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Journal of Health Politics, Policy and Law Journal of Health Politics, Policy and Law

Using Reporting Requirements to Improve Employer Wellness Incentives and Their Regulation Kristin Madison Northeastern University Harald Schmidt Kevin G. Volpp University of Pennsylvania

Abstract Employer interest in offering financial incentives for healthy behaviors has been increasing. Some employers have begun to tie health plan–based rewards or penalties to standards based on tobacco use or biometric measures such as body mass index. The Patient Protection and Affordable Care Act attempts to strike a balance between the potential benefits and risks of wellness incentive programs by permitting these incentives but simultaneously limiting their use. Evidence about the implications of the newest generation of incentive programs for health, health costs, and burdens on individual employees will be critical for informing both private and public decision makers. After describing the many pieces of information that would be valuable for assessing these programs, this article proposes more narrowly targeted reporting requirements that could facilitate incentive program development, evaluation, and oversight.

Introduction

One increasingly prevalent feature of employer-sponsored wellness programs in the United States is the use of financial incentives to promote healthy behaviors. Many employers offer financial incentives to employees to complete health risk appraisal surveys, participate in health screenings, or engage in other health-related activities (Towers Watson 2012: 6; Mattke, Schnyer, and Van Busum 2012: 32–33). In 2013 CVS Caremark, for example, announced that to avoid paying a $600 surcharge, employees would have to participate in a health screening and online wellness review. Some employers adjust health insurance premiums based on smoking status (Towers Watson and NBGH 2011: 16); in 2011 Wal-Mart reportedly Journal of Health Politics, Policy and Law, Vol. 39, No. 5, October 2014 DOI 10.1215/03616878-2813683 Ó 2014 by Duke University Press

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imposed a premium surcharge of $2,000 on some employees who smoked (Abelson 2011). A few employers have begun to tie rewards or penalties to biometric measures such as body mass index (BMI) or blood pressure. A recent survey of midsize to large employers found that 13 percent had already implemented biometric outcomes incentives, that 9 percent planned to do so in 2012, and that more than half were considering using such incentives in the future (Towers Watson 2012: 6). A 2013 report on workplace wellness programs found that of the approximately one-half of surveyed employers that offered wellness programs, more than two-thirds incorporated some form of financial incentive into their programs (Mattke et al. 2013). Employers may adopt wellness programs to improve employee health, increase morale, reduce health care costs, decrease absenteeism, or enhance productivity (Kaiser Family Foundation and Health Research and Educational Trust 2012: 187). The use of financial incentives could help employers achieve some or all of these goals by focusing employees’ attention on specific health issues and by increasing the attractiveness of engaging in incentivized behaviors. The promise of a reward—or the threat of a penalty—may lead to behavioral change that significantly reduces the risk of poor health outcomes when intrinsic motivation does not suffice. While health incentives may yield benefits for both employers and employees, they may also have problematic consequences. Rather than promote health, they may merely shift costs to less healthy employees. Critics have suggested that they may facilitate discrimination, threaten fairness, undermine privacy, and reduce the affordability of health insurance. Policy makers have responded to these concerns. Regulations under the Health Insurance Portability and Accountability Act (HIPAA), for example, established incentive program limits designed to preserve the affordability of health insurance and ensure that everyone, regardless of health status, would have the opportunity to take advantage of incentive programs (Nondiscrimination and Wellness Programs in Health Coverage in the Group Market, 71 Fed. Reg. 75,014 (Dec. 13, 2006)). Recently issued regulations under the Patient Protection and Affordable Care Act (ACA) sought to add clarity to these incentive program requirements (Incentives for Nondiscriminatory Wellness Programs in Group Health Plans, 78 Fed. Reg. 33,157 (June 3, 2013) [hereafter cited as Final Rule]). Do these regulations strike the ideal balance between program benefits and risks? It is difficult to say. Peer-reviewed literature demonstrates that financial incentives can affect health-related behaviors (Sutherland, Christianson, and Leatherman 2008). Randomized trials show that incentives

