Employers Target Bad Habits
For Insurance Coverages

At Bank of Geneva, a community bank in northeast Indiana, employees get a $500 break on their $3,000 annual health insurance deductible if they don't smoke.

And the potential upside doesn't end there: Workers who keep their weight, blood pressure and cholesterol in check can earn another $1,500 in annual credits.

Rewarding healthy behavior is Bank of Geneva's way of stemming double-digit growth in annual health insurance premiums. As the incentive program enters its third year, Andrew Briggs, the bank's president, said money was motivating bank employees to take control of their health.

"We're seeing people that want to get their deductibles down," he added. "They've got a goal and (they're) working toward it."

Growing numbers of employers across the country are using rewards or penalties to persuade workers to stop smoking, shed excess weight and lead healthier lives. Studies show modifiable behaviors, such as smoking, and other risk factors for disease, including high blood pressure and obesity, significantly boost health expenditures.

Dale Rayman, an actuarial consultant in the Charlotte, N.C., office of Towers Perrin, a global benefits consulting firm, said employers historically have been afraid to intrude in employees' lives.

But that's changing.

"Now, today they realize that that poor lifestyle behavior has a significant impact on the employer cost. So it's the employer that's suffering financial consequences of that poor behavior through their health plans costs," Rayman said.

Compared with non-smoking employees, workers who light up cost their employer $1,000 a year more in direct and indirect costs, according to the American Lung Association.

Obesity costs employers an estimated $13 billion annually, according to the National Business Group on Health.

At some companies, employees who meet specified health targets can qualify for lower insurance premiums.

Beginning this month, employees of King County, Wash., and their covered spouses or domestic partners will be asked to take an annual wellness assessment. It's voluntary, but those who refuse to participate will pay the highest level of out-of-pocket expenses under a new three-tier benefit design. Those who take the assessment and begin taking steps to improve their health are eligible for the lowest level of out-of-pocket expenses.

A few employers are taking a punitive approach, typically by tacking on a surcharge for smoking. At least four states -- Alabama, Georgia, Kentucky and West Virginia -- now charge higher premiums to state employees who smoke and lower premiums to non-smokers, according to the National Conference of State Legislatures.

The World Health Organization, which has a global mission to curb smoking, recently enacted an outright ban on hiring smokers. All job applicants will be asked whether they smoke or use tobacco products and, if they do, whether they would continue to do so as a WHO employee. If the answer to both is "yes," that person will not be considered for employment.

Overall, though, punitive measures aren't as popular because most employers would rather use a carrot than a stick to reform employee behaviors, benefits consultants explained.

"It's not so much the ding, it's the pat on the back," said Howard Kraft, a principal in the Norwalk, Conn., office of Mercer Health & Benefits.

High-cost individuals with multiple risk factors, especially, may need some encouragement to take action, Kraft added. "You want to reward those people to get them in the program," he said, "because we know the behavior change is so tough."

On the other hand, the distinction between penalty and reward can be nebulous. "One man's incentive is another man's disincentive," Kraft said. "It is how you position it."

In structuring incentives and disincentives, employers must take care not to breach federal laws that protect Americans with disabilities and workers who get health insurance coverage on the job. They also need to heed state laws preventing employers from discriminating on the basis of a health condition.

But there are a lot of gray areas, noted Tower Perrin's Rayman, so employers typically are consulting legal counsel before they put new incentives in place.

To avoid discrimination claims, a Fort Wayne, Ind.-based administrator of medical benefits has created a supplemental insurance product that gives employers a way to reward healthy behaviors. The plan, called BeniComp Advantage, addresses the problem of rising health insurance costs by targeting behaviors. It differs from another recent approach: the use of health savings accounts, or HSAs.

"If an employer were to say, whoever does not smoke, I will put $1,000 in your HSA, that's illegal. You are not allowed to put deposits into an HSA based on any wellness goals," said BeniComp Group President Douglas J. Short.

BeniComp's product, now approved in 32 states, structures the incentive in a different way, Short said. "What this is saying is, it's my money and I will reward you for your lifestyle selections," he explained. "So I'm not even going to give it to you if you don't change your lifestyle."

It's working for Bank of Geneva, which implemented BeniComp's product in 2004, said Briggs. About 70 percent of the bank's 51 employees elect to receive health benefits from their employer.

"If you project it out at the rate of increase we were going in the last two years," Briggs added, "we've seen about a $400,000 savings."

For advice on small steps you can take to improve your health, visit the U.S. Department of Health and Human Services .

SOURCES: Andrew Briggs, president, Bank of Geneva, Geneva, Ind.; Dale Rayman, actuarial consultant, Towers Perrin, Charlotte, N.C.; Howard Kraft, principal, Mercer Health & Benefits, Norwalk, Conn.; Douglas J. Short, president, BeniComp Inc., Fort Wayne, Ind.; Nov. 2, 2005, American Lung Association, New York City; National Business Group on Health, Washington, D.C.; King County, Wash., news release; November 2005, WHO Policy on Recruitment of Smokers or Other Tobacco Users

Reference Source 62
January 17, 2006

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