportion of employers offering programs to help employees lose weight or stop smoking, or offering other lifestyle or behavioral coaching, remained steady, half of these firms made changes to their health promotion programs, such as reducing or eliminating incentives or adding new digital programming.

These changes may specifically reflect the unique circumstances of a global pandemic—and a single year’s worth of data does not establish a trend—but a closer look at workplace wellness programs suggests the pandemic may only partially explain these program changes. Employers initially established these programs in the belief that these initiatives would help them control health care spending and, by extension, their health insurance costs. In the 2008 edition of KFF’s employer survey, for example, 44 percent of firms offering health coverage reported that they thought wellness programs effectively reduced their health care costs—with 68 percent of large firms reporting this belief. Large firms were also more likely than small firms to employ financial incentives within their workplace wellness programs. By 2014, employers reported that they put more stock in wellness programs’ ability to control costs than in narrow provider networks or increased employee cost-sharing.

Lack of Efficacy, Cost Shifting Plagues Wellness Programs

The evidence about whether these programs actually control employees’ health care costs, and produce a return on employers’ investments, however, is decidedly less rosy. Early research was mixed—a 2010 meta-analysis found that wellness programs produced savings of $3.27 in reduced health spending for every dollar invested in workplace wellness, but RAND’s 2013 examination of wellness programs found these initiatives made no significant impact on health care spending or utilization. More recent large-scale, randomized studies, such as the Illinois Workplace Wellness Study, have not found short-term savings in health expenditures or improved health behaviors, employee productivity, or self-reported health status. Similarly, a new longer-term study of a multi-site workplace wellness program found no significant differences between randomized participants and non-participants in health care spending and utilization, or changes in conditions such as diabetes and obesity. Analyses have also shown that savings from health-contingent programs in particular may actually result in shifting health care costs to lower-income workers and workers in poorer health rather than reducing plan spending overall. Some employers also report dissatisfaction with workplace wellness programs—for example, in CHIR’s recent assessment of cost-control strategies within state employee health plans, only two of fifteen states with recently-implemented workplace wellness initiatives could attribute cost savings to these programs, with one program administrator noting that their state’s participation-based incentive program was “remarkably unsuccessful.”

The Future of Wellness Programs is Uncertain

Future developments in workplace wellness programs are hard to forecast. The pandemic continues to provide one type of uncertainty for these programs, and employers may, in response, make further changes for their 2022 benefit plans.  At the same time, the federal regulatory structure is in a holding pattern. Upon taking office, the Biden Administration withdrew proposed Equal Employment Opportunity Commission (EEOC) rules on workplace wellness, which would have created new limits on financial incentives for wellness programs that track employees’ health data in order to comply with Americans with Disability Act (ADA) and Genetic Information Nondiscrimination Act (GINA) requirements. The proposed rules, however, would have excepted certain wellness programs offered as part of group health plans from these new incentive limits (the EEOC proposed four factors for determining whether a health-contingent program would be considered part of a group health plan: who can participate, the structure of any financial incentives, who provides the program, and whether it is a required element of the plan). The EEOC does not appear to be in any hurry to promulgate new regulations, so the nature and scope of new incentive limits are unknown for now.

Given this uncertainty, and wellness programs’ poor—or at least uninspiring—results, employers should examine their workplace wellness programs carefully. Employers have other tools at their disposal to improve employees’ health behaviors, engagement, and productivity and create a corporate culture of health without shifting costs to lower-income employees or over-investing in the workplace wellness industry. Some of these alternatives—such as improved cafeteria menus and informal exercise opportunities—likely depend on a full return to in-person work. Others, such as vaccination clinics and improved behavioral health and stress-reduction programming within Employee Assistance Programs, could support urgent employee health needs, a critical component of not only a culture of health but to our collective pandemic response.

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