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can influence a wide range of behaviors and outcomes including smoking cessation, substance abuse, and weight loss (Bigelow and Silverman 1999; Curry, Wagner, and Grothaus 1991; Donatelle et al. 2000; Giuffrida and Torgerson 1997; Higgins 1999; Higgins, Bickel, and Hughes 1994; Higgins et al. 2000; Jeffery 2012; Jeffery et al. 1983; Jeffery, Thompson, and Wing 1978; John et al. 2011; Kane et al. 2004; Kullgren et al. 2013; Stitzer and Bigelow 1983, 1984; Volpp et al. 2006; Volpp et al. 2008; Volpp et al. 2009). But few studies systematically examine the impact of financial incentives in the context of employer wellness programs. Studies of employer wellness programs often do not separately evaluate the impact of incentive components of the programs (Osilla et al. 2012) and tend to focus on the experience of large employers (Baicker, Cutler, and Song 2010). Information on the nature and prevalence of incentive programs is also limited. Much of the historically available information on employers’ use of incentives comes from surveys that sometimes suffer from methodological shortcomings, such as unrepresentative samples, and published survey results often lack detailed information about incentive program structures. This article examines ways to fill the information gap about incentive programs. Some countries, such as Germany, have already imposed reporting requirements on insurers using incentive programs (Elliott, Bernstein, and Bowman in this issue; Schmidt, Gerber, and Stock 2009), but the United States has not. This article explores what an American reporting regime might look like. With a better understanding of the nature, benefits, and drawbacks of the programs, regulators may be able to craft regulations that give employers the flexibility they need to design programs that improve health, reduce costs, and increase productivity, without imposing an undue burden on employees. Policy Makers’ Goals for Incentive Programs

Employers have long been interested in tying financial incentives to health or healthy behaviors, and policy makers have long supported employers’ efforts to do so. By the mid-1990s, some employers already used health incentives in some form, including adjustments to health insurance premiums (Madison, Volpp, and Halpern 2011: 451; Conrad 1987: 256). When Congress enacted HIPAA in 1996, it limited group health plans’ ability to discriminate based on health status, but it accommodated incentive programs by carving out an exception for adjustments of premiums, co-payments, or deductibles ‘‘in return for adherence to programs



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of health promotion and disease prevention’’ (29 U.S.C. x 1182(b)(2)(B) (2011)). Similar policy-maker support for the use of incentives is found at the state level. Some states have created exceptions to state insurance laws that might otherwise preclude health plans’ use of health incentives, while others seek to encourage wellness programs (Klautzer, Mattke, and Greenberg 2012: 272–73; Mello and Rosenthal 2008: 196). Colorado, for example, allows insurers providing individual and small group coverage to offer incentives, as long as the incentives are consistent with HIPAA and a variety of other requirements (Colo. Rev. Stat. x 10-16-136 (2013)). Claims that wellness programs might benefit employee health, health care costs, and productivity appear to have captured policy makers’ attention (Strassel 2009; White House 2009). At the same time, however, policy makers are clearly concerned about the implications of allowing health plan terms to vary with health status. Regulators have expressed the worry that incentives might become so large as to effectively ‘‘deny coverage’’ to or ‘‘create too heavy a financial penalty’’ on individuals who fail to meet health standards (Nondiscrimination and Wellness Programs in Health Coverage in the Group Market, 71 Fed. Reg. 75,013, 75,018 (Dec. 13, 2006)). Regulators responded to the risks posed by incentive programs by requiring programs to ‘‘be reasonably designed to promote health or prevent disease,’’ not ‘‘overly burdensome’’ or a ‘‘subterfuge for discrimination based on a health factor’’ (26 C.F.R. x 54.98021(f )(2)(ii) (2007)). The ACA expanded on both of HIPAA’s competing impulses: promoting equal access to insurance and harnessing the potential power of incentives to improve health. The ACA went beyond HIPAA’s prohibition on health status–based discrimination in group health plans, permitting premiums in the individual and small group markets to vary based only on age, tobacco use, geographic area, and whether the plan is for an individual or a family, but not on health factors (ACA x 1201, codified at 42 U.S.C. x 300gg(a)(2011)). The ACA explicitly extended HIPAA’s nondiscrimination provisions to the individual market (ACA x 1201, codified at 42 U.S.C. x 300gg-4 (2011)). At the same time, the ACA expanded the scope for incentive programs beyond what HIPAA regulations permitted by lifting the ceiling for health-contingent incentives from 20 percent to 30 percent of premiums and granting regulators the authority to raise the ceiling to as much as 50 percent of premiums (ACA x 1201, codified at 42 U.S.C. x 300gg-4(j)(3)(A) (2011)). Citing the fact that under the ACA, individual and small group




