LEGISLATION TO STIMULATE INVESTMENT IN COMPREHENSIVE WORKPLACE HEALTH PROMOTION PROGRAMS
July/August 2007

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Senators Harkin (D-IO) and Smith (R-OR) are preparing to introduce two bills in the US Senate that are designed to stimulate investment in comprehensive workplace health promotion programs. In the spirit of full disclosure, I would like to acknowledge that I worked closely with the staff of Senator Harkin to develop the contents of these bills.

Healthy Workforce Act, Finance Committee portion. The centerpiece of the Healthy Workforce Act is a tax credit for 50% of the cost of a qualified employer health promotion program, up to $200/employee for the first 200 employees and $100/employee for remaining employees. Costs for food and health insurance are excluded. The tax credit is paid through a payroll tax refund; so it benefits all employers who pay wages, including state and local governments, tax-exempt not-for-profit organizations, sub chapter S corporations, and employers who did not pay income taxes because they are not earning a profit. Employers with existing programs can receive the tax credit for up to three years, and employers who do not have programs can receive the tax credit for up to 10 years. Employers who enhance existing programs to meet the qualifying criteria may be eligible for additional years of tax credits.

The Secretary of Health and Human Services, in conjunction with the Centers for Disease Control and Prevention (CDC), will certify which programs qualify, but all programs must have the following specific features:

• Include at least three of the following four components: health awareness, behavior change, employee engagement, and supportive environments.
   
• Use practices that are consistent with evidence-based research and best-practices strategies.
   
• Focus on employee populations with disproportionate health burdens, be culturally competent, and meet employees’ health literacy needs.
   
• Offer all programs to all employees who work at least 25 hours per week,

The bill also instructs the Secretary of the Treasury, in conjunction with CDC, to develop an outreach program to make employers aware of the tax credit and to educate them on how to develop effective programs and measure success.

An unpublished economic analysis of this legislation estimated that the tax credit earned by employers would be approximately $734 million per year, but that the tax credit is likely to have no net cost to the federal government and, in fact, is likely to increase net federal tax receipts.¹ This counterintuitive outcome is expected to occur for two reasons. First, the legislation is projected to stimulate $3 billion per year in new spending on workplace health promotion programs. Assuming a conservative ROI of 1.00:1.00 in medical care cost savings, an investment of $3 billion in the programs is projected to stimulate annual returns of $985 million in federal income tax, $409 million in FICA tax, and $183 million in state income tax receipts. An ROI of only .20 to 1.00 (i.e., saving only 20 cents of every dollar invested in health promotion) is required for the tax credit to break even, that is, for new tax receipts to equal the tax credit. Second, tax credits will be redeemable by employers in the year AFTER they invest in programs. Therefore, if there is no spending on programs, no tax credits will be granted. The only way this legislation could have a net cost to the federal government would be if no new programs are developed and existing programs do not expand their offerings. If that occurred, employers would earn a tax credit for the programs they are already offering. This is an unlikely outcome, but even if it occurred, the tax credit would be minimal because very few existing programs meet all the criteria required for the tax credit.

Healthy Workforce Act, HELP Committee portion. This portion of the bill amends Title III of the Public Health Service Act to stimulate employer health promotion programs in four ways.

• Section 399Z-1 instructs CDC to develop an educational campaign to make employers aware of the benefits of employer health promotion programs, and to create an annual award program for small, medium, and large employers.
   
• Section 399Z-2 instructs CDC to contract with experts to provide technical assistance in evaluating employer based health promotion programs and to train employers how to conduct program evaluations.
   
• Section 399Z-3 instructs CDC to conduct an annual national study on workplace health promotion programs and policies and to prepare an annual report on effective program implementation strategies.
   
• Section 399Z-4 instructs CDC to expand the Behavioral Risk Factor Surveillance System (BRFSS) to include a workforce component and to award grants to support research demonstration projects on the effects of new models in public and private sectors and among small and large employers.

For more details, see http://www.HealthPromotionAdvocates.org.

Michael P. O'Donnell, PhD, MBA, MPH

References

1.    O'Donnell MP. Economic analysis of the proposed Healthy Workforce Act. Unpublished analysis performed for staff of Senator Tom Harkin of Iowa. 2005:6 pp.