U.S. employers consider penalizing workers for unhealthy behaviour

While U.S. companies continue to use financial incentives as a way to increase employee participation in health and wellness programs, a new survey by Hewitt Associates shows employers' appetite for penalizing workers for unhealthy behaviours is also on the rise. This shift in strategy suggests that companies are increasingly challenging employees and their dependents to be accountable for the decisions they make regarding their health. However, in Canadian workplaces, lawyer Shana Ivall French suggests employers have legal duties that could place obligations on them to protect and accommodate employees under human rights, OHS and workers compensation legislation.

Hewitt's annual health care trends survey of nearly 600 large U.S. employers representing more than 10 million employees shows nearly one-half (47 per cent) say they either already use or plan to use financial penalties over the next three to five years for employees who do not participate in certain health improvement programs. Of those companies using or planning to use penalties, the majority (81 per cent) say they will do so through higher benefit premiums. Increasing deductibles (17 per cent) and out-of-pocket expenses (17 per cent) were also cited as possible penalties. When asked what types of behaviours or programs they would penalize, almost two-thirds (64 per cent) of employers cited smoking, half (50 per cent) indicated not participating in disease management/lifestyle behaviour programs and 45 per cent noted not participating in biometric screenings (45 per cent).

"The economy and continued escalation of health care costs have driven many employers to be a little more bold and demanding of their employees, making disincentives an increasingly attractive option," says Cathy Tripp, a principal in Hewitt's Health Management practice. "As companies learn more about their workforce, they're realizing that some people may be more motivated to take action if they risk losing $100 versus gaining $100. The key for each employer is to find the right mix of strategies and plan designs that will motivate employees to be healthier, but not go so far as to drive the wrong behaviors."

Health Care Penalties
Use of Health Care Penalties                                      Percentage of Companies That Impose
                                                                                   or Plan to Impose Penalties
Smoker Surcharge                                                               64%
Require participation with disease
   management/lifestyle behavior
   programs or pay a penalty                                                50%
Require biometric screening or pay a penalty                       45%
Require participation with a health coach
  or pay a penalty                                                                25%
Require biometric improvements or pay a penalty
  (e.g., lower blood pressure, lower BMI)                              17%

Incentive Use on the Rise
Fortunately, according to the same Hewitt survey, employer use of financial incentives is also growing. More than half (58 per cent) offer employees incentives for participating in health and wellness programs. Of those, almost a quarter (24 per cent) extends these incentives to spouses and/or family members. Nearly two-thirds (63 per cent) offer cash incentives for completing a health risk questionnaire, up from 35 per cent in 2009. In addition, 37 per cent of companies provide cash incentives for participating in health improvement and wellness programs, up from 29 per cent in 2009.

Companies Offering Cash Incentives
Health Care Programs                 For participation in 2009              For participation in 2010
Health Risk Questionnaire                           35%                                          63%
Health Improvement/
Wellness Programs                                      29%                                          37%
Condition Management Programs              14%                                          17%

Canadian situation
Consultants at Hewitt in Canada find that most Canadian companies prefer to reward employees’ positive behaviour, rather than penalize risky behaviour. Sherrard Kuzz LLP lawyer Shana Ivall French agrees, noting that human rights commissions across the country tend to be impatient with employers for attempting to punish employees for what they may be, or perceived to be doing. In Canada, employers have a duty to accommodate employees with handicaps, as designated in various human rights legislation. Such conditions such as smoking or obesity may well fall into these protected areas.

Promoting Employee Accountability
Employers' increased focus on incentives and penalties in the U.S. may stem from a concern about rising health care costs. Hewitt's research shows that total health care costs have more than doubled in a decade-from $4,793 in 2001 to $11,058 in 2010-and are expected to continue increasing over the next 10 years. Ninety-five per cent of employers say cost is a top business issue. Seventy per cent indicate that "promoting employee accountability" is a key component of their health care strategy, and for the second year in a row, keeping employees healthy is their top workforce issue.

"Incentives and penalties are not aimed at punishing those who are sick," adds Craig Dolezal, principal and senior Health Management consultant. "Employers may reward a diabetic who manages her condition well, with appropriate prevention, weight management and nutrition. In contrast, they may hold an employee who does little to address the behaviours that may lead him to become a diabetic accountable for those behaviours."

Hewitt Associates provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. For more information, please visit www.hewitt.com.