Wellness programs gain a bigger piece of the shrinking benefits pie

Bottom-line results help health promotion buck trend

It may be open enrollment season, but it’s anything but open season on wellness program budgets. In fact, say health promotion and benefit plan experts, while companies continue to tighten their benefit plan budget belts, health promotion and management efforts are gradually attaining "MFP" (most-favored program) status.

"On the one hand, we’ve seen an erosion of health insurance coverage, for both employees and retirees," notes Paul Fronstin, PhD, a research associate and health care economist with the Washington, DC-based Employee Benefit Research Institute. "On the other side of that coin are wellness programs. From the data we have looked at in 1988, 17% of all full-time workers had [employer-provided] wellness programs. By 1993, that had gone up to 37%. So, while employers are cutting back on what they are willing to pay for in terms of overall benefits, they’re expanding what they are willing to pay for on wellness. They see there’s a clear benefit."

(See p. 98 for a breakdown of these trends by program type.)

"There is definitely an increased interest on the part of employers to become active in health promotion or to help employees enhance their health and/or manage their chronic conditions," adds Camille Haltom, MS, benefit consultant with Lincolnshire, IL-based Hewitt Associates, LLC, a benefits consulting firm.

Kenneth R. Pelletier, PhD, clinical associate professor of medicine at Stanford University School of Medicine’s Center for Research and Disease Prevention in Palo Alto, CA, sees a strong trend emerging. "In the past, health promotion tended to be isolated as an add-on and was basically ‘outside’ the health or medical budget, but that is gradually vanishing. In the ‘90s, what I’m seeing are very sophisticated benefits managers who’ve included wellness in the bids that go out to providers who want to be part of the open enrollment plan," he says.

Haltom sees the same trend. "There’s very much a movement to integrate all these different health management initiatives with overall health benefits," she says. "Where in the past these programs were component based, now there’s more interaction with providers — perhaps [with programs] even coming from those providers."

This type of total benefits package, Pelletier says, has tremendous implications for health promotion. "When integrated benefits are demanded of providers," he explains, "the pricing of wellness becomes invisible."

The reason for this shift, say observers, is that research has now demonstrated that health promotion programs can improve the health of employees and enhance the corporate bottom line.

Employers are much more focused on measurement and quantification, Pelletier says, and they are getting it. "In addition, managed health practitioners have become more adept at focusing on specific population groups to get a better return on their investment."

As director of the Stanford Corporate Health Program, a collaboration between Stanford and 20 major corporations including American Airlines, Bristol Myers Squibb, Hewlett-Packard, and Xerox, Pelletier is in a unique position to both observe benefit trends and to track results. The program entails the implementation of health promotion/disease prevention programs in the worksite and evaluating them from a cost-effectiveness standpoint. He agrees with Haltom that health promotion practitioners are now better able to make a good economic case for their programs.

"The database we have generated indicates that these programs can improve employees’ health — that’s definitive. And they’re very likely to be cost-effective." The data are not as strong on cost-effectiveness as they are on outcomes, admits Pelletier, "But every major study I’ve seen except one has shown cost-effectiveness. So, if plan benefits managers want to know, can I improve employees’ health? The answer is yes. Is it cost-effective? Yes, although not as certainly."

While trends indicate that employees increasingly will be offered corporate wellness programs, they may also be asked to bear a greater share of the financial burden, say observers.

This burden, they say, will not simply be levied in a straightforward fashion, such as it is in health care coverage when employees are required to pay a greater share of the premium. Rather, it will take the form of incentives and disincentives, related to the employee’s personal health and lifestyle behaviors.

"It seems to me that given this trend of incorporating wellness into the overall benefits package, this then becomes part of the total deduction the employer is responsible for, and in a sense, the employee is being more burdened by it," says Pelletier. "Part of the deductible impact, however, is being offset by allowing employees to apply for rebates or accumulate points they can use to buy running shoes, water bottles, and so forth. A non-smoker may have less taken out for his premium; another may have a lower premium if he demonstrates he’s entered a smoking cessation program and has quit. So, there are a lot of tangible financial incentives for health maintenance, and this only makes sense for both the employer and the employee."

"We have seen a significant increase in the number of employers using an incentive or disincentive strategy to get employees to follow a healthy lifestyle," adds Haltom. "Employees are being asked to take more responsibility for their health and are being told that an unhealthy habit may cost them more." (See table, above left.)

Pre-existing conditions

Haltom sees a potential threat to this strategy in the form of the recently passed Health Insurance Portability Act. While most people simply think of the act as guaranteeing health coverage to employees who have lost their jobs, Haltom says the law also makes it illegal for employers to use health status as a basis for denying coverage — i.e., a pre-existing condition. "Employers may not be able to link coverage costs to health risk levels anymore," she says, although she notes this aspect of the new law has not yet been tested in court.

Haltom doesn’t say that incentives and disincentives will disappear, "But they may change in some cases where the employer is being very directive," she predicts. "Employers may also carve in coverage for some types of alternative medicine, or alternate communication strategy, to make sure employees understand how to access the health system appropriately."

Trend will increase

Observers see wellness gaining an ever-increasing piece of the benefits pie. "If we take a trend toward capitation and toward companies demanding that more insurance carriers include health promotion within their total cost structure, it will definitely increase," Pelletier predicts.

"What you suddenly get is that the MCO and the company are both financially responsible, and they then have a financial responsibility to maintain the health and well-being of employees — because if they don’t, they will lose money. To put it simply, is it less expensive to have a cholesterol lowering program or for an employee to have a heart attack?"

Pelletier also sees more companies adding dependents and retirees to benefit plan coverage because their health care costs are generally greater than those of current employees.

Haltom agrees. "I see employers continuing to be interested in the health and well-being of dependents," she says. "And if they themselves do not get directly involved, they will look to their provider partners to make sure the proper initiatives are in place."