As of 2008, state and local governments were spending about $132 billion annually on employee health benefits--more than 5 percent of their overall expenditures. That's the latest year for which overall figures are available, but that number is certain to be a lot bigger now: The cost of employee health benefits has grown over the years by double-digit percentages. As the effects of the recession continue to impact government revenues, public officials are looking ever more aggressively for areas where spending can be reduced without cutting public services. So it's not surprising that the cost of employee health benefits is one area that's attracting attention.
Among the options governments are considering are altering the mix of employee contributions and deductibles, more-efficient benefits administration, and the development or expansion of employee wellness programs. According to the Centers for Disease Control and Prevention, as much as 75 percent of our health-care spending is for control of chronic diseases, and just four modifiable health risks--tobacco use, excessive alcohol use, poor nutrition and lack of physical activity--are responsible for much of that disease. In an effort to control costs, more and more public and private employers are turning to outcomes-based incentives--essentially paying people to lose weight or lower their blood pressure or cholesterol.
This outcomes-based approach is fraught with risk and challenges, including compliance with federal mandates such as the Health Insurance Portability and Accountability Act, the Americans with Disabilities Act and now the Patient Protection and Affordable Care Act, the federal health-reform law. Recently eight advocacy and research groups, including the American Diabetes Association, the American Cancer Society and the American Heart Association, published a "joint consensus statement" listing the HIPAA requirements that outcomes-based programs must meet and describing the elements of a reasonably designed program. The challenge for these programs is to reward people for achieving health outcomes without punishing or discriminating against those with medical conditions that prevent them from achieving the outcomes.
Basing incentives on outcomes is a seductive idea, but for employee wellness programs it is as yet relatively unproven. There is strong evidence, however, that a well-designed wellness program using "participation-based" incentives--that is, rewarding people for activities contributing to wellness rather than for achieving specific goals such as losing weight or stopping smoking--can achieve both better health outcomes and substantial cost savings.
An article in the Journal of Occupational and Environmental Medicine last fall detailed the success of one such participation-based plan, King County, Wash.'s "Healthy Incentives" program. Employees who complete a health assessment are given an individual action plan. If they follow it, they are rewarded with lower out-of-pocket health-care expenses that can total $1,200 a year for a family of four. The study of the King County program followed more than 10,000 participants over the course of five years. It found that participants sustained weight loss greater than that of a national sample and achieved health improvements in 11 of 13 areas. And not only did the health of its employees improve, but the program saved King County $45 million in employee health-care costs. That represents a three-to-one return on the county's investment in the program.
Brooke Bascom, communications director for King County's employee health initiatives, says the Healthy Incentives program would not have succeeded without the collaboration of the county's employees, 85 percent of whom are represented by one of 92 separate bargaining units. Part of the reason for that employee buy-in is that program managers have learned the importance of tailoring it to employees' varying needs and interests. Some employees, for example, wanted Weight Watchers on-site. That took some negotiation, but the county got it done. Other employees wanted gym discounts. The county issued a request for information and got discounts of all kinds with lots of different gyms.
The bottom line is this: While some employers are turning to outcomes-based incentives, that approach is risky and unproven. If public employers do choose that path, the paper representing the advocacy groups' consensus sets out best practices for designing such a program. But King County's experience shows that a well designed participation-based program can create the outcomes we want along with cost avoidance that substantially exceeds the investment required.
Whichever path is chosen, however, clearly employee wellness programs can be a vital part of the governing equation. When the public workforce is healthier, after all, everybody wins.