The Business Perspective for Health-Contingent Wellness Programs A Health Risk Management White Paper For Employee Benefit Consultants

The Business Perspective for Health-Contingent Wellness Programs

A White Paper by HealthCheck360°

DEFINING THE OPPORTUNITY

HealthCheck360° sees a tremendous need to educate corporate America on the benefits to be gained with

health-contingent wellness programs. Many existing plans are likely out of compliance with the new HIPAA

regulations. Since different categories of programs are subject to different sets of requirements, correct categorization

is essential for compliance.

The regulations divided employee wellness programs into two categories: “participatory” and “health-contingent.”

The regulations kept the “participatory” category but split “health-contingent” programs into two types: “activity-

only” and “outcome-based.” Health Contingent Programs are defined as any program that requires an individual to

satisfy a standard related to a health factor in order to obtain a reward. Thus, the final regulations divide wellness

programs into three types:

1) “Participatory” are programs that have no conditions for obtaining a reward that are based on an

individual satisfying a standard that is related to a health factor. Is available to all similarly situated

employees. It must be provided at no cost. It is not considered discriminatory therefore it does not

need to meet the five HIPAA requirements and there is no limit on the size of the reward.1

2) “Activity-only” programs require a certain activity that is related to a health-factor, but do not require

any particular outcome of the activity, (e.g., rewarding employees who successfully keep to a diet or

participate in a walking, running or exercise program). Activity only programs are considered

discriminatory therefore it does need to satisfy five HIPAA requirements to be non-discriminatory.2

The concern is that some individuals may not be able to qualify for the reward due to a health factor

such as severe asthma, pregnancy or recent surgery.

3) “Outcome-based” programs require individuals to meet a specific health outcome or attain a specific

health metric in order to qualify for a reward. Unlike activity only programs, outcome based programs

require an individual to attain or maintain a specific health outcome in order to receive a reward.

Programs that reward nonsmokers or penalize smokers; those who attain certain results on biometric

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screenings (e.g., BMI of 30 or under); or those who test within a “healthy range” for biometric

screening tests of certain risk factors (e.g., high cholesterol or glucose level) and require those who test

outside an acceptable range or who are at risk to take additional steps (like visiting with a health coach)

to obtain the reward are examples of outcome-based programs. It is considered discriminatory

therefore it does need to meet HIPAA requirements.3

Anecdotally, the final health-contingent wellness program rule offers employers substantial flexibility and embraces

the progress based incentive approach that HealthCheck360° advocates.

Additionally, and according to the 2013 Workplace Wellness Programs Study Final Report to Congress4:

The use of incentives targeted to achieving specific health outcomes such as smoking cessation and

reductions in body-mass index remains uncommon.

The survey suggests that nationally only 10 percent of employers with more than 50 employees use any such

incentives, and only seven percent link the incentives to the premiums for health coverage.

The average maximum incentive amount for these employers was less than 10 percent of the total annual

cost of coverage, far from the 20 percent (30% in 2014) regulatory ceiling imposed by the Health Insurance

Portability and Accountability Act (HIPAA).

The above overview illustrates the evolving state of health contingent programs. HealthCheck360° has been at the

forefront of delivering data driven results with our five step best practice for a successful health risk management

program since our inception in 2007. HealthCheck360° is a division of HealthCorp, a twenty year old medical

management firm. HealthCorp in turn is a subsidiary of Cotttingham & Butler, a nationwide top 50 insurance

brokerage firm doing business since 1885 with our corporate offices located in Dubuque, Iowa. HealthCheck360° is

a natural evolution of a business that has empowered organizations to achieve meaningful results in health

improvement and behavior change among their workforce.

DEFINING THE BUSINESS VALUE FRAMEWORK

HealthCheck360° provides a financially focused wellness solution that is unique, cost effective and delivers verifiable

results. When integrated with an effective benefits plan our system enables C-Suite clients to achieve the best possible

control over their health care spend while at the same time minimizes HR’s burdens of responsibilities.

