CMS Announces Wellness Program Demonstration Project

October 07, 2019

The Centers for Medicare & Medicaid Services (CMS) announced last week that it is beginning a pilot program for state-based health-contingent wellness programs. The agency is now accepting applications from the states to participate in one of two options. In the issuer-based demonstration project, healthcare payers who want to offer a wellness program on the individual insurance market will be able to design a plan and submit it to the state for approval. States will institute criteria for those wellness programs, and state standards will have to align with those designed for the group insurance market. In the second option, the standard demonstration project, healthcare payers will have to comply with a wellness program model designed by the state.

States will be able to offer financial incentives, including premium cost savings, to participants. The programs must be non-discriminatory and cannot lessen healthcare coverage for the state’s population, and states must offer an alternative for anyone who can’t participate due to a medical condition. Financial incentives are capped at 30% of the individual health plan’s cost; the exception is for programs with tobacco cessation and prevention elements, which are capped at 20% of the plan’s cost.

“Allowing states to implement these wellness programs in their individual markets offers the opportunity to not only improve the health of their residents but also to help reduce healthcare spending,” said CMS Administrator Seema Verma in an agency press release.

Ten states will be chosen for this pilot program. All states will have to submit results of the program three years after the start and annually after that.


Driving Change

Workplace wellness programs are an $8 billion industry in the United State alone. With the influx of new participants in this CMS pilot program, employers in those states will likely feel pressure to offer wellness programs as a benefit, whether health-contingent or participatory.

It’s also possible that this CMS pilot program is another step toward making wellness programs a required benefit for employers over a certain size, either through a government mandate, making it akin to health insurance, or by default because it makes wellness  programs a “staple” benefit.

Workplace wellness programs continue to be popular among employers of all sizes. A 2017 study by the CDC revealed that among large employers (500 or more employees), 92% offered a workplace health promotion program.


Justifying The Expense

Critics of wellness programs are often quick to highlight studies that indicate a lack of direct financial return for wellness programs. Broadly speaking, studies that have examined whether wellness programs improve employee health or lower healthcare expenses for employers have not shown a direct return on investment for the expenditure. As such, employers who try to establish a direct return for wellness programs are likely going to have a tough time finding it.

Some employees have even challenged health-contingent wellness programs in court, saying that the programs coerce people into participating because financial consequences of opting out are too high. These challenges have been presented where premium incentives were offered for full participation in a wellness program or by hitting certain health standards. The Equal Employment Opportunity Commission (EEOC) has offered guidance that financial incentives should be no more than 30% of premiums, but the D.C. Circuit Court ordered that 30% limit vacated.

Instead, employers should consider the value on investment (VOI) of wellness programs. Job seekers view wellness programs as evidence that employers care about them and their well-being, and the programs continue to be a popular attraction for skilled workers. In addition, there is some evidence that the employees most likely to participate in wellness programs tend to be healthier to begin with, which could translate to lower healthcare costs for employers.

Rather than look for a financial return, smart employers will look at the overall picture of increased employee productivity, retention, and satisfaction. By looking at VOI, employers can more accurately establish the true impact of their wellness programs on the bottom line.

Topics: Wellness

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