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premiums could be subject to a surcharge for tobacco use of up to 50 percent, regulators allowed incentive programs to increase the size of their healthcontingent rewards (or penalties) beyond the 30 percent threshold ‘‘by an additional 20 percentage points (to 50 percent) to the extent that the additional percentage is attributed to tobacco use prevention or reduction’’ (Final Rule, 33,167). Consistent with the HIPAA regulatory framework, the ACA required that health-contingent wellness programs ‘‘be reasonably designed to promote health or prevent disease,’’ offer ‘‘the opportunity to qualify for the reward under the program at least once each year,’’ allow for alternative standards or waivers for those for whom it is ‘‘unreasonably difficult due to a medical condition’’ or ‘‘medically inadvisable’’ to satisfy the standard, and disclose the availability of these alternatives (ACA x 1201, codified at 42 U.S.C. x 300gg-4(j)(3)(A) (2011)). In initially proposing the wellness program regulations under the ACA, regulators expressed an intention to ‘‘help prevent health-contingent wellness programs that provide little to no support to enrollees to improve individuals’ health’’ and to ‘‘reduce instances where wellness programs serve only to shift costs to higher risk individuals and increase instances where programs succeed at helping high risk individuals improve their health’’ (Incentives for Nondiscriminatory Wellness Programs in Group Health Plans, 77 Fed. Reg. 70,619, 70,624, 70,629 (Nov. 26, 2012) [hereafter cited as Proposed Rule]). The final regulations attempt to achieve these goals by imposing additional and more specific requirements, many of which are designed to ensure that individuals not meeting health targets are given a meaningful opportunity to take full advantage of wellness incentive programs. The regulations state that when rewards are based on outcomes such as biometric screening results, programs must make available a reasonable alternative standard to qualify for the reward or provide a waiver (26 C.F.R. x 54.9802-1(f )(4) (2013)). The regulations also provide some clarification of what constitutes a reasonable alternative standard. They explain, for example, that if an alternative standard involves a diet program, then the plan must pay any membership fee; if the standard involves the ‘‘completion of an educational program, the plan . . . must make the educational program available or assist the employee in finding such a program . . . and may not require an individual to pay for the cost of the program’’ (26 C.F.R. x 54.9802-1(f )(4)(iv)). Other federal statutes also shape incentive programs. The Americans with Disabilities Act (ADA), for example, may impose requirements on



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programs that affect those with disabilities (Basas, in this issue; Mello and Rosenthal 2008). The ADA also restricts employers’ collection of disability-related information from employees, a step that could prevent disability-based discrimination while also protecting the privacy of individual employees. Regulations under the Genetic Information Nondiscrimination Act (GINA) have a similar function. They preclude employers from offering financial inducements to provide genetic information, including information about family medical history (29 C.F.R. x 135.8 (2011)), a restriction that has prompted employers to remove family history–related questions from the health assessment surveys that often serve as a foundation for wellness programs (Bard 2011: 479–83). In short, HIPAA, the ACA, and other statutes and regulations support a shift from a health care coverage model focused on financing disease treatment to one that offers financial encouragement to stay healthy. In doing so, they embrace a hope that incentives can improve health. The public conversation surrounding incentive programs points to a widespread hope that they will reduce health care costs and improve productivity as well. But HIPAA, the ACA, the ADA, GINA, and other statutes also suggest that policy makers have a deep concern about the potential for incentive programs to open the door to discrimination based on health status, disability, or genetic makeup. Policy makers worry that incentive programs may make insurance too expensive for those in poor health or impose unacceptable burdens on enrollees. Recent wellness program regulations highlight regulators’ concerns that some employers might offer too little support for employees with health risks, undermining incentives’ ability to improve health. The Need for More Evidence

Attentive to these hopes and worries, researchers have begun to investigate the impact of wellness programs. They have examined whether wellness programs yield the benefits they are designed to achieve and have also considered programs’ potential negative consequences. Recent articles have evaluated the ‘‘impact of worksite wellness programs on health and financial outcomes’’ (Osilla et al. 2012) and the effect of a large employer’s wellness program on health costs (Gowrisankaran et al. 2013). Another recent article, after reviewing the results of numerous studies, raises questions about whether incentives lead to health changes that reduce health care costs and notes that wellness incentives might shift costs to employees with health risks (Horwitz, Kelly, and DiNardo 2013).




