Health Care Reform – A Clear Path for Employers
Part III – Achieving Success
By: Kerry Drake, Andy Impastato and Stephanie Pennington, BancorpSouth Insurance Services, Inc.
Introduction
Whether a company is poised for shifting from employer-sponsored health coverage or continuing to offer the same benefit
package it does now, health care reform will change the economics of its workforce and benefits, as well as how employees value
coverage. Understanding these changes at a granular level will enable companies to gain or defend a competitive advantage in
the increasingly dynamic market for talent.
In this installment of “A clear path for employers: Achieving success,” we are focusing on how employers can achieve success in
this new market environment. We will address steps for achieving an administratively and financially healthy plan, as well as best
practices for achieving behavior change—an employer’s primary ally for impacting costs—including compliant wellness
programs, communication and engagement.
Achieving success in the post-reform environment
Keeping an edge in today’s labor market means plan sponsors must maintain competitive employee benefit programs, which
translates into a strategic initiative for management. Planning is crucial for ensuring programs stay viable as new trends and
market demands emerge. Current methods of evaluating and managing health care cannot keep pace with rising costs. But
employers can achieve success in this new market environment if they are proactive and develop a strategic plan. A strategic plan
is a crucial component of a successful company’s strategy.
Everyone will be impacted by health care reform: employers, employees, providers, carriers, brokers and individuals. The decisions
employers make and the work they do now will determine whether or not they will succeed in this new market environment.
Employers have to fundamentally change the way they view health care to succeed in this new world. How does an employer
choose the appropriate path for their company? Tools such as our health care reform calculator provide employers with a
thorough examination of how the law will impact their plan(s) and offers a cost analysis associated with potential scenarios. Once
employers have this information, they can begin developing appropriate next steps for creating or modifying their health plan
strategy.
Employers face new administrative burdens with health care reform. It is imperative to communicate benefit program design and
plan changes to employees and dependents, keeping them informed of changes. Employers must also educate employees of their
benefits program through enrollment meetings, health fairs and staff training so they may be better consumers and have
accountability in their health care.
Employers must also focus on the key areas of workforce management, including employee benefits administration, payroll
processing, human resources and employee communications. Their strategic plan should focus on the organization’s challenges
and opportunities within health care reform and diagnose cost drivers within the employee population through data analytics.
Many employers are building wellness and preventive programs to help reduce health care costs and develop healthier and more
productive employees. Employers should also develop a proactive approach and outreach program for addressing core issues
within their population. This type of program will ultimately improve health care quality and also helps prevent larger, more costly
medical problems down the road.
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Health care reform’s impact on wellness programs
Wellness programs are arguably one of the biggest allies an employer has to affect behavior change and in turn control health
care costs, but employers must be mindful of new requirements brought about by reform.
The Department of Health and Human Services (HHS), the Treasury and the Department of Labor (DOL) recently released final
guidance on incentives for nondiscriminatory wellness programs under the Affordable Care Act. The final rule will affect all
grandfathered and non-grandfathered group health plans for plan years beginning on or after Jan. 1, 2014.
Wellness programs are divided into two general categories, “participatory” and “health-contingent” wellness programs. A
participatory wellness program is available to all individuals and does not provide a reward or financial incentive to members, nor
does it include conditions for obtaining a reward based on a health factor. For example, discounted health club memberships,
educational programs and diagnostic screenings where the reward is not tied to the outcome of the test.
Health-contingent programs are further divided into “activity-based” and “outcome-based” programs. An activity-based program
requires an individual to perform or complete an activity related to a health factor to obtain a reward. An outcome-based program
requires an individual to attain or maintain a specific health outcome in order to obtain a reward.
Health-contingent programs must meet five requirements to be compliant with the law. First, there must be a limit on the amount
of the reward. Beginning in 2014, an annual reward for a health-contingent wellness program may not exceed 30 percent of the
cost of coverage. If the program incentive is tied to tobacco cessation, the reward cannot exceed 50 percent of the cost of
coverage. Second, there must be an annual qualification. In other words, the program must give individuals the opportunity to
earn the reward at least once a year. Third, the program must be reasonable in design. This means the program must promote
health or prevent disease, have a reasonable chance of improving the health of, or preventing disease in, participating individuals,
not be overly burdensome, not be a subterfuge for discriminating based on a health factor and not be highly suspect in the
method chosen to promote health or prevent disease. Fourth the program must offer a reasonable alternative. For activity-based
programs, this means the plan must provide a reasonable alternative for individuals for whom it is unreasonably difficult due to a
medical condition to satisfy the standard or medically inadvisable to attempt to satisfy the standard. For outcome-based
programs, this means the plan must provide a reasonable alternative for any individual who does not meet the initial standard
based on measurement, test or screening that is related to a health factor regardless of medical condition. Plan sponsors have the
flexibility to determine whether to provide the same alternative to an entire class of individuals or to provide on an individual-byindividual basis. Finally, the plan must disclose in all plan materials describing the program the availability of the reasonable
alternative standard. This disclosure must also include contact information and a statement that an individual’s personal
physician will be accommodated.
