Lifestyle Incentive Programs Benefit Employers and Employees

Lifestyle Incentive Programs Benefit Employers and Employees

Competition in the global marketplace of the 21st century is increasingly aggressive. In a world where gaining the slightest advantage can mean everything, productivity is of utmost importance. For employers aiming to increase productivity, changes must start with their employees.

Pay raises and holiday parties are no longer the only means of improving employee morale and increasing output. Recent trends involve a more holistic approach, focusing on employee health and wellbeing. Research supports the assertion that a healthy worker is a productive worker. Across industries, Human Resource departments are responding by implementing healthy lifestyle incentive programs. Also known as wellness programs, workplace programs promoting employee health and well-being are becoming commonplace in New York City and across the country.

As these programs have grown in popularity, they have also become increasingly diverse. Every individual program is unique. Companies are developing incentive packages that cater to their particular industry and workforce.

Ultimately, programs should aim to take a comprehensive approach to employee health, focusing on diet, exercise, and even sleep. Some programs are structured to provide rewards for reaching milestones that indicate progress or impose punishments for lack of progress.

According to the CoreHealth Workplace Wellness Blog, “[t]he goal of a wellness program is for employees to adopt and maintain a healthy lifestyle for the long run—ideally, permanently.”

The Impact of the Affordable Care Act

Federal law and regulations have had a profound impact on the design and implementation of employee incentive programs. Workplace regulations create boundaries and guidelines that companies and employers must work within when implementing incentive programs. Among the most influential laws is the Affordable Care Act of 2010 (ACA), which, along with many other things, provided incentives for employers to establish wellness programs.

Changes Under the ACA

The Affordable Care Act revolutionized the way incentive programs are designed. According to Cigna, “[t]he goal of the ACA regulations is to ensure that wellness programs are designed to improve health and prevent disease, and not to limit benefits for employees who have health conditions.”

However, it is important to note that the ACA’s reforms only apply to wellness programs within group health plans. Under the ACA, wellness programs are divided into three categories: participatory, activity only, and outcome-based. To comply with the law, each type of program must meet certain criteria.

Participatory Programs

The goal of participatory programs is simply to encourage employees to participate. For example, a company might offer access to a smoking cessation class. An employee may receive a reward or benefit for taking part in the class despite whether he or she actually quits smoking. To comply with the ACA, participatory programs must be available to all similarly situated individuals.

Activity Only

Activity only programs offer rewards to participants who successfully complete certain activities. The activities within the program are believed to benefit participating employees overtime, rather than producing an immediate outcome. For example, an employer might offer a gift card to employees who sign up for a yoga or meditation class. To comply with the ACA, a reasonable alternative must exist for employees who cannot participate in the activities provided by the program.

Outcome Based

Outcome-based programs are focused on achieving specific health outcomes, as the name makes clear. For example, if an employee lowers their blood pressure their monthly costs for health insurance coverage may be reduced. Under the ACA, the “reasonable alternative” requirement also applies to outcome-based programs.

One-Size Does Not Fit All

Each company has unique needs and a unique workforce. Successful programs will be designed with industry- and employee-specific needs and goals in mind.

Although a company should consider as many factors as possible when designing a wellness program, experts suggest these important factors:

  • Workplace culture: Are employees in your workplace or industry generally goal-driven and aggressive (e.g., investment bankers) or are they more reserved and cautious? Additionally, employers should consider whether their staff prefers to work individually or in groups to find solutions as a team. These factors are all part of workplace culture. A program that doesn’t consider workplace culture is highly likely to be unsuccessful.
  • Employee objectives: Employers should work to understand their employees’ own specific health objectives. Designing a program around your staff’s personal health goals is an organic means of motivation. Employers may use anonymous surveys to gather information about employee’s personal goals. The CDC offers guidance on designing workplace surveys for this purpose.
  • Your budget: It may be obvious, but establishing how much you’re willing to spend is an important first step in designing employee programs. Companies should determine their budget early and consult managers during the process.
  • Healthcare plan use: Reviewing group health plan utilization rates reveals areas that could benefit from a reduction in costs. Reducing health care costs for employees should be an important objective of any wellness program.
  • Specific incentives: What are the specific incentives you want to offer your employees? The options are almost limitless. Employers may choose to offer affordable incentives (a complimentary gym water bottle) or more substantial incentives (a membership at an upscale fitness center).

Benefits for Both Employees and Employers

Lifestyle incentive programs offer numerous benefits to both employers and employees. Employee programs are one most cost-effective and efficient means of reducing costs and increasing productivity for the employer. The programs motivate employees to adopt healthy choices and improve well-being.

Other benefits of wellness programs may include:

  • Reductions in workers’ compensation and disability costs: Understandably, healthier employees reduce health insurance costs. Additionally, healthier employees are less likely to get hurt on the job, which decreases disability costs. In turn, a company may experience a reduction in their workers’ compensation insurance premiums.
  • Higher morale: A wellness program shows a company cares about its employees, which inherently boosts morale. Studies show that healthy, physically fit employees have higher self-esteem and self-image, which leads to a more positive and enthusiastic outlook. Furthermore, wellness programs increase employee satisfaction which makes retaining talent easier.
  • Improving a company’s brand and attracting talent: Companies that do not offer wellness programs may be less attractive for potential employees, especially if comparable companies provide employee programs. Overall, talented employees want to work for companies that care about their well-being.
  • Encouraging teamwork: Wellness programs can improve employee cooperation. Many programs encourage participation in sports and fitness classes that can encourage team-working and group camaraderie.
  • Tax incentives: Companies that implement wellness programs may qualify for tax incentives. Companies should explore tax-incentive opportunities at the local, state, and federal levels.

The popularity of wellness programs is only expected to increase. In an era of rising health care costs, employee programs are an efficient way to reduce spending and attract new talent. Programs and incentives are expected to become more complex as companies look for a competitive edge and relevant regulatory regimes will respond accordingly. Companies must be aware of the latest developments in programs promoting employee health and wellbeing, as their influence on productivity and reputation become undeniable.

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