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What is most apparent from a review of the literature on incentive programs, however, is how limited the existing evaluations of programs in the field are. A few studies consider the impact of incentives in an employer setting, such as a 2009 study finding that an employer’s financial incentive program significantly increased rates of smoking cessation (Volpp et al. 2009). But regulators have noted that ‘‘insufficient broad-based evidence makes it difficult to definitively assess the impact of workplace wellness on health outcomes and cost’’ (Proposed Rule, 70,626). Moreover, ‘‘the use of incentives to promote employee engagement remains poorly understood, so it is not clear how type (e.g., cash or non-cash), direction (reward versus penalty), and strength of incentive are related to employee engagement and outcomes. . . . There are also no data on potential unintended effects, such as discrimination against employees based on their health or health behaviors’’ (Proposed Rule, 70,628). A recent RAND report provided an assessment of the effectiveness of such programs nationally but was based on a survey with a response rate of 19 percent and more detailed information on incentive programs at five companies, none of which used the outcome-based incentives that have prompted the most regulatory concern (Mattke et al. 2013). In addition, retrospective evaluations done to date do not reflect cutting-edge incentive and benefit designs, which incorporate the insights of behavioral economics. The challenges of collecting and evaluating relevant evidence are numerous, particularly if the goal is to examine the implications of incentives in the private employment setting. Many employers have not attempted to calculate either their programs’ effectiveness or their return on investment (Proposed Rule, 70,628). Employers typically do not engage in rigorous evaluation of their own programs, nor do they generally work with researchers who could conduct such evaluations. In most employer settings, rigorous academic-type evaluations of program effectiveness are not part of the culture. Employers may be reluctant to participate in studies that could unearth evidence of problematic program effects, such as the absence of measurable health gains or cost shifting to the unhealthy or the disabled. In addition, the federal requirement that rewards be made available to all similarly situated individuals (42 U.S.C. x 300gg-4(j)(3)(D) (2011)) could be interpreted as precluding study designs in which incentive availability, type, or magnitude is randomized among similarly situated individuals. These challenges help explain the dearth of data about employer wellness incentives. Even when information is available, there may be significant limits on what can be inferred from it. Employers may be more likely to participate



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in studies in which they anticipate positive results, and journals are often more likely to publish studies showing strong results. Results that have been published may therefore provide a misleading picture of average effectiveness. Studies of wellness programs in general greatly outnumber studies of wellness incentives, which are present in only a subset of wellness programs. In addition, the many variations in incentive types and wellness program characteristics complicate efforts to develop a systematic understanding of the impacts of incentive programs. Policy makers have recognized the need for more data on wellness programs in general. The ACA mandated that the Centers for Disease Control and Prevention (CDC) provide employers with the technical assistance and tools they need to evaluate programs’ impact on health status, absenteeism, productivity, injury, and medical costs (ACA x 4303, codified at 42 U.S.C. x 280l (2011)). It mandated that the Department of Health and Human Services conduct a similar evaluation of federal health and wellness initiatives (ACA x 4402). In addition, it required the CDC to conduct surveys of worksite health programs (ACA x 4303, codified at 42 U.S.C. x 280l-1 (2011)). It also required a report on wellness programs’ effectiveness in promoting health, their impact on access to care and affordability of coverage, ‘‘the impact of premium-based and cost-sharing incentives on participant behavior and the role of such programs in changing behavior,’’ and ‘‘the effectiveness of different types of rewards’’ (ACA x 1201, codified at 42 U.S.C. x 300gg-4(m) (2011)). In 2012 a federally financed report on wellness programs concluded that the ‘‘overall effects of incentives are poorly understood’’ (Mattke et al. 2012: 6). The question, then, is how best to gather information that will make incentive programs and their effects better understood going forward. A well-done federal evaluation might shed some light on incentives’ impacts. Some employers may take advantage of the CDC’s guidance in conducting internal self-evaluations. More federal, foundation, or privatesector funding of formal evaluations might facilitate collaborations between researchers and employers and help accelerate the collection, analysis, and dissemination of evidence about wellness incentives. But these standalone initiatives might yield evidence that largely reflects the experiences of a small group of research-oriented employers with welldeveloped programs, providing a less comprehensive picture of incentives than would be available through a more systematic attempt to elicit information from a broader group of employers. A reporting regime could help fill the information void.




