University health plan shows flaws in wellness programs

Guest Column:
Austin Frakt and Aaron Carroll
It has been a tough couple of months for Pennsylvania State University’s new wellness program, Take Care of Your Health. In July, the university introduced the plan as a modification of the health coverage it offers employees. For good reason, those employees aren’t pleased. More

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OP-ED / LETTERS TO THE EDITOR

University health plan shows flaws in wellness programs

Guest Column:
Austin Frakt and Aaron Carroll
Posted 9/23/13

It has been a tough couple of months for Pennsylvania State University’s new wellness program, Take Care of Your Health. In July, the university introduced the plan as a modification of the health coverage it offers employees. For good reason, those employees aren’t pleased.

Beginning this fall, in order to avoid a $100 monthly surcharge for their health insurance, all nonunionized employees will have to submit health-history information via the online database WebMD, complete an annual health exam, and participate in periodic biometric scans that include measurement of cholesterol, blood-sugar and blood-pressure levels, body mass and waist circumference.

Spouses and domestic partners of employees will also have to comply with all but the biometric scan to avoid the surcharge. And tobacco users will have to pay an additional $75 a month.

Programs such as Penn State’s are not uncommon. According to an analysis by the Rand Corp., half of all large organizations – those with 50 or more employees – have wellness plans. In general, such programs use financial incentives to encourage employees to monitor and improve their health through designated assessments and lifestyle-modification programs. Some wellness programs use financial incentives to motivate compliance, like getting employees to complete a health-risk assessment. Others use them to penalize poor performance – for example, charging people more for smoking or having a high body-mass index. Penn State’s includes both components, as do those of many other large employers.

Penn State’s program, however, is unusually severe. The $100 a month penalty for noncompliance is more than double the average for such programs. The Affordable Care Act may spur more employers to adopt wellness programs with large penalties; it raises the legal limit on penalties that employers can charge for health-contingent wellness programs to 30 percent of total premium costs.

Penn State’s motivation is understandable. Health care spending is the fastest-growing component of workplace compensation. These expenses have grown particularly rapidly in Pennsylvania, where they increased 8.4 percent a year from 2008 to 2010. According to the report, Pennsylvania ranks among the highest-cost regions in the nation for health care, after controlling for demographic factors.

Employers like Penn State should attempt to control health care spending. In this light, it’s natural for employers to consider wellness programs to motivate employees to monitor and improve their health. To the extent such programs reduce spending, studies show that those reductions benefit employees in the form of higher wages.

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