Does your employer really care about your ‘wellness’? Maybe not

Employers are increasingly frowning upon smoking.
(Mario Tama / Getty Images)

A federal judge in Minneapolis on Monday refused to block Honeywell International from imposing penalties on workers who refuse to participate in a workplace “wellness” program, denying a request for an injunction by the Equal Employment Opportunity Commission.

This can be seen as a victory for the cause of workplace health, for the goal of the Honeywell program was to discourage smoking, obesity and other bad health behaviors and outcomes in its workforce. It can also be seen as a defeat for worker privacy and independence, for the EEOC saw the program as intrusive and coercive.

Either way, the case underscores the growing popularity of wellness programs in the workplace -- and also illustrates that big companies may be using them to save money, rather than really providing their employees with better health. That’s because the evidence for the former is strong, but evidence for the latter is weak. In fact, there’s very little data supporting the notion that wellness programs produce better health, and considerable doubt that they’re even designed to do so.


Of course, that’s not the story that corporate managements are hearing from the wellness program industry, which has grown to as much as $6 billion.

Wellness programs have taken corporate America by storm. Just over half of all companies with more than 200 workers offer health screening programs, according to the Kaiser Family Foundation, and 8% of those offer an incentive to participate or (much the same thing) a penalty for refusing.

That’s where the legal difficulty arises. Under federal law, workplace medical testing is legal only if it’s voluntary (unless it’s directly related to a job qualification). But the line between incentives that encourage voluntary participation and those that coerce it is blurry. The Affordable Care Act permits incentives worth up to 30% of health plan costs, as well as surcharges for smokers, but depending on the structure of the policies, they may run afoul of the Americans With Disabilities Act or other federal laws.

The EEOC felt Honeywell had plainly crossed the line. The company offers employees a high-deductible health insurance plan supplemented with a company-paid health savings account for workers earning less than $100,000.

The company’s wellness program involves screening for cholesterol, blood pressure, height, weight, waist size, and tobacco use for employees and their spouses. The cost of nonparticipation can be steep: Those who opt out will lose their company HSA contributions, which can reach $1,500, and will be charged a surcharge of $500 on their insurance premiums. Another $1,000 will be charged for workers or spouses who smoke, and those who opt out of the screening will be assumed to be smokers. All in all, that comes to as much as $4,000. Is that voluntary or coercive? You be the judge.

Honeywell originally planned to impose annual goals on screened employees, presumably for smoking cessation, weight loss and other health indicators, but it has put those off.


The real question about wellness programs, labor economists say, is whether they’re designed to create a healthier workforce (which is good for everyone), or merely to shift healthcare costs on unhealthier workers, even to discourage less healthy people from applying for jobs in the first place. (Not so good.)

In a recent paper, Scott Greer of the University of Michigan and Robert Fannion of the U.S. Court of International Trade observed that employers don’t actually profit much from proactively spending to improve workers’ health. That’s because workers can easily take their good health to a competing employer.

In that sense, a wellness program is akin to training that improves workers’ general skills -- it just makes them more mobile and less loyal. That’s why costly programs, say those that provide diabetes medicine, exercise rooms or trainers, are relatively rare except in industries with a tight labor market, such as high tech, where such programs are recruitment tools.

It’s much more common to see “negative wellness policies,” Greer and Fannion say. By imposing higher costs on employees who fail to take their own steps toward health, these policies lower employee compensation to make up for higher healthcare costs.

Even negative policies might lead to better health, but that’s by no means proven. A Rand Corp. study for the federal government last year found that wellness programs were associated with a trend toward lower healthcare costs, but it wasn’t statistically significant. Most other published studies haven’t been large enough to produce usable statistics, researchers say. Rand found that employers were “overwhelmingly” convinced that wellness programs paid off, but “only about half stated that they have evaluated program impacts formally and only 2% reported actual savings estimates.”

The little evidence that exists, including a large study of PepsiCo employees, suggests that lifestyle management programs, such as weight, nutrition, stress relief and anti-smoking, have almost no impact on health costs. At PepsiCo, they cost more than they produced in savings. The value was in disease management programs -- targeted at those with asthma, cardiac disease, hypertension, diabetes, etc. But those tend to be more costly and intensive, and thus rarer, harder to implement and less appealing to management.


That means you can expect to see more general wellness programs in the workplace, with more stringent penalties -- excuse me, incentives -- promoting participation, and possibly less long-term health improvement. (The Los Angeles Times offers a health plan discount for employees who undergo an annual physical and undertake other wellness measures.)

In sum, workplace wellness policies at the moment tend to be more about shifting costs onto the sickest employees than making everyone more hale. For now, corporate managers are in the blind faith stage, and it may be years before they learn enough to create programs that actually work. But as health economist Austin Frakt observes: “This would not be the first time Americans bought something that hasn’t rigorously been proven to work as well as advertised.”

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