Lots of companies — nearly 90 percent, according to a 2013 survey by Fidelity Investments — are looking to cut their health insurance costs through “wellness programs,” many of which incorporate both financial rewards and penalties.
For employees, that can mean failing to do things like lose weight or stop smoking could mean you end up paying much more for health insurance than coworkers deemed healthier. How much more depends on the company, but employers’ ability to reward healthy workers may be getting a big boost in 2014.
Why everyone loves wellness programs
So why do companies — and the federal government — love these programs so much, anyway? To put it bluntly, America’s health care costs are insane, even by the standards of developed nations. In 2011 alone, America spent $2.7 trillion (with a “t”) on health care, or about $8,608 per person, according to the World Health Organization. By comparison, Canada spent $5,630 per person and the United Kingdom spent just $3,609 — less than half.
Reducing those costs is a big priority for the current administration, which is why there are so many provisions in the Affordable Care Act — aka Obamacare — aimed at doing just that. In fact, on Jan. 1, 2014, new rules by the Departments of Labor, Treasury and Health and Human Services go into effect allowing companies to increase the financial stakes  of such programs.
Those rules will increase the maximum permissible reward under a wellness program from 20 percent to 30 percent of the cost of health coverage, and further increase the maximum reward to as much as 50 percent for programs designed to get employees to stop smoking, according to the Department of Labor.
Why lots of employees might not
Trying to reduce health care costs seems like something most people could get behind, but for workers, it probably won’t be all roses and sunshine and bunnies dancing around with low cholesterol and an excellent BMI.
One example of how these programs can backfire for employees: At Scotts Miracle-Gro lawn and garden center in Massachusetts, one employee lost his job because nicotine was found in his system during a routine drug test, according to a 2009 report by the Harvard School of Public Health . The company had decided smoking was “bad for their bottom line.”
However, the same program purportedly saved the life of another employee at the same company. Under the advisory of a company-paid health coach, the man underwent health testing that revealed he was mere days away from experiencing a heart attack.
These are two extreme examples of how wellness programs could impact the individual, but most companies don’t go that far. According to a workplace wellness programs study released by the federal government , the average incentive amounts given to employees for participation-based incentive programs in 2012, were $203 for smoking cessation, $188 for weight and obesity, $143 for fitness and $67 for other lifestyle management.
Those who opt out of participating in such programs or fail to meet certain health criteria could face financial penalties, depending on the company. Groups most likely to be penalized by these wellness programs include smokers, the overweight, those with high cholesterol, alcohol and drug abusers and those who disregard incentive programs for whatever reason.
But worry over those penalties may be overblown, at least for the time being, says Dennis Kravetz, a psychologist and business management consultant.
“It is very tempting to make those who account for the majority of the expenditures pay more for insurance,” says Kravetz. “Some actually do this, but the more common trend is not to do this until after the employee gets counseling, support, etc. for changing.”
Kravetz estimates that no more than 5 percent of large companies and government agencies are charging their less healthy employees more for insurance, but those numbers could rise.
Some controls in place to prevent abuse
If you find yourself being penalized for a health condition beyond your control, your company may be running afoul of labor laws, says Nicole Nazzaro, founder of The Wellness Playbook, a wellness consultancy for employers.
“Wellness programs need to be implemented so as not to penalize workers for health conditions beyond their control,” Nazzaro says.
The Department of Labor provides clear guidelines for implementing such programs, Nazzaro says, noting that any program that provides incentive is also required to provide alternatives to people who cannot meet certain goals.
But genetics may not be the only thing that prevents a worker from meeting health incentives. Income and wealth may also be a factor, says Carla Saporta, health policy director at the Greenlining Institute.
“Unfortunately this burden (of punitive measures) is often most felt in low-income and communities of color that live in neighborhoods that do not provide the opportunity for an employee to choose healthy options and activities outside of their work because of factors beyond their control: a dearth of healthy food options and grocery stores, unsafe streets, and the need to work multiple jobs to make ends meet,” says Saporta.
Some employees fear retaliation if they speak up about wellness programs and an inability to comply, leaving their perspectives unheard, Saporta says.
Wellness programs vary widely
Health-related penalties vary widely at American companies, but here are some more specific examples The Wall Street Journal dug up earlier this year .
What seems certain is that many companies plan to jump on the wellness incentive bandwagon. According to a 2012 Mercer Survey, 87 percent of employers with more than 200 employees plan to start or beef up their incentive programs. Employees who smoke are especially likely to be a target — 17 percent of employers plan to put in place a reward or penalty based on tobacco use, according to TowersWatson.
What do you think? Should companies be able to penalize workers for what they perceive as unhealthy habits? Does it happen at your employer?