The following originally appeared on The Upshot (copyright 2014, The New York Times Company) and is coauthored by Austin Frakt and Aaron Carroll.
Most news coverage of the new Kaiser Family Foundationannual survey on employer-sponsored health plans has focused on the fact that growth in premiums in 2013 was as low as it has ever been in the 16 years of the survey. But buried in the details of the report are some interesting insights into how employers think about controlling health care costs. One example is that they’re very fond of workplace wellness programs. This is surprising, because while such programs sound great, research shows they rarely work as advertised.
Wellness programs aim to encourage workers to be more healthy. Many use financial incentives to motivate workers to monitor and improve their health, sometimes through lifestyle-modification programs aimed at lowering cholesterol or blood pressure, for instance. Some programs offer a carrot, like discounts on health insurance to employees who complete health-risk assessments. Others use a stick, penalizing poor performance, or charging people more for smoking or having a high body mass index, for example.
Wellness programs are popular among employers. An analysis by the RAND Corporation found that half of all organizations with 50 or more employeeshave them. The new survey by the Kaiser Family Foundation found that 36 percent of firms with more than 200 workers, and 18 percent of firms over all, use financial incentives tied to health objectives like weight loss and smoking cessation. Even more large firms — 51 percent of those with 200 workers or more — offer incentives for employees to complete health risk assessments, intended to identify health issues.
Medium-to-large employers spent an average of $521 per employee on wellness programs last year, double the amount they spent five years ago, according to a February report by Fidelity Investments and the National Business Group on Health. The programs are generally offered not directly by insurance companies, but by specialist firms that tell employers they will reduce spending on employees’ care by encouraging the employees to take better care of their health.
Wellness programs have grown into a $6 billion industry because employers believe this. In fact, asked which programs are most effective at reducing costs, more firms picked wellness programs than any other approach. The Kaiser survey found that 71 percent of all firms think such programs are “very” or “somewhat” effective, compared with only 47 percent for greater employee cost sharing or 33 percent for tighter networks. (Recent research on public employee plans in Massachusetts found that tighter networks were associated with large savings.)
What research exists on wellness programs does not support this optimism. This is, in part, because most studies of wellness programs are of poor quality, using weak methods that suggest that wellness programs are associated with lower savings, but don’t prove causation. Or they consider only short-term effects that aren’t likely to be sustained. Many such studies are written by the wellness industry itself. More rigorous studies tend to find that wellness programs don’t save money and, with few exceptions, do notappreciably improve health. This is often because additional health screenings built into the programs encourage overuse of unnecessary care, pushing spending higher without improving health.
However, this doesn’t mean that employers aren’t right, in a way. Wellness programs can achieve cost savings — for employers — by shifting higher costs of care onto workers. In particular, workers who don’t meet the demands and goals of wellness programs (whether by not participating at all, or by failing to meet benchmarks like a reduction in body mass index) end up paying more. Financial incentives to get healthier sometimes simply become financial penalties on workers who resist participation or who aren’t as fit. Some believe this can be a form of discrimination.
The Affordable Care Act encourages this approach. It raises the legal limit on penalties that employers can charge for health-contingent wellness programs to 30 percent of total premium costs. Employers can also charge tobacco users up to 50 percent more in premiums. Needless to say, this strikes some people as unfair and has led to objections by workers at some organizations, as well as lawsuits.
Another way that wellness programs can help employers is by putting a more palatable gloss on other changes in health coverage. For instance, workers might complain if a company tries to reduce costs through higher cost sharing or narrower networks that limit doctor and hospital choice. But if these are quietly phased in at the same time as a wellness program that’s marketed as helping people become healthier, a company might be able to achieve those cost reductions with less grumbling.
At least one study has shown that a wellness program can achieve long-term savings. In 2003, PepsiCo introduced what was to become its Healthy Living program, which included lifestyle management (weight, nutrition and stress management along with smoking cessation and fitness) and disease management components (targeting participants with asthma, coronary artery disease, atrial fibrillation, congestive heart failure, stroke, hyperlipidemia, hypertension, diabetes, low back pain and chronic obstructive pulmonary disease). A study published in Health Affairs examined the outcomes of the program seven years after implementation, the longest such study of a wellness program to date.
Researchers found that participation in the PepsiCo program was associated with lower health care costs, but only after the third year, and all from the disease management components of the program. This suggests that wellness programs that target specific diseases that may drive employer costs could achieve savings, though perhaps only after several years. When more broadly implemented and focused on lifestyle management, as many wellness programs are, savings may not materialize, and certainly not in the short term.
Employers may misunderstand the research if they think that just any wellness program, by itself, is the surest route to reducing overall health care spending. That just isn’t the case. It may be true that, if designed well, some programs can save money for both the employer and employees in the long run, but not by focusing on lifestyle changes. Programs that merely do that may cut employer costs, but only by shifting them to employees. If firms wish to count that as a victory in the battle against health care costs, they may do so, but their employees may look at it differently.