May 2009

Various studies of the return on investment (ROI) generated by wellness and health promotion programs establish that these programs can indeed provide payback on the dollars invested in them. Regardless of the ultimate payback, however, an employer wishing to establish such programs still will need to find the financial resources to set them up — an investment that might be small or large, depending on the extent of the program. Given the added costs generated by employees with unhealthy lifestyles or modifiable health risks, it’s worth exploring all possible ways to fund a wellness initiative.

Employees’ unhealthy behaviors add greatly to a company’s health care costs. Using tobacco, living a sedentary lifestyle, being overweight or obese, eating a diet lacking in nutrition, or failing to properly care for a controllable chronic health condition all can take a toll on a company’s bottom line, as well as on an individual’s health. According to data cited in a report from the Wisconsin Public Health & Health Policy Institute, illness and injury associated with an unhealthy lifestyle or modifiable risk factor can account for at least 25% of employee health care expenditures.

This same report cites a handful of studies that support the proposition that wellness, health promotion and disease prevention programs provide “multifaceted payback on investment,” through improved worker health, reduced benefit expense and enhanced productivity. Studies cited reported ROI ranging from approximately $1.50 to close to $6.00 per dollar invested, varying by type of program and by whether health care costs alone, or also factors such as reduced absenteeism and improved productivity, were considered. Another study published in the Journal of Occupational and Environmental Medicine found that employers could save $1.65 in health care costs for every dollar spent on a comprehensive employee wellness program.

If you accept that wellness programs will save you money over time, you still need to find the money to get such a program up and running. Try not to let funding concerns convince you to skimp on the quality of the program, as it takes a well-designed, targeted and comprehensive program to achieve the kind of ROI found in the studies. That said, consider these funding possibilities:

• Implement the wellness program at the same time that you make other health plan changes. If your benefit program does not include any high deductible health plan options (with lower premiums), now would be a good time to think about adding a consumer-driven plan to the mix.
• Make a health risk assessment part of the wellness program, charge a higher health plan premium rate for employees who decline to take the assessment, and apply these funds to wellness program costs.
• Ask your health plan vendors what wellness programs they offer and whether they are integrated with your current plan, or if they could be added to your plan at a discount.
• Survey employees to ascertain what types of programs they would use and, furthermore, would be willing to contribute to.
• Look at your benefits program overall for possible sources of funding. For example, are there little-used benefits that could be converted to a voluntary program? Or any high cost (for both employer and employees) health plan options that draw a low enrollment and, potentially, could be eliminated?

Employees with unhealthy lifestyles or modifiable health risks are likely to cost more to employ. It’s worth taking the time and exploring all options to fund programs that target these employees’ needs.

The U.S. Department of Labor has issued four model COBRA notices which cover the provisions of the American Recovery and Reinvestment Act of 2009. These model notices will enable employers to notify former employees and their dependents how to take advantage of COBRA coverage and the subsidy.

There are four new notices available for different types of plans and individuals:

1. General Notice (Full version) – Send this notice to ALL qualified beneficiaries going forward. This combines a general COBRA notice with the premium reduction provisions of ARRA.
2. Abbreviated Version of the General Notice – This notice covers just the premium reduction information under ARRA – Send this notice to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.
3. Alternative Notice – This notice is sent to persons who became eligible for continuation coverage under a State law. Plans will need to modify notice to bring it into compliance with their applicable state law.
4. Notice in Connection with Extended Election Periods – This notice includes information on ARRA’s special election opportunity along with the premium reduction information. This notice MUST be provided to these individuals by April 18, 2009. Plans subject to the Federal COBRA provisions MUST send this notice any “assistance eligible individual” who:
   

   a. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and,
   b. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

Additional References

http://www.dol.gov/ebsa/COBRAmodelnotice.html
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html

New special enrollment rights, together with notice and disclosure requirements for employers, are among the provisions in the Children’s Health Insurance Program (CHIP) Reauthorization Act of 2009, signed into law by President Obama on February 4, 2009. CHIP is the federal program that gives matching funds to states in order to provide Health insurance to low income families with children. The Reauthorization Act expands the program, but is also including new special enrollment rights and notice and disclosure requirements for employers.

The law creates special enrollment rights for employees and their dependents who are “eligible but not enrolled for coverage” under an employer’s group health plan in two situations: The employee’s or dependent’s Medicaid or CHIP coverage is terminated as a result of loss of eligibility, or the employee or dependent becomes eligible for a subsidy (see next paragraph) under Medicaid or CHIP. An employee exercising one of these special enrollment rights must do so within 60 days of Medicaid/CHIP termination or becoming subsidy-eligible. (Note that this special enrollment rights period is twice as long as that under the HIPAA special enrollment rights situations.) These special enrollment rights became effective April 1, 2009.

States can provide health care coverage directly to CHIP-eligible individuals, but the law also allows them the option of paying a premium assistance subsidy so that low-income employees can cover CHIP-eligible children under an employer group plan. The subsidy can be provided to the employee as a reimbursement for premiums paid to the group plan, or to the employer sponsoring the plan. Employers can opt out of receiving the subsidy payment, in which case it will be paid to the employee. The subsidy can only be offered for what the law refers to as “qualified employer-sponsored coverage” — a plan for which the employer contributes at least 40% of the cost, and not including health care flexible spending accounts and high deductible health plans.

In states that provide a premium assistance subsidy, employers will be required to give employees notice of the potential opportunity for the subsidy. Such a notice will need to be provided when notifying the employee of plan eligibility, when open enrollment materials are distributed, or when providing the summary plan description (SPD). The Department of Health and Human Services (HHS) is to develop a model notice by February 4, 2010; this notice requirement will become effective for employers beginning with the plan year after issuance of the HHS model notice.

The law also creates a disclosure requirement for group health plans. The purpose of disclosure will be to help states determine eligibility for the subsidy and its cost-effectiveness. HHS and the Department of Labor (DOL) will form a working group to develop a model disclosure form, and employers will be required to disclose information upon request beginning with the plan year following issuance of the model disclosure form.

The law provides for penalties of up to $100 a day for failure to comply with either the notice or disclosure requirements.

So what should employers be doing now to get up to speed on this new law?

• Identify all states where employees reside and determine whether the state provides a premium assistance subsidy.
• Review health plan documents and amend them as necessary to provide for the new special enrollment rights. As noted above, employees are able to exercise these special enrollment rights effective April 1, 2009.
• Review any health insurance contracts’ coordination of benefits (COB) provisions, because states will be the secondary payer for services provided under employer group health plans for which a premium assistance subsidy is provided.
• Stay alert to developments from the DOL and HHS concerning this law, and be prepared to take compliance steps as soon as the model notice and disclosure forms are released.