Human Capital & Careers

Be Well (or Else)

More and more companies plan to use the stick approach for employees who resist corporate wellness efforts.
Alix StuartMarch 23, 2010

Corporate wellness programs will likely retain their popularity when health-care reform is implemented, say experts. In fact, the bill signed into law by President Obama on Tuesday contains limited incentives for employers to provide them. But to ensure that wellness programs are effective, companies are increasingly making them less voluntary, penalizing employees who choose not to participate.

The basic idea behind wellness programs, which include smoking cessation, weight control, and proactive management of treatable diseases such as diabetes and hypertension, is that if companies can keep their workers healthy, they will reap savings on health-care costs and improved productivity. Companies typically offer employees incentives to participate in the programs, ranging from coffee mugs and T-shirts to cash, gift certificates, and premium reductions.

But more and more employers are using sticks as well as carrots, imposing financial penalties on those who refuse to take part in wellness programs. According to a recent Hewitt Associates survey of nearly 600 large companies, about half use or are planning to use fines (most in the form of higher benefit premiums) for employees who refuse to make efforts to be healthy. Around 20% are also considering increasing deductibles or out-of-pocket expenses for such employees.

“The economy, as well as rising health-care costs, is enabling employers to take bolder stances on this issue,” says Cathy Tripp, a principal in Hewitt’s health-management practice. “They are realizing that what they’re doing now just isn’t bending the trends enough.”

To be sure, the measures aren’t as drastic as they could be. So far, no one is planning to fine employees for, say, missing gym workouts. According to the Hewitt survey, the top reason companies would penalize a worker would be for smoking, said 64% of those planning to use fines. That was followed by not participating in disease management/lifestyle behavior programs and not submitting to biometric screenings, which can determine a person’s risk for developing certain diseases. Only 17% said they would impose penalties on employees who actually fail to improve their health, in terms of metrics such as blood pressure and body-mass index (BMI).

In the long term, however, Tripp says she expects more companies to push harder for results rather than just efforts. Already, some have begun aiming incentives at healthier workers. For example, in January Whole Foods Market announced that it would offer employees who hit certain blood pressure, cholesterol, and BMI targets greater discounts on their store purchases.

Rosen Hotels and Resorts, a privately owned hotel group in Florida, is taking perhaps the most extreme approach: terminating employees who smoke. The company tried to modify smokers’ behavior for 10 years by doubling their health-insurance premiums, says CFO Frank Santos, to no avail. Only “an insignificant percentage” quit over that time, in part because the premiums were already relatively low, he says. So after a 3-year phase-in, including a smoking-cessation program to help people quit, the company instituted a “quit or you’re fired” approach in late 2008, with tobacco testing beginning in 2009.

As a result, the termination of the smokers on Rosen’s workforce boosted the company’s turnover rate from an average of 15% to an estimated 20% to 22% last year, says Santos. (One smoker was a finance-department employee with a 28-year tenure.) Nevertheless, he says, “we’re still feeling strong and confident that we’re doing this for all the right reasons.”

“It’s still on the fringe to say, ‘Improve your biometrics or pay a penalty,’” says Hewitt’s Tripp. “But I’m working with clients who are saying, ‘That’s our plan three years from now.’” While Tripp knows of no other companies that are systematically firing employees for smoking, the fact that Rosen did it “shows employers are taking this pretty seriously,” she says.