Financial Incentives for Healthy Lifestyles:
Who's Doing It, What's Legal and Where's the Evidence?

Introduction

Employers are increasingly offering incentives financial incentives to improve employee engagement in health and productivity programs. According to the 14th Annual National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care, nearly half of large employers use financial incentives to promote healthy behaviors and improve health outcomes; 21% offer incentives to dependents. The most common types of financial incentives include premium differentials, cash, health savings/health reimbursement account contributions, and rewards programs.

While incentives have become quite popular, they must be carefully designed to avoid several pitfalls. For example, employers must be sure to comply with a range of federal and state laws; in particular, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes privacy requirements on health plans, and the portability provisions prohibit health plans from discriminating against enrollees on the basis of health status. In addition, the Americans with Disabilities Act (ADA) and federal tax laws must be considered.

This toolkit provides information about how to offer financial incentives while complying with the law. It also provides evidence of what incentives appear to be the most effective based on the limited research that is available. Finally, the toolkit presents examples of companies offering incentives to illustrate how this can be done successfully.

Toolkit Components

• Financial Incentives: How to Avoid Five Common Pitfalls.
  A quick look at common mistakes made by employers when offering financial incentives for healthy behaviors.
• Issue Update: Summary of the Current Evidence Base for Financial Incentives.
  A 2010 update on the evidence for and employer experiences with financial incentives.
• Voluntary Wellness Program Incentive Strategies.
  A chart detailing the incentive programs of twenty Business Group member companies and the outcomes achieved from each program.
• Legal Considerations for Employer-Sponsored Health Improvement and Incentive Programs.
  *Update Underway — Please Check Back*
  
• Q&A: HIPAA Eligibility and Premium and Contribution Rules.
  *Update Underway — Please Check Back*
  
• Designing Health Improvement Programs in Compliance with HIPAA Nondiscrimination Rules.
  *Update Underway — Please Check Back*
  
• About the Institute.
  Information about the Institute on the Costs and Health Effects of Obesity.