The new plan by Arkansas Children's Hospital to no longer hire smokers is a growing trend at medical facilities, but since the passage of the Affordable Care Act, the decades-old movement of workplace wellness programs has accelerated in all business sectors, analysts said.
But the profitability of these programs for medical companies -- which have sprouted into a $6 billion industry in the United States -- is up for debate.
"Employers are desperate," said Soeren Mattke, a senior scientist at the Rand Corp. and managing director of Rand Health Advisory Services. "They kind of saw over the last [few] years rapidly rising health care costs ... and they know most chronic conditions are caused by poor health and diet."
"An entire industry sprung from that hope," he added.
Some analysts say that by offering programs for employees to quit smoking or lose weight, companies are able to reduce their spending on health care -- and in some cases receive a hefty rate of return.
Other analysts say that because of rules allowed under the Affordable Care Act, instead of lowering the company's health insurance rates, businesses are transferring more of the costs to their employees by imposing financial penalties on unhealthy workers.
Arkansas Children's Hospital notified its employees last week that it would no longer hire smokers starting May 1 when its new Tobacco and Nicotine-Free Campus policy goes into effect.
The policy prohibits all nicotine use, from cigarettes to smokeless tobacco to nicotine patches and gum.
Under the policy, new hires will be required to submit to urine tests for nicotine -- just as they would for illegal drug use -- and their employment is contingent on passing those tests.
Nicotine also will be added to the drug-screening program that Children's Hospital already has in place for current employees. However, their employment status is not endangered by a positive reading. But the hospital will reach out to them from an "education perspective."
Jennifer Holland, director of occupational health for Children's Hospital, said Tuesday the new policy is part of the hospital's goal to promote good health among its employees. The decision was not tied to Children's Hospital's health insurance plan or costs, she said.
Speaking generally, Holland said, "We continue to see medical plans [costs] go up every year, which suggests that we're not necessarily getting healthier. Smoking is one of those things we can control."
When asked whether employees were surprised by the new policy, Holland said the hospital has been actively focused on improving the health of its employees for several years now.
"We've been applying these health and wellness habits in other areas," she said. "I think employees are hearing that and are used to hearing that so I don't think that they were surprised."
Interest in employee health dates back several decades, with the aim of wellness programs to improve health and productivity while also reducing health care costs.
For employees, the benefit of participating in such a program is an opportunity to reduce the risk of serious disease by quitting smoking or managing their weight by eating healthier, said Ron Goetzel, senior scientist and director of the Institute for Health and Productivity Studies at Johns Hopkins Bloomberg School of Public Health.
If programs are designed correctly, employers can see the health of their workforce improve, which will help reduce health care costs, he said.
Annual premiums for employer-sponsored family health coverage rose 3 percent last year to $16,834, with employees paying on average $4,823 toward their coverage, according to a report by the Kaiser Family Foundation.
About 74 percent of companies surveyed by the foundation in 2014 offered at least one wellness program, with many provided under their health plan.
Workplace wellness programs vary by company but are commonly split into two categories: lifestyle modification and disease management.
Lifestyle programs focus on issues such as smoking and obesity. And disease management programs help employees who already have a chronic disease such as heart disease or diabetes.
"Overall, the two component programs reduced the employer's average health care costs by about $30 per member per month," said a recent report by Rand. "But disease management was responsible for 87 [percent] of those savings."
Employee participation in disease management programs results in most of the savings, mainly by decreasing hospital admissions by 30 percent, the study said.
Rand projects a return-on-investment of $1.50 for every $1 a company invests on wellness programs, with the bulk of the return coming from disease management programs. The lifestyle program only had a return rate of 50 cents per dollar despite having more participants.
"Managing these lifestyle risks like unhealthy eating and lack of exercise doesn't really save money," Mattke said. "The intervention might be able to be effective today, but the cost savings might not happen for another decade."
This is because not everyone who has an unhealthy lifestyle gets sick. So, "not every person with poor lifestyle habits have high health care costs," Mattke said.
As a result of the health care overhaul, employers are increasingly offering financial incentives or penalties for the participation or nonparticipation in wellness programs.
About 36 percent of companies with 200 or more workers that offer at least one wellness program also offer financial incentives to employees who participate, according to the report by the foundation.
"Today there really hasn't been any evidence that they promote health," Pollitz said. "They do save cost for employers by shifting costs."
Employee incentives for participating in these programs include lower premiums, reduced cost-sharing and higher health reimbursement arrangements. Sometimes the incentives are extended to the completion of a program by an employee.
New rules by the Affordable Care Act allow companies to increase an employee's premium contribution up to 30 percent of the cost of the plan for simply not completing a wellness program and up to 50 percent for smokers, according to the foundation.
"This is a more recent development than it was expressly permitted under the Affordable Care Act," said Karen Pollitz, senior fellow at the Kaiser Family Foundation. "Not that many employers are doing that. Only about 10 to 12 percent are offering financial incentives that actually link how much you pay on your health plan to reaching healthy targets."
Employers pay the majority of a health care plan, but workers are paying more each year as companies offer plans with higher premiums--some with deductibles exceeding $1,000 -- for lifestyles deemed unhealthy, she said
"They've got vital organs in the game at this point," Pollitz said. "Employees every year have paid a little bit more for their service premium and the content of coverage gets a little slimmer each year because the deductible goes up."
SundayMonday Business on 04/05/2015