Corporate wellness programs are flawed

  • Article by: AUSTIN FRAKT and AARON CARROLL , Bloomberg News
  • Updated: September 19, 2013 - 6:53 PM
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It has been a tough couple of months for Penn State University’s new wellness program, Take Care of Your Health. In July, the university introduced the plan as a modification of the health coverage it offers employees. For good reason, those employees aren’t pleased.

Beginning this fall, in order to avoid a $100 monthly surcharge for their health insurance, all nonunionized employees will have to submit health-history information via the online database WebMD, complete an annual health exam, and participate in periodic biometric scans that include measurement of cholesterol, blood-sugar and blood-pressure levels, body mass, and waist circumference.

Spouses and domestic partners of employees will also have to comply with all but the biometric scan to avoid the surcharge. And tobacco users will have to pay an additional $75 a month.

Programs such as Penn State’s are not uncommon. According to an analysis by the Rand Corp., half of all large organizations - those with 50 or more employees - have wellness plans.

In general, such programs use financial incentives to encourage employees to monitor and improve their health through designated assessments and lifestyle-modification programs. Some wellness programs use financial incentives to motivate compliance, like getting employees to complete a health-risk assessment.

Others use them to penalize poor performance - for example, charging people more for smoking or having a high body mass index. Penn State’s includes both components, as do those of many other large employers.

Penn State’s program, however, is unusually severe. The $100 a month penalty for noncompliance is more than double the average for such programs. The Affordable Care Act may spur more employers to adopt wellness programs with large penalties; it raises the legal limit on penalties that employers can charge for health-contingent wellness programs to 30 percent of total premium costs.

Penn State’s motivation is understandable. Health-care spending is the fastest-growing component of workplace compensation. These expenses have grown particularly rapidly in Pennsylvania, where they increased 8.4 percent a year from 2008 to 2010. According to the report, Pennsylvania ranks among the highest-cost regions in the nation for health care, after controlling for demographic factors.

For the benefit of its employees, as well as in response to competitive pressures, employers like Penn State should attempt to control health-care spending. In this light, it’s natural for employers to consider wellness programs to motivate employees to monitor and improve their health. To the extent such programs reduce spending, studies show that those reductions benefit employees in the form of higher wages.

Whether wellness programs work as intended or not, let’s recognize what they also do: They increase the cost of coverage for some employees. That saves employers money but by shifting costs to workers. Those who bear the brunt of this increase are the less healthy employees, who also tend to be those of lower socioeconomic status.

Now let’s consider what wellness programs might do: reduce health-care spending and improve health. In general, the evidence is weak that they will. Why? Conceptually, factors within workers’ control make only a small contribution to rising health-care costs, so there’s only so much such a program can do, even if it works perfectly. Empirically, the track record of wellness programs’ efficacy is mixed at best.

In a recently released white paper, health economists Dennis Scanlon and Dennis Shea reviewed the evidence on what drives health-care cost growth. A leading factor is health-care technology. Expansion of third-party payment (i.e. insurance coverage) and income growth have also, historically, played large roles. The evidence suggests that disease prevalence may explain 25 percent of health-care spending growth, only a portion of which is due to modifiable lifestyle factors.

So, yes, wellness programs designed to motivate lifestyle modifications may, theoretically, help control the growth of health-care spending, but only a little. How we live is just one component, and it’s far from the largest one. It raises the question of just how much an organization can reduce spending by focusing on wellness.

The research to date is disappointing. For a variety of reasons, most studies of wellness programs are of poor quality and consider only their short-term effects, leading to results that can’t be trusted. Many, such as those that Penn State cites as evidence in support of its program, are written by the wellness industry itself - hardly an unbiased source.

More rigorous studies find that wellness programs in general don’t save money. With few exceptions, they often don’t improve health, either. The additional screenings that such programs encourage can lead to overuse of care, pushing spending higher without improving health.

Given all of this, why are wellness programs so pervasive? Our hypothesis is that it’s a form of supplier-induced demand: The wellness industry is doing a good job of pushing its product. Understanding research is challenging, and it’s relatively easy for a marketing representative to cite glorious- sounding results.

Health and wellness are important; no doubt advocates of wellness programs are well-meaning. But it’s also big business: The industry generates $6 billion annually. The temptation to overpromise and underdeliver is clear. Before Penn State or any organization puts its faith in a wellness program to deliver lower spending and better health, such programs need to be more rigorously assessed. There is a clear role for research; we should look harder before we leap.

So far, there is insufficient evidence that wellness programs, as currently designed and implemented, save money or generally improve health. Penn State’s plan would hardly be the first time Americans bought something that may not work as well as advertised. Companies should reconsider the reasons that they are so eager to have them and whether they’re really worth the investment.

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Austin Frakt is a health economist with the U.S. Department of Veterans Affairs. Aaron Carroll is a professor of pediatrics at Indiana University School of Medicine.

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