Employee Wellness: What are Outcome-based Incentives?

Outcome-based Incentives are the new buzz words in Employee Wellness. As employers look to employee wellness plans to minimize the rising cost of healthcare and keep employees productive and engaged, there is a growing emphasis on outcome-based incentives. Furthermore, with the Patient Protection and Affordable Care Act (PPACA) encouraging the use of Outcome-based Incentives, their use is expected to spread. Therefore, what are outcome-based incentives?

Outcome-based Incentives are employee wellness programs where employees receive a financial reward for meeting specific health outcomes. In some programs there may also be a penalty for failing to meet the health goals. A primary purpose of Outcome-based Incentives is to increase participation by employees through the motivation of financial reward.

Currently, Outcome-based Incentives can be up to 20% of the employee’s total healthcare premiums. However, under the PPACA it jumps from 20% to 30% in 2014. While 30% could be a significant reward or penalty, “Guidance for a Reasonably Designed Employer-Sponsored Wellness Program Using Outcomes-based Incentives” suggests that amounts ranging from $40 to $60 per month are likely to generate behavioral changes by many participants.

The most commonly targeted health categories with Outcome-based Incentives are high blood pressure, high cholesterol, obesity and tobacco use. With many programs employees will first undergo biometric testing. Goals will then be put in place and the employee’s health monitored. Rewards are then awarded depending on the success in meeting the goals—typically after one year.

Any employer, however, seeking to implement an Outcome-based Incentive program is advised that their program must comply with HIPAA and provide reasonable alternative standards for those who cannot meet the standards due to disabilities or a medical condition. The best programs include the employee’s family and  incorporate individualize goals and coaching.

For additional information, see the July 13, 2012 issue of the Journal of Occupational and Environmental Medicine.