Presented By: Best Practices for Premium Differentials in Tobacco Cessation PRESENTED BY:

TABLE OF CONTENTS Introduction... 3 Defining the Premium Differential... 4 Types of Premium Differentials... 4 How to Set Up a Premium Differential at Your Worksite... 5 Assess... 5 Plan... 6 Promote... 7 Implement... 8 Evaluate... 8 Client Stories... 9 Sherwin Williams... 9 WellPoint, Inc... 11 Family Dollar... 13 Conclusion... 14 About Us... 15 Best Practices for Premium Differentials in Tobacco Cessation 2

Introduction Tobacco use remains the number one cause of preventable death and disease in the United States and it s well known that it results in higher healthcare costs, high life insurance premiums and increased claims, greater disability costs, and higher costs for workers compensation. In fact, tobacco use costs employers an estimated excess cost of $21 per smoker, per day, or $7,874 per year. According to the Centers for Disease Control and Prevention, an evidence-based tobacco cessation program is one of the only employer benefits with a proven ROI. If you already have a tobacco cessation program in place at your organization, your goal is to effectively drive participation and engagement in the program. Premium differentials are quickly becoming the new trend for employers trying to save on healthcare costs, yet you may wonder whether implementing a premium differential would discriminate against smoking employees or negate the ROI for your tobacco cessation program. At Alere Wellbeing, we currently have 76 clients in the Fortune 500, and 30 have a premium differential in place. By the end of 2011, about 40 percent of our total client base had, at some point in time, implemented a premium differential. In our experience, employers who implement a premium differential usually see increased participation in and success with their tobacco cessation program. In fact, we ve seen evidence of clients quit rates that are 50 percent higher than those without a premium differential. Higher program participation rates lead to higher quit rates, which in turn lead to a higher return on investment. This white paper, based on a panel presentation given by Alere Wellbeing clients, will discuss lessons learned and best practices for implementing a premium differential at your worksite. Best Practices for Premium Differentials in Tobacco Cessation 3

Defining the Premium Differential Types of Premium Differentials Premium differentials come in many different formats, but their purpose is similar - to provide incentives for tobacco users to quit smoking. The most common form is to charge a higher health insurance premium for employees who use tobacco, or put another way, provide a premium discount to non-tobacco users. Other options are to offer wellness credits to employees who display healthy behaviors (like not smoking), allowing employees to put dollars into their HSA or FSA, or charging a tobacco surcharge. CLEAR INSIGHTS Premium discount Wellness credits Dollars into HSA or FSA Tobacco surcharge There are many variations on premium differentials, but those that are well designed have a few things in common: they have intuitive appeal, send a positive and decisive message about the importance of quitting tobacco use, are excellent vehicles for financing the wellness offerings you provide your employees, and are long-term solutions that provide measurable outcomes. IMPLEMENTATION STRATEGIES Not only are there multiple types of premium differentials, there are also myriad ways to implement them and ensure compliance. Here are a few variations on implementation methods: Require employees to make smoke-free pledges or sign affidavits. Many employers have found that the honor system works. Simply asking employees to be truthful about their tobacco use status and signing a document stating that they are smoke-free (either on paper or online) can be enough to ensure compliance. Administer a nicotine test to determine employees tobacco use status. Some employers find extra security in implementing a randomized nicotine test throughout the organization, which acts as a deterrent to employees who may otherwise be dishonest about their tobacco use in order to obtain the incentive or premium differential designed for non-tobacco users. Sometimes just the threat of random testing is enough to encourage better compliance. Tie the premium differential to your tobacco cessation program. Some employers choose to tie the premium differential to enrollment; we recommend instead rewarding employees on completed activities, such as engaging in a certain number of phone calls with Quit Coaches, setting a quit date, and other measurable activities along the quit continuum. Best Practices for Premium Differentials in Tobacco Cessation 4

