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It's not just CVS: Wellness plans tied to health insurance

March 28, 2013 at 2:59 PM ET

That doughnut you ate for breakfast or cigarette you smoked after lunch may be costing you more than you thought.

As insurance costs rise, workers are finding their employers are trading in the carrot for a stick and hiking premiums upward of $1,000 annually if they don’t quit smoking or undergo urine or blood tests to assess their health. About 83 percent of U.S. companies offer incentives to employees who take part in wellness programs, and about 45 percent of those are tying the cost to the employee’s insurance premium or health savings plan, according to a new Aon Hewitt survey.

CVS Caremark drug store recently raised hackles when it told employees that its company health insurance would add a $50 monthly surcharge for workers who did not participate in its wellness program, which requires a confidential weigh-in and blood test. Many other companies are doing the same thing, but it’s almost always framed as an incentive rather than a penalty.

CVS is not alone with the surcharges.

At the not-for-profit MaineHealth group, smokers on the company insurance plan now face an annual $1,200 “tobacco fee” if a urine test shows recent tobacco use.

Until 2011, MaineHealth had used only incentives to encourage wellness among its employees.“The combination of carrot and stick seems to work better,” said Laurie Jones Mitchell, the director of Health & Productivity for MaineHealth. “Some people call it a ‘frozen carrot.’”

The tobacco fee is only one element of MaineHealth’s WebMD wellness program, which also offers cash incentives for employees who reach certain health standards. About 7 percent of MaineHealth’s 10,000 employees are currently paying the tobacco fee, Mitchell said. There has also been a big uptick in the numbers of people using the company’s free tobacco cessation programs and free tobacco medications, she said.

The size and type of the incentives (or consequences) of company wellness plans vary widely. Some only offer a $25 cash bonus for taking part, whereas others will increase your health care premiums more than $1,000 if you don't join a wellness program that requires an annual weigh-in and tests to determine blood sugar, blood pressure, cholesterol and nicotine levels. Those results are required to remain private with the employee's doctor or the wellness plan, but can impact how much your insurance costs.

Current law allows employers to tie the amount of the incentive up to 20 percent of the individual’s health care premium. In 2014, that percentage is expected to rise to 30 percent, and then up to 50 percent for smokers.

“Incentives are not necessarily a new thing,” said Stephanie Pronk, the Health Transformation leader for Health & Benefits at Aon Hewitt. But they are "absolutely" increasing, she said, based on Aon's survey of nearly 800 large and mid-size U.S. employers.

Aon has been studying these types of programs for about six years and found they were on the rise before the recent health care reform changes were approved. “We were seeing an overall uptick long before that came into play,” Pronk said.

And while the numbers are increasing, many employers are remaining on the sidelines, said Howard Bye-Torre, an attorney at Stoel Rives LLP in Seattle, who advises companies dealing with wellness plans.

“Some employers don’t really want to get into the issue of their employees’ health. They view it as very personal,” Bye-Torre said. Others, he said, are wary of the complicated federal regulations.

Among the complications is a possible conflict between the American Disabilities Act and the Health Insurance Portability and Accountability Act. While HIPAA specifically allows companies to offer financial incentives to employees who take part in wellness programs, the ADA states that any questions about an employee's health must be voluntary (and not coerced with an incentive of anything more valuable than a T-shirt or hat.)

The U.S. Equal Employment Opportunity Commission, which administers the ADA, has declined to clarify its stance on the apparent conflict, leaving some companies to wonder if there is a legal risk, Bye-Torre said. “Please give us guidance on these,” Bye-Torre said he and other attorneys have asked of the EEOC.

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