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Front Page of the Wall Street Journal for the Wrong Reason – Rewards in Healthcare Up the Ante on Design and Execution

Last week, the Wall Street Journal published an article entitled Wellness Programs Get a Health Check in which it outlined many of the challenges and opportunities of wellness and associated reward programs. At their best, wellness programs with rewards can drive important health improvement and cost savings. When not done right, these programs can land their sponsors on the front page of the Wall Street Journal for all the wrong reasons.

A few years ago, reward programs targeted to healthier behavior consisted of a $50 gift card for completing a health risk assessment. Today, health rewards is one of the fundamental tools being used to drive consumer (and provider) behavior. Not only are health rewards used by over 80 percent of large companies, but consumer retailers such as Walgreens have enrolled over 110 million in its reward program and rewards are a cornerstone strategy being used to redesign Medicaid and Medicare. Even hospital systems are getting in the game, launching reward programs to attract consumers both before and after they are patients. In pharma, consumers have indicated that rewards are the #1 thing they want from pharmaceutical companies. In fact, its a fair assumption that it is just a matter of time before every health plan has a rewards program just like our favorite airlines, hotels, banks and retailers.

Reward programs are hardly new to industries other than healthcare.  As the health industry – health plans, employers, hospitals, pharma – will soon realize, the standard for reward programs will not be set by those in the healthcare industry, but rather by the reward programs consumers experience in their non-healthcare lives.  Accurate data, processed in real-time, and without error or delay, and the immediate delivery of rewards – standard that are common outside of healthcare – will set the standard for health reward programs.  The ideas of 30 day lags for claims data, incorrect eligibility, poor communication among stakeholders or faulty customer service will hardly be tolerated. When we book a flight, use our credit card, or purchase a pair of shoes, we expect immediate transfer of transaction data and availability of rewards.

Other industries must execute their reward programs with execution rigor and discipline. This rigor will be heightened in healthcare.  Unlike other industries, rewards in healthcare is tied to an even more personal area – our health. Even though healthcare is learning fast, design and execution rigor is paramount – especially in an era of consumer mistrust of their health plans, employers and pharma companies and the efforts of those companies to drive consumer acquisition and retention in an ObamaCare world.

Have we seen examples of programs that have faced challenges when it comes to design, execution and compliance? We have. Here are four examples of programs that may or have fallen short of the standards that are now expected:

Penn State Employee Wellness Program

Penn State implemented a wellness program that penalized employees $100 per month if they did not fill out an online health questionnaire.  After weeks of vociferous objections by faculty members, Penn State suspended this aspect of the program that some professors had criticized as coercive and financially punitive. Faculty members criticized administrators for adopting a wellness program without seeking input on its design from outside experts. The uproar at Penn State illustrates the pitfalls employers can face in imposing incentive-based wellness programs without first obtaining employee support. On a larger level, it suggests that employers’ increasing efforts to cut their health care costs are on a collision course with employees’ boundaries about medical privacy.

Industry experts also said Penn State stumbled by using a stick rather than a carrot approach to motivate employees. Professors complained, for instance, that the $100 monthly fine seemed like a strong-arm tactic, considering that some employees earned less than $50,000 annually. Penn State faculty members welcomed the university’s decision to suspend the noncompliance fee and to set up a task force to seek faculty input on possible alternatives.

“By removing the penalty, at least temporarily, they have removed the sticking point that was the biggest concern for employees,” said Matthew C. Woessner, an associate professor of political science. “It gives us hope that whatever future program they undertake, it will be undertaken with due diligence and high ethical standards.”

CVS Employee Wellness Program

A CVS employee sued the pharmacy chain over its controversial health-screening program. CVS cashier Roberta Watterson claimed the company made her disclose personal information, including her weight and level of sexual activity, threatening to charge her $600 a year if she refused. Critics claimed such programs let employers meddle in workers’ lives, unfairly penalize those who have difficulty meeting certain health targets and may put employee privacy at risk.

“I think what irked people with the CVS program was the slightly coercive nature,” said Soeren Mattke, a senior scientist at the RAND Corporation. “It’s more common to offer smaller rewards, it’s less common to say you have to pay $500 if you don’t participate.”