Our system provides four primary value added benefits to you:

1) Demonstrates your thought leadership and reinforces your position as a trusted advisor

2) Streamlines your work load; an easy but effective system to adopt and implement;

3) Increased revenue; two pricing models; retail (commission based) or wholesale (net of commission)

4) Increases favorable referral opportunities because our system delivers results

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DEFINING THE STRATEGIC BENEFITS

HealthCheck360° is unique because we lead with an outcome based wellness strategy as a solution. Ninety

eight percent of our clients are tying their financial incentives to an objective health outcome. HealthCheck360°

fervently believes that our industry leading eighty-two percent total population participation rate along with our

ninety-eight percent retention rate is a testimony that outcomes based programs not only work but delivers the

results that business owners require. What this means to you is that you have a strategic partner that expresses

program efficacy and longevity. Although we tout our primary differentiator as being an almost exclusive outcome

based program provider, our research shows the need for balancing extrinsic motivation with intrinsic motivation for

overall program sustainability.

DEFINING OUR PROPRIETARY SCORING METHODOLOGY BENFITS

HealthCheck360° employs a unique and proprietary scoring methodology. Our scoring system is

specifically designed to reward “progress not perfection”. This unique approach rewards participants for incremental

improvements with their overall health. This method is in stark contrast to an “all-or-none” incentive model

employed by many of our competitors.

BIOMETRIC DATA AS THE BASIS FOR IDENTIFYING a POPULATION’s HEALTH RISK

We only use the participant’s objective biometric test results to develop our scoring algorithms. No self-

reported data or information is used in our scoring methodology. This results in greater confidence in health cost

predictability and accurate and actionable data for determining appropriate health interventions and incentive

strategies. Speaking of incentive strategies, it’s important to note that our scoring methodology captures the essence

of a progressive incentive structure yet provides substantial flexibility in program design. This is important because

no two businesses are alike and each plan design is unique to their specific needs, wants and desires.

EFFICIENT & EFFECTIVE MANAGEMENT OF THE REASONABLE ALTERNATIVE STANDARD

Our proprietary scoring system enables HealthCheck360° to effectively manage and administer the

Reasonable Alternative Standard and Waiver process creating peace-of-mind and efficiency for a company’s HR

department and corporate executives. Maintaining program compliance is a top priority for HealthCheck360°.

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HRA DATA COMPLIMENTS BIOMETRICS FOR BEHAVIORAL INTERVENTIONS

HealthCheck360° compliments the individual participant’s objective biometric data with the responses to

the HealthCheck360° health risk assessment survey. It’s designed to elicit responses to questions that allow us to

obtain the details of their current lifestyle from their perception. Taken together, the objective biometrics along with

the survey responses, enable us to provide customized communication, challenges and programming

recommendations that are important and unique to the individual participant while supporting them to prioritize and

achieve their health goals. This enables effective and efficient integration with condition management programs (i.e.,

disease management and compliance management.)

SELF FUNDING “COST NEUTRAL” STRATEGY

The HealthCheck360° system is cost effective; a properly designed program can be cost neutral in the first

year. This results in immediate cost savings to the company. The company will also experience a reduction in claims

& workers compensation costs, improved absenteeism and presenteeism as well as an increase in overall productivity

in years two through five.

DEVELOPING KEY PERFORMANCE INDICATORS (KPI’S)

Finally, we provide verifiable results through our data and analytics reporting. We report on the following

key performance indicators: 1) Incentive eligibility, 2) Risk migration analysis illustrating the population’s overall

health improvement; 3) Claims analysis, 4) Health coaching results 5) Critical value report shows the number of

individuals who were directed to consult with their primary care physician because of an immediate health risk.

HealthCheck360° provides an executive review presentation at least annually to review a program’s

performance. We identify and alert management to issues that we deem important and relevant for management

consideration. Finally, HealthCheck360° compares company data to industry specific cohorts as well as the overall

HealthCheck360° population. Our deliverables and executive review process enables management to excel at:

1) effective supervision of the Health Risk Management Program

2) establishing measurable objectives for each goal (within the overall strategic plan) to ensure Program progression and results

3) holding all stakeholders accountable (e.g., employees, management and consultants)

