The 2010 health care law was designed to give everyone access to affordable medical insurance, regardless of their history, by charging low-risk beneficiaries more in order to charge high-risk ones—particularly older and sicker ones—less.
But one provision pulls in the opposite direction. The Affordable Care Act allows employers to incentivize healthy living by penalizing workers who fail to quit smoking, meet certain weight or exercise targets, or maintain low cholesterol or blood pressure. The idea is that “wellness” programs will nudge workers toward lifestyles that will benefit them and their employers. But in practice, many plans appear to save money by charging their company’s sickest and poorest employees more, a system that runs counter to the law’s overall goal. “It really does undermine the community risk-pool concept,” says Dick Woodruff, the vice president for federal affairs at the American Cancer Society Cancer Action Network.
Employee-wellness plans are catching on, especially among large employers. About 18 percent of those with more than 500 workers now use some financial-incentive program tied to medical data, according to a recent survey from the human resources firm Mercer, and that number is growing. Employers embrace the programs, in part, because published literature demonstrates a hefty return on investment. A meta-study by professors at the Harvard School of Public Health found that the plans tend to get employers $3 in health insurance savings for every $1 they spend. Vendors, too, promise big returns. Benicomp, for example, an Indiana-based wellness company, tells employers they can save 12 to 20 percent of their health insurance expense by adopting such a plan. “The promise of workplace wellness is enticing, because it suggests a win-win-win solution for health care spending,” says Jill Horwitz, a law professor at UCLA who has studied the programs. “It would be terrific if companies could save money, employees could get healthier, and health spending could go down.”
Horwitz and her coauthors recently examined the evidence, however, and found the theory wanting. Research does not show that incentives drive workers to reach certain healthy-lifestyle goals, or that workers who reach them spend meaningfully less on health care than those who don’t.
Take weight loss. Many plans want workers to hit a healthy “body mass index,” but the evidence on health spending by overweight workers is mixed. Horwitz’s survey, published in Health Affairs, found that those with high BMIs don’t necessarily cost their employees more than thinner workers, overall. (Obesity is related to higher lifetime health costs, but much is spent after retirement.) Horwitz also found that financial incentives weren’t driving much weight loss. The average weight lost in programs she examined was just a few pounds, and most workers gained them back over time. After all, she says, people already have many physical, social, and financial pressures to lose weight—and they still struggle.
The same appears to hold true for smoking, another expensive and stigmatized risk factor. Wal-Mart, among others, has paired antismoking programs with financial penalties for those who fail to quit. Entry-level workers there pay about $17, on average, every two weeks for health insurance, while smokers must pay an additional $12. Still, early results are disappointing, says Sally Welborn, the company’s senior vice president for global benefits. “We haven’t seen a significant reduction in the percentage of our population that smokes right now,” she says. “It seems to be stuck.” And even when workers do quit smoking, their overall health doesn’t improve instantly.
But even if an incentive program fails to reduce short-term medical spending, it still can save the company money by charging workers who fail to meet benchmarks a higher premium. It can save companies money in other ways, too. Benicomp’s website boasts that workers who can’t meet the health targets “may be motivated to seek other coverage options.” That could mean dropping their insurance, joining a spouse’s plan, or leaving their job. Those options would take the employee’s coverage off the company’s books without reducing the worker’s overall health spending or improving her health.
Employers don’t necessarily have bad intentions. Many, struggling with the ever-rising cost of insurance, think a health-promotion program is better than simply raising rates across the board. “This is an alternative to asking employees to pay more,” says Maria Ghazal, a vice president at the Business Roundtable, which supported the ACA’s wellness provision. Some employers are pairing incentives with workplace gyms, nutrition classes, antismoking programs, and other free initiatives. A group of employers, vendors, and disease-advocacy groups has recently established a set of best-practice guidelines to make sure plans promote health without penalizing the sick.
Still, consumer groups remain worried. While employers have been free to use wellness incentives for several years, the Affordable Care Act broadened the financial penalties companies can impose. Now, they can charge unwell workers up to an additional 30 percent of their total health-plan premium—which amounts to more than $1,000 for the average employee. And the law does not require that programs be scientifically proven to enhance health or lower spending. The workers at highest risk of failing the commonly used tests tend to be poor or members of racial-minority groups. The plans typically don’t measure risk factors that might drive up spending among more-affluent workers—driving a fast car or running so many miles that a knee replacement may be needed. “There are social reasons why we choose some kinds of things and not other things,” Horwitz says.
CORRECTION: A previous version of this story misspelled the name of Maria Ghazal, vice president at the Business Roundtable.