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Considerations in Designing a Reporting Regime Potential Benefits of a Reporting Regime

By eliciting information and facilitating its aggregation, a reporting regime could fulfill many different functions. First, it could promote greater self-scrutiny among reporting entities. An employer faced with a reporting requirement must develop a mechanism to collect the relevant data, if it does not already have one. The development and implementation process would focus employers’ attention on areas subject to reporting and potentially increase awareness of incentive programs’ effects, which might lead to program modifications. Self-scrutiny effects are particularly likely if employers taking advantage of wellness programs are required to report program information directly to their own employees or to the public as a whole. Second, if appropriately structured, a reporting regime would serve the public good by supporting research and evaluation that substantially increases information on program effectiveness. If a government agency collected and made available sufficiently detailed and comprehensive data, researchers could examine the relationship between particular incentive structures and employee health outcomes, worker productivity, and other outcomes of interest. Employers, public and private providers of health coverage, pharmacy benefits managers, and others could then use the results of this research to develop more effective incentive programs. Third, a reporting regime could serve as a foundation for better informed regulation. Reporting regulations that foster high-quality research and evaluation could assist regulators just as they would assist employers; with more research on the effects of incentive programs, regulators could more easily craft regulations to achieve policy objectives. Even a more limited set of reporting requirements could be helpful. Regulators could collect basic information about the nature and prevalence of incentive programs, which would help to ensure that their understanding of programs accurately reflected the full range of programs in place, rather than being unduly influenced by the small subset of programs inclined to subject themselves to rigorous evaluation. This basic information would also allow regulators to identify trends that might merit further investigation or regulatory intervention. What Kinds of Information Could Be Reported?

Self-scrutiny, evaluation, and regulation would all benefit from the collection of a broad range of information. Work has already begun on



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identifying the variables of interest; researchers and other stakeholders have defined a lengthy research agenda for incentive programs (Health Enhancement Research Organization et al. 2012: 894–95). Many data points would be helpful in studying incentive structures and their impact on health, health costs, productivity, and other measures. Table 1 supplies a partial list of potentially relevant data. Additional detail, including breakdowns according to demographics, could be valuable for many of the listed variables. Reporting mandates have become a ubiquitous form of regulation. The ACA, for example, calls for reporting of physician quality, physician financial relationships with drug and device manufacturers, and calorie content of restaurant foods (ACA xx 10331, 6002, 4205). Some reporting schemes are complex, such as the one governing federal hospital quality reporting (Hospital Inpatient Value-Based Purchasing Program, 76 Fed. Reg. 26,489 (May 6, 2011)). A few require a large volume of information, such as the Internal Revenue Service Form 990 and its Schedule H for nonprofit hospitals, which asks many questions, some of which are openended (‘‘Provide any other information important to describing how the organization’s hospital facilities . . . further its exempt purpose by promoting the health of the community’’) (US Department of the Treasury 2012: 8). Attempting to collect all the data points identified in table 1, however, would probably be both unwise and politically infeasible. Few existing reporting requirements would rival a table 1–based reporting regime in scope, particularly in the employer health plan context. Under federal law, many health plan administrators must provide summary plan descriptions to plan participants and to the secretary of labor (29 U.S.C. x 1024 (2011), 29 C.F.R. pt. 2520 (2011)), but these documents generally describe the structure of the plan, not its impact on beneficiaries. Each year, many thousands of plan administrators file a series of forms that serve as ‘‘an important compliance, research, and disclosure tool for the Department of Labor, a disclosure document for plan participants and beneficiaries, and a source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies’’ (US Department of Labor, n.d.), but the data collected are limited and relate to the overall administration of the plan. The federal Bureau of Labor Statistics publishes information about health plan coverage and co-payment levels (US Bureau of Labor Statistics 2012), but again the focus is on the structure of the plan, not employee experiences,




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Table 1 What Might We Want to Know about Incentive Programs? Type of information Structure of program: Incentive structure Program supports

Alternative standards Program participation: Overall participation

Incentive frequency Incentive intensity

Health: Targeted behaviors Targeted outcomes Other behaviors and outcomes

Workforce composition Costs: Incentive program Health care claims

Sample questions to be asked Incentive types (premium, co-pay, or cash)? Size of incentive? Behaviors or outcomes incentivized? Offered to dependents or just to employee? To what extent does the employer offer services that would assist the employee in achieving outcomes? On-site gym? Smoking cessation classes? What types of alternative standards were recognized (or waivers granted) for employees unable to meet program requirements? Of those eligible for the program, what percentage participated? What were the demographics (age, sex, race, ethnicity, income, education, health status) of those who participated versus those who did not? Of those who participated, what percentage of each group earned rewards? What was employees’ average financial gain (or loss) associated with the incentive program? 10th percentile? 90th percentile? How did these amounts vary by demographics, including health status? To what extent did participants engage in the targeted behaviors? To what extent did participants achieve targeted outcomes? Has participation resulted in unintended consequences for nontargeted health outcomes, such as weight gain following a smoking cessation program? How big are these effects? What is the average health status of employees who left the health plan? What is the average health status of employees who joined the health plan? How much was spent on incentives? How much was spent on operating the incentive program? What is the difference in total health care costs for those who achieved standards versus those who did not? How much did health care costs change as a result of implementing the program? (continued )