How to Set Up a Premium Differential at Your Worksite Premium differential design is unique to every worksite, so it s crucial to consider the needs specific to your workforce and leadership team. To do so, there are a few key steps to ensure you re building the best possible plan: assess, plan, promote, implement, and evaluate. Assess Take the time to understand your organization s needs, interests, and limitations. Gather input across different departments to help you gain a clear understanding of what is needed. Your goal is to prepare for any pitfalls before launching implementation. Identify your organization s limitations. You ll need to dedicate resources to the set up and implementation of the premium differential. Determine whether you have the staff trained and available to do so. Consider whether your leadership team will be naturally supportive of a premium differential, or if you will need to convince them of the benefits. Determine level of management interest and ability to enforce policies. Gaining and maintaining support from management down is perhaps the single most important aspect of implementing any kind of worksite health initiative, but especially one with as many moving pieces as a premium differential. You want to be certain that once your policy is drafted and communicated, you will have ongoing support from the key stakeholders in the organization should you face any noncompliance. Determine level of employee interest. How many of your employees smoke? Studies show that 1 in 5 American adults smoke and 70 percent of those have the desire to quit, but no one likes to feel pressured to make such a personal decision. Take the time to survey your employees and determine how much support you will receive from the different departments in your organization. Consider asking your employees which kind of premium differential would work best for them. Take legal considerations into account. Will you require employees to sign an affidavit saying they are non-tobacco users? Will implementing such a program remain in line with state law? Make sure you give your legal team adequate time to address any concerns they may have. Best Practices for Premium Differentials in Tobacco Cessation 5

Plan Ensure that you have a concrete plan for your organization, with multi-level support. Draft clear requirements for the incentive. Include your long-term and short-term goals for its implementation. Are you trying to increase participation rates in your tobacco cessation program? Reduce employee healthcare costs by a certain amount or by a certain time? Offer a tobacco cessation program first. If you re going to ask people to quit smoking, make sure to provide them access to a comprehensive program that will support them in their quitting goals. Offer the program free of charge and with access to free medication and you ll see even more success. Tie the premium differential to your tobacco cessation program. We often recommend that clients tie premium differentials to engagement in their tobacco cessation program rather than tying a financial incentive to simply enrolling in the program. Set a realistic timeline. Your timeline will differ from that of other organizations, depending on the size and unique needs of your staff. It usually takes our clients about 30 days to launch our tobacco cessation program, and 12-18 months to fully launch a premium differential. Make sure to give your employees enough time to enroll and engage with the program before implementing a discount or surcharge. Set up an administration system to manage the program year-round. Take the time to think about how you will administer and deliver the premium differential, considering staffing needs and resources. We recommend a plan include the ability to allow employee qualification all year, as many people will require several quit attempts to overcome the complex addiction to tobacco. Providing employees with as many opportunities as possible to participate in your tobacco cessation program (and qualify for the incentive) will give them motivation to keep trying. Develop staff training. Decide how you will train appropriate staff members on the administrative tasks linked to the implementation process. Best Practices for Premium Differentials in Tobacco Cessation 6

Promote Once you have agreed upon a timeline and have a solid plan in place, it s time to start developing a communication strategy to promote the new initiative. Identify key communicators at your organization. Nominate people on your dedicated wellness committee or human resources team who will take responsibility for ensuring clear and ongoing communication support. Create a clear communication strategy. A clearly documented promotional communications calendar may be helpful in keeping you on track. Map out content pieces and copy ahead of time to ensure clarity and consistency of your messaging. Make communications about incentives clear, specific, and actionable. Do not allow any confusion to surround the new offering, but instead make it easy for employees to participate. Keep communications encouraging. Remember that the premium differential is intended to promote wellness and encourage employees to live a healthy lifestyle, not to punish tobacco users. Never make smokers feel as though you are penalizing them for their off-duty behaviors. Frame your communications pieces with this in mind, and always communicate in an encouraging manner. Enlist the support of your tobacco cessation provider. Your chosen vendor should have resources to help you come up with compelling communications pieces to help reach the tobacco users in your organization. Best Practices for Premium Differentials in Tobacco Cessation 7

Implement Once you ve got a detailed plan created and approved, execute it accordingly. Honor your timeline. If you ve created a plan with a timeline that addresses the needs of your organization, you should be equipped to roll out the premium differential accordingly. Stay on task and remember that the sooner you implement the program, the sooner you have the opportunity to help more smokers quit and save more money for your organization. Stick to your communications plan. A surprising number of clients fail to create a communications calendar and stick to it, and then find that they have failed to communicate clearly. Regroup if necessary. If you find you ve left something out during the planning phase, regroup and figure out how to fix the process. If this means you need to reassess your timeline, do so. Larger organizations may need more time to put all the pieces together. Evaluate After spending the time and effort planning, communicating, and implementing the initiative, you and your leadership team will want to see clear results. Formal evaluation of the incentive program will be an ongoing process that will help you know how to make improvements. Begin planning early to ensure that you can effectively collect the data you need to clearly evaluate the program s success. Determine early how management defines success. In order to have clear results, you will need to ensure that your management team has clearly defined its expectations for what constitutes a successful implementation. Monitor employees reactions to the premium differential. Pay close attention to the reactions of both employees and management as the initiative is implemented. Identify any areas of confusion and instances of noncompliance. Set goals for future improvements to implementation. Take your employees reactions into consideration and determine how you can improve communication strategies, offer more support, or perhaps implement a tobacco cessation program if you haven t already. Best Practices for Premium Differentials in Tobacco Cessation 8