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Resources & References

1Any rewards offered in connection with participatory wellness programs do not count toward the maximum permissible reward, and as such, may be provided over and above the 2014 HIPAA 30% (50% to prevent tobacco use) maximum permissible rewards. Specifically, the maximum rewards (or penalties) may total up to 30% of the total cost of coverage (including both employer and employee contributions), up from 20% in 2013. In addition, the final regulation increases the maximum permissible reward (or penalty) to 50% for wellness program incentives designed to prevent or reduce tobacco use. The final regulation limits the total amount of the reward for health-contingent wellness programs for both activity-only and outcome-based programs. The total reward offered to a participant or beneficiary under all health-contingent wellness programs with respect to a group health plan cannot exceed a specified percentage referred to as the “applicable percentage” of the total cost of employee-only coverage under the plan. If, in addition to employees, any class of dependents such as spouses, or spouses and dependent children) may participate in the health-contingent wellness program, the reward cannot exceed the applicable percentage of the total cost of the coverage in which the employee and any dependents are enrolled, such as family coverage or employee-plus-one coverage. The total cost of coverage is determined based on the total amount of employer and employee contributions toward the cost of coverage for the benefit package under which the employee is, or the employee and any dependents are, receiving coverage. From a practical perspective, this will generally be the plan’s COBRA rate (minus the COBRA-permitted 2% administration fee, or the plan’s premium equivalent rate). (From the PPACA Final Wellness Regulations for 2014 published in the June 3, 2013 Federal Register) 2,3As under the previous HIPAA rules, health –contingent wellness programs will be permitted in a group health plan only if they satisfy all five special requirements, as restated and revised in the final regulation. The five special requirements are: 1) Frequency of opportunity to qualify; 2) Size of Reward; 3) Reasonable design; 4) Uniform availability and reasonable alternative standards; 5) Notice of availability of reasonable alternative standards. These five requirements will generally be familiar from the previous HIPAA health status nondiscrimination rules. However, some of the five requirements, in particular, the size of the reward and the uniform availability and reasonable alternative standard, have been modified in the final regulation in several important ways. The five requirements apply only to wellness programs that are health-contingent programs. With regards to “Reasonable Design and Uniform Availability and Reasonable Alternative Standards: The final regulation states that a wellness program is reasonably designed if it has a reasonable chance of improving the health of, or preventing disease in, participating individuals, and is not overly burdensome, is not a subterfuge for discrimination based on a health factor and is not highly suspect in the method chosen to promote health or prevent disease. To ensure that an outcome-based wellness program is reasonably designed to improve health and does not act as a subterfuge for underwriting or reducing benefits based on a health factor, a reasonable alternative standard to qualify for the reward must be provided to any individual who does not meet the initial (healthy) standard based on a measurement, test or screening that is related to a health factor such as not smoking or attaining certain results on biometric screenings. In this regard, the final regulation includes a new requirement not present under previous HIPAA rules, namely that all individuals, not just those for whom meeting an initial standard is unreasonably difficult due to a medical condition to satisfy (or medically inadvisable to attempt to satisfy), must be provided with a reasonable alternative standard to qualify for the reward. It is important to distinguish the Reasonable Alternative Standard process between an activity-only wellness program and that of an outcome-based wellness program. Under an activity-only wellness program, as under previous HIPAA rules, it is permissible for a plan or issuer to seek verification, such as a statement from the individual’s personal physician, that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard in an activity-only wellness program, if reasonable under the circumstances. Plans and issuers are permitted to seek verification with respect to an individual’s request for a reasonable alternative standard for which it is reasonable to determine that medical judgment is required to evaluate the validity of the request. In contrast, the final regulation clarifies that, with respect to outcome-based wellness programs, plans and issuers cannot require verification by the individual’s physician that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard as a condition for providing a reasonable alternative to the initial standard. Therefore, if an individual does not meet a plan’s target biometrics (or other, similar outcome-based initial standards, such as being a non-tobacco user), that individual must be provided with a reasonable alternative standard regardless of any medical condition or other health status factor, to ensure that outcome-based initial standards are not a subterfuge for discrimination or underwriting based on a health factor. (From the PPACA Final Wellness Regulations for 2014 published in the June 3, 2013 Federal Register) 4 Workplace Wellness Programs Study Final Report to Congress 2013, Rand Health Corporation; Sponsored by U.S. Department of Labor and U.S. Department of Health & Human Services (page 108 & xxvi)