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Table 1 What Might We Want to Know about Incentive Programs? (continued ) Type of information Insurance coverage: Net costs Coverage levels Productivity Satisfaction

Sample questions to be asked What was the distribution of total health plan–related costs (including discounts or surcharges) among employees? What percentage of employees participates in the health plan? What are absenteeism rates? Other measures of productivity? Were employees who participated in the incentive program satisfied with their experience? Do they believe that incentives helped improve their health? Were employees who did not take advantage of the incentive program satisfied with it as an option?

and the data are drawn from a voluntary survey as well as from summary plan descriptions. Nor do employer reporting requirements outside the health plan context give reason to believe that broad incentive reporting requirements would be viable. Many employers are required to report information on employee demographics to the Equal Employment Opportunity Commission each year, but the total time estimated to complete the response is 3.5 hours (EEOC 2006). The Occupational Safety and Health Administration requires certain employers to answer questions about injuries in order to ‘‘calculate establishment-specific injury/illness rates, and in combination with other data sources, to target enforcement and compliance assistance activities’’ (OSHA 2013), but the time estimate for completing this survey is ten minutes (OSHA 2012). A survey that incorporates all the elements of table 1 would surely take much longer. These comparisons suggest a need for parsimony in crafting a reporting regime. A table 1–based reporting regime imposed on all employer-based health plans taking advantage of the wellness program exception to HIPAA’s rules would seem to depart from the historical pattern of narrowly targeted reporting requirements. The entities that should be asked to report, as well as the quantity of data required, must be limited. This is particularly the case because incentive programs are voluntary, and burdensome reporting requirements could quickly lead to the programs’ abandonment. The nature of reporting requirements must ultimately depend on their costs as well as the purposes they are intended to serve. Other considerations may also matter. While research and evaluation in particular would benefit from the reporting of individual level data, such




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reporting could raise privacy concerns for employees. Employers, too, may be reluctant to share detailed data about the structure of their incentive programs, just as they are other aspects of their operations; health plans may view this information as confidential or proprietary. Policy makers attuned to privacy and confidentiality concerns will tend to limit the scope of reporting requirements. Proposals for Reporting Requirements

Experts and stakeholders have begun to offer suggestions about the collection of incentive-related information. In a guidance document on reasonably designed wellness programs, for example, a coalition of groups recommended that employers evaluate aggregate measures such as program participation rates (broken down by health and income groups if feasible), participant satisfaction, improvement in targeted health outcomes, and health plan retention rates. The groups also recommended that employers examine other measures related to stated wellness program goals; such measures might include health care claims costs, workers’ compensation claims, absences, and productivity (Health Enhancement Research Organization et al. 2012: 892). Other organizations have called specifically for reporting requirements. In 2011, in anticipation of development of the ACA’s incentive program regulations, the American Heart Association and other organizations submitted a letter to regulators that called for increased regulatory protections for employees. They suggested that employers taking advantage of the wellness exception be required to report many of the types of information listed in table 1, including information related to incentive structure, program supports, participation, employee health status, costs, coverage (specifically, the program’s impact on insurance premiums), and employee satisfaction. They also suggested that employers be required to report the savings to the employer and ‘‘the amount of insurance costs shifted from the employer to employees due to the wellness plan’’ and to offer assurances that the wellness plan has not resulted in discrimination’’ under various antidiscrimination laws (AAPD et al. 2011: 15–16). This reporting proposal has not been embraced by regulators. In fact, final regulations published in 2013 contained no reporting requirements whatsoever (Final Rule). It is worthwhile to consider, however, whether there might be alternative reporting regimes might that would focus employers’ attention, expand the knowledge base about incentive programs, and support regulatory efforts, without being overly burdensome.