The carrot versus the stick approach
Only 19% of employers with 500 or more employees offered wellness
programs in 2006. Now, nearly 800 American employers and more than 7
million employees use some form of wellness incentive.1 Employers who
implement wellness incentives can experience a 6%-20% increase in
engagement in health and wellness activities.1 Rewards tied directly to a
health and wellness activity have proven more successful than standalone incentives.1 For example, offering an incentive for a specific task
such as completing a health risk assessment or achieving a weight-loss
goal. [Both incentives and disincentives can be helpful in motivating
employee behavior change and ultimately reducing an employer’s
health care cost.] A recent study found that 56% of employers require
employees to actively participate in health programs, comply with
medications or participate in activities such as health coaching.2 The
study also found that 24% of employers offered incentives for achieving
biometric measures such as blood pressure, BMI, blood sugar and
cholesterol.2 Employers reported a positive impact from offering
incentives, such as improved health behaviors and positive employee
morale and engagement.
REQUIREMENTS FOR
HEALTH-CONTIGENT PROGRAMS
•
•
•
•
•
AWARD LIMITS
ANNUAL QUALIFICATION
REASONABLE DESIGN
OFFERS ALTERNATIVE
DISCLOSURE
In 2012, 15%-22% of employers had incorporated some form of penalty
into their wellness programs and 36%-58% of employers said they plan
to add penalties within the next year.3
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Although disincentive programs commonly surround smoking cessation and tobacco surcharges, some employers have started tying
penalties to weight loss and BMIs. For example, an employer may offer different premium tiers based on biometric screening results.
Both incentives and disincentives play a vital role in helping employers drive participation and motivate employee behavior change.
Communication and engagement
The employment landscape today requires employers to actively and intentionally focus effort on making employees better
consumers of their benefits program. The ultimate goal is for employees to act as informed consumers when making health and
wellness decisions as well as when implementing healthier lifestyle choices. In order to increase consumerism and accountability
among your employees, you must first educate them on how to effectively access and use their benefits programs. But communication
and education is not enough. Employee engagement is a key component and is pivotal to the success of your consumerism initiative.
Consumerism strategies
Consumer-driven health plans
Consumer-driven health plans such as high-deductible plans, health reimbursement accounts (HRAs) and health savings accounts
(HSAs) have grown in popularity over the last several years. Consumer-driven health plans encourage positive health behaviors and
engage members to take control of their own health care spending. These plans also promote healthier lifestyle choices, helping
contain long-term health care costs. By strategically choosing plan changes promoting consumerism, employers are creating an
environment for positive employee behavior and ultimately increasing productivity and business results.
Member accountability
Through employee engagement, employers can shift the dial from potential to performance by engaging the minds and hearts of their
employees. [Employee engagement can provide higher service, quality and productivity, leading to higher customer satisfaction,
higher levels of profit and higher shareholder returns.] By creating an environment for positive employee behavior change, employers
can choose approaches deliberately driving employees to make better health care decisions.
The bottom line
Employers can achieve success in the post-reform environment by developing strategies aimed at improving the health of their
employees. Motivation will also be a key piece of the puzzle for successful employers. Employees must be motivated to become
accountable, quality- and cost-conscious health care consumers. Employers will also need to focus on key cost drivers by pinpointing
the root cause of medical and pharmaceutical costs within their employee base. But they can’t stop there. A strategic, structured
approach is necessary. Employers must offer programs and resources targeting chronic conditions and key cost drivers within their
population. Now more than ever employers need to rely on their trusted advisors including their insurance broker and consultant,
CPA, attorney and others, to help them navigate the waters of health care reform.
Notes
1Roberts,
G. (May 2013). “The Big Stick.” Employee Benefit Advisor.
2“Aon
Hewitt Survey Highlights Important Role of Incentives in U.S. Employers' Efforts to Improve Workforce Health and Performance.”
(Mar. 25, 2013). Retrieved from http://aon.mediaroom.com/2013-03-25-Aon-Hewitt-Survey-Highlights-Important-Role-of-Incentivesin-U-S-Employers-Efforts-to-Improve-Workforce-Health-and-Performance.
3“Employers
use penalties to push workers into wellness programs.” Business Insurance. Retrieved from
http://www.businessinsurance.com/article/20130407/NEWS03/304079974#full_story.
This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any
information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated
otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under
the Internal Revenue Code.
BancorpSouth Insurance Services Inc. is a wholly owned subsidiary of BancorpSouth Bank. Insurance products are • Not a deposit • Not FDIC insured •
Not insured by any federal government agency • Not guaranteed by the bank • May go down in value. Services provided by BancorpSouth Insurance
Services, Inc. are supplemental to the insurance carrier and your legal counsel.— ©, 2013, BancorpSouth Insurance Services, Inc.
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