Healthier employees mean lower premiums. And vice-versa.
This article is part of an eight-part series on how to cope with the implementation of Obamacare. Check back tomorrow for part eight.
Generally, if you subsidize employees’ health-insurance premiums, you have to do so equitably. The exception: Since 2006, employers have been permitted to vary premiums on the basis of participation in wellness programs--charging less for those who take part or more for those who don’t.
Starting in 2014, the ACA will increase the incentives that you can offer, from 20 percent to 30 percent of the total cost of coverage for participation in “health-contingent” wellness programs-;which require participation in a physical activity, for example, or meeting certain health standards, such as a desired cholesterol or blood sugar level or body mass. To encourage smokers to quit, you can charge them premiums up to 50 percent higher than those for nonsmokers. And if you don’t already have a wellness program in place, there are $200 million in federal grants available to help you start one.
Let’s say your group health plan has an annual premium for employee-only coverage of $6,000, of which the employee pays $1,500. You offer employees a chance to undergo a health-risk assessment to see if they meet blood pressure, cholesterol, and body mass targets, along with a program to help those who don’t meet the targets to work toward them. You can give those who participate an annual premium rebate of up to 30 percent of the total annual cost of employee-only coverage. In this case, the maximum rebate would be $1,800; but you can pay any amount you choose. If you offer a smoking cessation program, you can charge smokers who don’t enroll in it a surcharge up to 50 percent of the total cost of coverage--$3,000 in this case.
A surcharge on smokers’ premiums can have an immediate financial payback: A smoker’s premium is higher than a nonsmoker’s and therefore drives up your company’s average premium. Having them contribute more helps offset those additional costs.
The impact of other kinds of wellness initiatives is harder to gauge in dollars and cents. In large-group plans that aren’t affected by community rating, encouraging employees to be healthier can help keep long-term health costs down by reducing overall medical claims and corresponding rate increases. A 2010 study by Harvard, for example, showed an average return on investment of $3.27 per $1 for wellness programs when considering health care costs alone.
In smaller companies, the return on investment comes mostly through reduced disability and workers’ comp claims and soft savings, such as reduced absenteeism and higher productivity. “If you have a company with 10 people, it’s a huge issue when someone is in poor health and not coming in to work-;or coming in and not performing,” says Thomas Parry, president of the Integrated Benefits Institute, a nonprofit membership organization that provides health and productivity research to
companies of all sizes.
The Small Business Guide to Obamacare
Part One: How to Notify Your Employees
Part Two: Get an Accurate Head Count
Part Three: Determine Whether You Should Offer Coverage At All
Part Four: Decide Where to Shop for a Plan
Part Five: Explore a Self-Funded Plan
Part Six: Ponder a Skinny Strategy
Part Seven: Launch a Wellness Program
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