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Targeting Reporting Requirements

One way to limit the burden associated with a reporting mandate is to target only a subset of employers. In the case of wellness programs, it would be reasonable to impose reporting requirements only on programs that make heavy use of incentives. Information collected on such programs may be particularly valuable for research and evaluation purposes, since these programs may be more likely than others to foster behavioral change, all else equal. At the same time, these programs may be more likely to create insurance affordability problems and therefore merit greater regulatory scrutiny. Reporting requirements could be triggered by aggregate incentive size, individual incentive size, or both. For example, the Department of Labor could require that any employer health plan subject to HIPAA’s nondiscrimination requirements report incentive-related information if the magnitude of health-contingent rewards or penalties at stake in the program in aggregate exceeded a certain percentage of the health insurance premium. One reasonable threshold for reporting would be 20 percent, the ceiling on health-contingent wellness incentives before the ACA’s passage. Firms seeking to take advantage of the ACA’s higher ceiling by tying more than 20 percent of insurance premiums to health-contingent standards could be asked to report on their programs. Thus a program that penalized smokers with a premium surcharge of 10 percent of the cost of coverage, rewarded individuals with a BMI below 30 with a premium discount of 10 percent, and rewarded individuals with blood pressure in the normal range with a discount of 5 percent would be required to report. Additionally or alternatively, employers could be asked to report information if any single incentive exceeds a particular level. For example, if the threshold were set at 10 percent, an employer that offered a discount of 15 percent of the total cost of coverage to individuals maintaining a BMI below 30 would be subject to reporting requirements, even if the employer offered no other health incentives. For affected individuals, a program with just one or two large incentives may have more implications for health and affordability than a program with many small ones, so the presence of such incentives could justify a reporting requirement. Defining Reporting Requirements

Employer health plans incorporating incentives that exceed reporting thresholds could be required to provide a basic description of their wellness




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programs along with a few aggregate statistics that would give a glimpse of how the program operated in practice.1 Congress could authorize a federal regulatory agency, such as the Department of Labor, to create a reporting regime under which plans would describe incentive structures, program supports, and types of alternative standards used by employees in a given plan year.2 Employers could be asked to provide the same descriptive materials they give to employees, to provide narrative descriptions of program features, or to answer specific questions posed by regulators, as appropriate. If this basic information were made publicly available, employers and employees could learn about the range of incentive structures offered across employers and where a particular employer fits in this spectrum. This information would also allow policy makers to better understand the nature of incentive programs and the prevalence of specific program features, a natural first step in determining whether greater regulatory attention may be needed in this area. More detailed information about incentive program use would be helpful for regulators seeking to assess the potential implications of incentive programs for both insurance affordability and health promotion for the population as a whole. For each incentive, employers could be asked to report the percentage of employees for which eligibility for the incentive could be determined, the percentage of these employees who were in fact eligible for the incentive, and, of eligible employees, the percentage who actually earned the incentive. When the amount of incentives employees might earn varies (such as in a program incorporating multiple incentives), employers could be asked to give a sense of the variation involved by reporting on the 10th percentile, median, and 90th percentile of incentives actually earned. Regulators could also seek more detailed information on health outcomes. For example, an employer offering rewards to employees 1. Some of table 1’s questions would likely need to be answered based on data held by plan administrators, while other questions might require information directly from employers. The focus of this article is the nature of the information to be collected, rather than the identity of the reporting entity, although this question would of course need to be addressed in crafting reporting requirements. 2. The Department of Labor is home to the Employee Benefits Security Administration, which was one of the agencies that issued the wellness program regulations and which is responsible for administering Title I of the Employee Retirement Income Security Act (ERISA), a statute that imposes other types of benefit plan reporting requirements. Another agency that might be able to house wellness program information or provide other assistance is the CDC. While the CDC does not generally perform regulatory or enforcement functions, it sponsors the Healthier Worksite Initiative, which provides guidance on health promotion programs, and it is required to conduct national surveys on workplace health promotion programs (42 U.S.C. x 280l-1 (2011), CDC 2010).



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who reduce their cholesterol levels by a certain amount could be asked to report both the percentage of employees who qualified for the reward and the average level of reduction among employees earning the incentive. Finally, the employer could be asked to report the percentage of incentive earners who earned the incentive through each type of alternative standard used. Information about alternative standards would be helpful in monitoring employers’ efforts to ensure that all employees have the opportunity to participate in incentive programs in a meaningful way. Many details about such a reporting regime would of course need to be determined, from the identity of the regulator involved to the nature of penalties for failure to report. This regime also has many potentially viable permutations. Trigger thresholds could be changed. Additional variables could be added to the reporting list. But the basic set of variables described here would give regulators at least some information helpful for effective oversight. More data would be needed if the goal is to build a better understanding of the implications of incentive structures for the issues that most interest employers, policy makers, and the public, including health status, health costs, and the differential burdens borne by individuals with health risks. To support research and evaluation, plans could be asked to provide information across a wider range of areas, including health care costs, spending on program supports, and employee satisfaction. They could also be asked to provide demographic breakdowns of core measures such as incentive program participation, health standard achievement, and aggregate incentive levels. If this more intensive reporting regime were adopted, the data reported could be made confidential, so that only the regulatory agency and researchers with the appropriate agreements in place could have access to the relevant data. If the benefits of detailed reporting are to be fully realized, researchers will need funding to evaluate collected data. Policy makers could consider implementing a requirement that reporting employers contribute to a fund that would support agency-led internal evaluations or agency-authorized external evaluations conducted by research teams selected on a competitive basis. Employers that are subject to the reporting requirement could be asked to pay a fee tied to the intensity of their health incentive programs; for example, they could be asked to contribute a small percentage of their incentive-based rewards or penalties, such as 1 percent or 3 percent. This approach could be viewed as a variation on the user fee currently collected by the Food and Drug Administration (FDA) to support timely




