Tip Tuesday! Use of wellness penalties growing: 2 ways to keep ’em legal

August 30, 2011 by Christian Schappel

Wellness programs are “in” for employers – and so are penalties for workers who make unhealthy choices.

Over the next three to five years, 73% of employers said they’ll offer a wellness program and tie incentives or penalties to it to motivate their employees to make healthy choices, found a 2011 Aon Hewitt survey.

Carrot v. stick

Currently, the penalties appear to be getting a stronger foothold in companies’ wellness strategies.

Reason: Many businesses have found in their wellness programs that people are more motivated by the risk of losing money than gaining it.

How many companies operate under that belief? Here’s a rundown compiled by a 2010 Aon Hewitt survey:

• 64% of employers impose or plan to impose penalties for smoking
• 50% for not taking part in disease management/lifestyle behavior programs
• 45% for not participating in biometric screenings
• 25% for not consulting with health coaches, and
• 17% for not making biometric improvements, like lowering blood pressure or losing a set amount of weight.

2 things to remember

When it comes to offering incentives or penalties, there are two things employers need to remember to avoid breaking the law:

1. The size of any incentives or penalties in a wellness program can’t exceed 20% of the total cost of health coverage for employees (in 2014 that limit will be bumped up to 30%, thanks to the healthcare reform law), and
2. If an employee is unable to earn an incentive — or avoid a penalty — due to a health condition, the wellness program must create an alternate way for that employee to do so.