A new initiative by a group of leading health care organizations has produced guidance for the use of outcomes-based incentives in employer-sponsored wellness (or health management) programs.

“The guidance is intended to help ensure that worksite wellness programs utilizing such incentives are effective and fair to all employees, and improve health results,” according to a statement by the American College of Occupational and Environmental Medicine (ACOEM).

Outcomes-based incentives are a relatively new incentive design in which employees receive a financial reward for meeting a specific health outcome — or a penalty may be imposed for failure to meet a health standard. While the ability of outcomes-based incentives has not been well researched or documented, the impact of incentives linked to participation in wellness programs has been demonstrated by leading researchers as a means to increase employee participation.

Outcomes-based incentives are expected to become more common in the workplace as a result of provisions in the Patient Protection and Affordable Care Act — which encourage their use.

The guidance, which was published in the July issue of the Journal of Occupational and Environmental Medicine, is unique in that it represents the collaborative thinking of six well-respected health care organizations with diverse constituencies and roles in the health care system.

Recognizing the need for best practices as outcomes-based incentives become more commonly used, the organizations compared their varying approaches and opinions in order to identify key areas of consensus.

The resulting guidance, titled Guidance for a Reasonably Designed Employer-Sponsored Wellness Program Using Outcomes-based Incentives, incorporates research, practical application, policy perspectives, and a set of basic considerations for employers who want to maximize the health improvement results of their incentive programs while also providing proper protection for employees against discrimination, unaffordable coverage, and loss of access to health care.

The participating organizations are the Health Enhancement Research Organization, American College of Occupational and Environmental Medicine, American Cancer Society, American Cancer Society Cancer Action Network (ACS CAN), American Diabetes Association, and the American Heart Association. Together, they represent a wide range of stakeholders, including patients, care providers, and the business community.

Jerry Noyce, president and CEO of the Health Enhancement Research Organization, said employers can play a significant role in influencing the health behaviors of their workforce, which can help reduce health care costs, disability, and absenteeism, while increasing productivity.

For employers that choose to implement outcomes-based incentives, the published guidance provides direction on two key questions:

What are the elements of a reasonably designed wellness program that incorporates outcomes-based incentives?

How can employers who use outcomes-based incentives be sure that their programs comply with the Health Insurance Portability Accountability Act (HIPAA) guidelines for a “reasonable alternative standard” to those who cannot meet the health standard?

“In order to achieve and maintain good health, employees need insurance coverage that includes basic preventive care, as well as effective treatments for chronic conditions,” said Nancy Brown, CEO, American Heart Association.

The sponsoring organizations stress that the new guidance is not meant to advocate for an outcomes-based incentive approach over a variety of other strategies for increasing employee engagement in wellness programs.

“Incentives can be an effective way to motivate some employees to participate in workplace wellness programs and to begin behavior changes,” said Larry Hausner, CEO of the American Diabetes Association. “If not implemented carefully, however, incentives can also operate as penalties — imposing financial or other burdens on employees which may be counterproductive.

For example, workplace culture is identified as one of the keys to a successful worksite wellness program. A workplace culture that supports healthy behaviors is one of the proven best practices for effective and sustained improvements in employee health. Other best practices include preparing a strategic plan to guide and support company wellness goals, developing a risk assessment and screening program, as well as behavioral intervention programs, employee engagement strategies, ongoing employee communications, and a commitment to measurement and evaluation.

Click here to view the guidance document.