The 1990s have witnessed the skyrocketing of health care costs which for several years grew at an annual rate greater deal of this burden through benefits packages offered to employees. Although many companies have explored a variety of cost reduction strategies during the past decade, corporate health care costs continue to climb. What is a company to do? The answer for Hershey Foods Corporation lay in a wellness incentive program.
Hershey made the decision to focus on employee health in 1991, after an outside consulting firm attributed 25 to 35 percent of Hershey’s health care costs to employee lifestyles. Hershey set about creating incentives to encourage employee “wellness”
In April 1991, Hershey launched a pilot wellness incentive program for 624 of its salaried employees at its Pennsylvania headquarters. The program was designed to reduce modified health risk factors such as smoking and high blood pressure, intended to decrease the company’s health care expenditures, and, in line with Hershey’s strong people orientation and care for every employee philosophy increase employee health and morale. We’ve had a commitment to well employee’ well being for years, noted Rick Dreyfuss, director of executive compensation and employee benefits at Hershey. Now, we have taken it one step further by linking employee wellness to annual health care costs.
Under the experimental program, which if successful, was to be expanded to all 11,000 of Hershey’s employees people received debits or credits according to how they ranked on certain risk factors. For example, employees who did smoke in 1993 earned $48 that could be taken as cash or applied to out-of-pockets costs for their benefit program. Employees who did smoke, however, were charged as much as $444 for the year. Other categories included blood pressure, regularity of aerobic exercise, weight, and cholesterol level. Employees under a doctor’s care for any of the categories were considered “cost neutral” and were neither rewarded nor penalized. While weight, blood pressure, and cholesterol level were measured confidentially by the company’s medical department, Hershey relied on an hour system to determine if employees smoked or regularly exercised. We entrust our employees with the responsibility to play fair, said Dreyfuss. Do we get 100 percent accuracy? The answer is no. Nevertheless, Hershey decided to stick with the honor system out of respect for its employees.
The incentive based program did show impressive first year results for Hershey employees, particularly in light of the limited success enjoyed by previous wellness programs and cost shifting strategies. A survey of the first year program participants revealed that half had altered their lifestyles in some way. Nearly 30 percent of the respondents reported that they had begun exercising more regularly and had lowered their cholesterol levels.
However, the program has also met with considerable resistance. Some employees though this was the best thing we’ve ever done, said Dreyfuss. Others though the company was more involved in their personal lives than it needed to be. One such person was Earl Light, business manager for Local 464 of the Bakery, Confectionary, and Tobacco Worker’s Union, which represents 2,800 Hershey factory employees. I feel uncomfortable about any program that dictates lifestyle, he explained. I don’t have a problem with programs that offer incentives to be healthy but I don’t think you should penalize people who don’t meet company standards. There’s no way our union is going to agree to this program, and I believe I speak for all unions. Despite union objections, however, Hershey has kept the program in place. We don’t see this as dictating lifestyle or an invasion of privacy, asserted Dreyfuss. We simply believe employees need to ebb financially accountable to the health care system.