States May Require Some Employers to Provide Wellness Programs

By Staff Report

May. 20, 2008

As if paying heed to the adage that an ounce of prevention is worth a pound of cure, state legislators are looking at ways to encourage—or force—employers to offer work-site wellness programs to their employees.

While most of the measures gently encourage employers to promote wellness by offering financial incentives, at least two states are now considering taking a harder line: A California Assembly committee passed a bill this month that would require employers contracting with the state to offer one or more wellness programs to their employees. A bill introduced in Michigan would require that the state give preference to employers that offer wellness programs in awarding contracts.

California Assembly Bill 2360, introduced by Assemblyman Lloyd Levine, D-Van Nuys, in February, would apply to employers with 10 or more employees bidding on state contracts worth more than $1 million. Businesses could comply in a variety of ways, such as subsidizing memberships to fitness clubs, setting up their own fitness facilities, sponsoring amateur sports teams composed of employees, or providing employees with health information.

Levine’s bill was introduced after state legislators rejected a sweeping health care reform proposal by Republican Gov. Arnold Schwarzenegger that, among other things, would have provided incentives to plan members such as gym memberships; weight management programs; and reductions in health insurance premiums to promote prevention, wellness and healthy lifestyles.

A.B. 2360 has been referred to the Assembly Appropriations Committee, where it will be considered along with all other bills that could have a financial impact on the state, according to a spokesman for Assemblyman Levine.

Michigan’s wellness measure would require the state’s Department of Management and Budget to give preference to business entities that have wellness programs in place for their employees in awarding a contract for services and items needed by state agencies. The bill does not define wellness beyond “a health promotion program offered by an employer to his or her employees.”

A report by the Senate Fiscal Agency for the state of Michigan found that the bill, which was introduced in February 2007 by state Sen. Roger Kahn, R-Lansing, would have no fiscal impact on state or local government. The bill has been referred to the Michigan Senate Committee on Health Policy.

This wave of wellness-related state legislation is a relatively recent phenomenon, according to Amy Winterfeld, a health policy analyst for the National Conference of State Legislatures in Denver.

It is apparently being driven by the need to address the growing burden that chronic disease is putting on state budgets, according to a June/July 2007 legislative brief published by the NCSL.

Chronic disease is now the principal cause of disability and use of health services, accounting for 78 percent of U.S. health expenditures, and state budgets are affected by these higher medical costs through additional costs borne by Medicare and Medicaid, the NCSL report says.

“There wasn’t much state legislation at all on this subject before two or three years ago,” Winterfeld said. Now, however, “there has been a noticeable increase in the number of bills promoting wellness.”

Some of the measures overrule bars on differential rating and allow employers to offer financial incentives to their employees to encourage participation in wellness and health promotion programs.

Others permit health insurers to offer premium rebates or discounts for enrollment in wellness programs. A measure enacted last year in Indiana provides tax credit to small businesses that offer wellness programs to their employees that are equal to 50 percent of the programs’ cost.

While most employers acknowledge the benefits of wellness and prevention programs, they are not keen on laws mandating that they provide them to their employees.

“We already have several wellness programs,” but “I don’t like to be mandated,” said Lea Gerber, director of risk management and benefits at Elixer Industries, a diverse manufacturer in Mission Viejo, California

Among other things, Elixer’s benefit plan covers bariatric surgery, provides incentives for plan members with chronic conditions to adhere to their medication regimens, and provides free car seats to pregnant women who enroll in a prenatal program, according to Gerber.

“Employers have to weigh what’s most important to them. If they can’t afford a health plan, and many small businesses can’t, they certainly can’t afford wellness,” she said.

Elixer currently doesn’t have any contracts with the state of California, Gerber said.

Benefit consultants shared Gerber’s sentiments.

“The intention of this bill is laudable,” said Kirby Bosley, a consultant with Watson Wyatt Worldwide in Los Angeles. “But it’s a very expensive proposition for employers, especially smaller ones.”

J.D. Piro, an attorney with Hewitt Associates Inc. in Norwalk, Connecticut, likened the California legislation to a 1996 San Francisco ordinance requiring city contractors to offer domestic partner benefits, which some members of the benefits community felt was intended to influence the benefit programs of all employers, not just state contractors.

“It certainly does fit in with what is becoming a pattern in California,” he said. “These are certain policies that the state wants employers to follow.”

Because the legislation raises awareness of wellness benefits, it could result in more employers providing them, just as more employers began offering domestic partner benefits following passage of San Francisco’s domestic partners ordinance, said Johan DeKeyzer, senior vice president in the health and benefits practice of Aon Consulting based in Irvine, California.

“It’s a very small step in the right direction,” he said.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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