City of Kansas City Employee Wellness Program

Members of Blue Cross Blue Shield of Kansas City’s wellness program committed fraud by falsely claiming to have participated in certain activities to receive financial rewards. The wellness program, which Blue Cross launched in 2010, was based on a point system, providing financial rewards of up to $250 when members and/or their dependents receive points for partaking in a set of healthy activities, Workforce Management reported. However, seven Blue Cross members, employed by Kansas City or Jackson County, were arrested for allegedly stealing $300,000 from the insurer. The members falsified records to show they completed strenuous activities, which reward more points and therefore more money, the Kansas City Business Journal reported. Some even claimed their young children completed duathalons, marathons and triathlons to earn extra money.

After learning of this healthcare fraud scheme, Blue Cross has redesigned its wellness program so that the results can be more easily verified, the Kansas City Star reported. It now prohibits self-reporting and requires verifiable activities. Blue Cross also reduced the maximum reward allowed for any year to only $100.

EEOC Lawsuits Over Employee Wellness Program

The EEOC has initiated two lawsuits over employer based wellness programs and associated rewards.

The EEOC, in its first known lawsuit related to an employer wellness program, charged Wisconsin-based Orion Energy Systems with violating federal law by requiring an employee to submit to medical exams that were not job-related but were part of the employer’s wellness program, and then firing the employee when she objected to the program. The EEOC’s lawsuit is the agency’s first to directly challenge a wellness program under the Americans with Disabilities Act (ADA).

“Employers certainly may have voluntary wellness programs—there’s no dispute about that—and many see such programs as a positive development,” said John Hendrickson, regional attorney for the EEOC Chicago district, in a released statement. “But they have to actually be voluntary. They can’t compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate. Having to choose between responding to medical exams and inquiries—which are not job-related—in a wellness program, on the one hand, or being fired, on the other hand, is no choice at all.”

“The EEOC…has questioned whether mandatory wellness programs or those that include penalties for noncompliance (as opposed to a reward for participation) would be permitted under the ADA. However, the EEOC has not issued formal guidance,” the nonprofit Disability Management Employer Coalition said in a statement. “Employers should be aware that the ADA may prohibit severe penalties under wellness programs and should monitor this case and other developments. Positive incentives are less likely to run afoul of the ADA.” – See more at:

In its second lawsuit, the EEOC said Flambeau, Inc., a Baraboo, Wisconsin based plastics manufacturer, violated the Americans with Disabilities Act by requiring an employee to submit to medical exams and answer health questions not related to his job. According to the lawsuit filed  in federal court in Madison, Flambeau asked its employees to complete biometric testing and a health risk assessment in December 2011 as part of its wellness program. The health risk assessment asked workers about their medical histories.

Flambeau also did not provide new employees with health insurance unless they completed biometric testing and a health risk assessment, another indication that the wellness program was not truly optional, the lawsuit said.

One worker, Dale Arnold, didn’t meet the deadline for having the tests done and completing the assessment because he was on medical leave and in a hospital being treated for cardiomyopathy and congestive heart failure, the lawsuit said. Soon after, the company told Arnold that because he had not met the deadline, it would no longer provide him with health insurance and cover about three-fourths of the premium. Arnold paid the full premium for his insurance for about six months before he could no longer afford it and the policy was cancelled, the lawsuit said.

The lawsuit seeks back pay to compensate Arnold for the premiums he paid and other losses, along with an order barring Flambeau from requiring workers to participate in the wellness plan.

According to the EEOC, “Employers certainly may have voluntary wellness programs — there’s no dispute about that — and many see such programs as a positive development,” EEOC regional attorney John Hendrickson said Wednesday in a statement. “But they have actually to be voluntary. They can’t compel participation … by cancelling coverage or imposing enormous penalties.”

The Lesson

Yes, credit card data and purchasing data is certainly highly private, but we haven’t seen outrage about the design of reward programs in non-healthcare industries like we have in healthcare. Health reward programs are here to stay. The healthcare community brings a high level of rigor and discipline to many of the clinical and administrative services it delivers to consumers.  In a consumer-centric world, the ability to design and execute programs that engage consumers and comply with all relevant laws, rules and regulations will be key. There are many good reasons to end up on the front page of the Wall Street Journal – outrage over your health reward program is not one of them.






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