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internal reviews of the safety and effectiveness of drugs (Hamburg 2012). In the wellness incentive case, regulators would be evaluating the effects of wellness programs that offer potential benefits to but also present risks for the populations exposed to them. The higher level of risk posed by higher levels of incentives justifies more regulatory scrutiny. Wellness program regulators might rely less than the FDA on internal evaluation, and they would not conduct individual program ‘‘approval’’ of the sort the FDA conducts, but they would gain access to information that could be helpful in refining program limits to further benefit employees. Conclusion

The preamble to the 2006 wellness regulations indicated that while incentive programs must be ‘‘reasonably designed’’ to promote health, ‘‘there does not need to be a scientific record that the method promotes wellness to satisfy this standard’’ (71 Fed. Reg. 75,014, 75,018 (Dec. 13, 2006)). This approach made sense in 2006 as a means of fostering experimentation at a time when very little was known about the effects of incentives. Some might argue that it still makes sense today, given our limited knowledge about how the newest generation of incentive programs will affect health. We should be doing more to foster innovative programs and to learn from these programs. While very poor designs are relatively easy to spot, what constitutes a ‘‘reasonable design’’ of a wellness incentive program is unclear and will remain so until more systematic evidence is available. To maximize our understanding of incentive programs’ effects, the ideal would be for a broad range of employers to formally evaluate their programs and publish their results. In practice, only the small subset of employers that are well organized and oriented toward public knowledge creation do so. Some impediments, such as regulations perceived as a barrier to randomized program designs, might be addressed through policy changes, such as a safe harbor that allows randomization under specified conditions. Other impediments, such as employers’ reluctance to disclose information about incentive programs that have little impact, are harder to address. Reporting mandates would help to overcome these barriers by forcing employers to reveal data about their experiences, improving both employers’ and regulators’ understanding of the intended and unintended effects of incentive programs.



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Kristin Madison is professor of law and health sciences at Northeastern University, where she teaches in the areas of health law, health economics, and health policy. Her most recent scholarship has focused on the topics of health care quality, health incentives, and mechanisms for improving regulation. Her publications have appeared in Health Services Research, JAMA, the Journal of Law, Medicine and Ethics, the North Carolina Law Review, the UC Davis Law Review, and a number of other law- and health-related journals. She holds a JD from Yale Law School and a PhD in economics from Stanford University. Harald Schmidt is assistant professor in the Department of Medical Ethics and Health Policy and research associate at the Center for Health Incentives and Behavioral Economics, both at the Perelman School of Medicine, University of Pennsylvania. His research focuses on personal responsibility for health, public health ethics, and fairness in resource allocation. He has published in the American Journal of Public Health, the New England Journal of Medicine, the British Medical Journal, and other journals. During 2009–2010 he was a Harkness Fellow in Health Care Policy and Practice at the Harvard School of Public Health, and for seven years he was an assistant director of the UK’s Nuffield Council on Bioethics in London. He completed his PhD in Health/Social Policy at the London School of Economics. Kevin G. Volpp is the founding director of the Center for Health Incentives and Behavioral Economics at the Leonard Davis Institute, University of Pennsylvania, and codirector of the Penn Medicine Center for Health Care Innovation. At the University of Pennsylvania, he is also a professor of medicine at the Perelman School of Medicine and of health care management at the Wharton School. His publications have appeared in JAMA, the New England Journal of Medicine, Health Services Research, and other journals. He did his medical training at the University of Pennsylvania and Brigham and Women’s Hospital and has a PhD in applied economics and managerial science from the Wharton School. He is a board-certified general internist and practicing physician at the Philadelphia VA Medical Center.

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