Client Stories Sherwin Williams Offering a Premium Discount to Non-Tobacco Users Since 2007 Stacey Guinn, Disability Coordinator, Employee Benefits OVERVIEW One of the goals of the Employee Benefits Department is to help guide employees to live a healthier lifestyle. Many smokers want to quit, but need a gentle push to get started. We implemented a premium differential because of the additional costs incurred by tobacco use, as well as to provide added incentive to employees to start down the path of becoming tobacco free. LAUNCH CRITERIA We wanted to determine a figure that was fair to employees but also great enough to make them seriously consider quitting tobacco. We called several other companies to see if they used a premium differential and if so, what that figure was. We began our program in 2007, and many companies were not using a premium differential at that time, so we started with a figure that would be noticeable, but not deemed punitive. We also wanted to set up a support system for employees a tobacco cessation program to help them become tobacco free and avoid the premium differential in the future. We ultimately selected Alere Wellbeing s Quit For Life tobacco cessation program. We also knew we needed buy-in and support from senior leadership. The idea of a premium differential, how it would work, how many employees would be affected, and an alternative for employees was presented to our executive staff. The executives were initially concerned for the employees, but after presenting the initiative to them with the Quit For Life Program as an alternative, they thought it was a practical idea and a good way to steer tobacco users toward a healthier lifestyle. Best Practices for Premium Differentials in Tobacco Cessation 9

Sherwin Williams continued TIMELINE Approximately 6 months. APPROACH Our tobacco using employees have two options: do nothing and pay the higher premium on their medical plan contributions, or enroll in the Quit For Life Program and get the reduced medical plan contribution rate beginning the following month. We are an organization that places a high value on our employees, their families, and their needs. Tobacco users are self-reporting so our program is based on the honor system. Our program is available to all U.S. and Canadian employees, their spouses and their eligible dependents 18 years of age or older. COMMUNICATIONS We communicated the launch of the program in late fall of 2006 using many of the Alere Wellbeing communication vehicles and toolkit (brochures, posters, FAQs, wallet cards, giveaways). We sent launch materials and program details to our HR staff, mailed letters to our employees, circulated posters to all of our worksites and stores, posted information on our intranet, and utilized our wellness center for additional information distribution and support. We reiterated our planned implementation for the premium differential during our annual Open Enrollment period, published articles in our company newsletter, and emphasized communications during the annual Great American Smokeout (sponsored by the American Cancer Society ). We presented our premium differential plan as a reward for non-tobacco users, not a penalty for tobacco users. This was perceived as incentive to quit tobacco to get the reward and save money, as opposed to a punishment. LESSONS LEARNED We have learned that many employees who use tobacco want to quit but need a push to take on the task of quitting. Employees appreciate the company-sponsored program and the fact that it is also available to their family members. Many employees reap benefits from talk therapy, online tools, and nicotine replacement therapy. Some tobacco users prefer to remain tobacco users regardless of the consequences, both physical and financial. The program works well for our employees. Those who want to quit have a viable option with the Quit For Life Program. Best Practices for Premium Differentials in Tobacco Cessation 10

WellPoint, Inc. Offering Wellness Credits for Non-Tobacco Users Since 2011 Pamela Ventura, Human Resources Director OVERVIEW WellPoint s Wellness Credit Program is designed as a credit to offset the cost of medical coverage. Because there is a proven connection between healthy choices and healthcare costs, our wellness credit allows associates to pay less for the medical coverage when they demonstrate that they are taking care of their health and achieving desired results. The wellness credit is available to associates and their spouses and domestic partners. LAUNCH CRITERIA We developed a three year plan with the objectives of reinforcing personal accountability for health and wellness, reinforcing the connection between healthy choices and healthcare costs, and reminding our associates and their families of the many wellness programs we offer to support them. We choose a credit toward the cost of medical coverage to reinforce the connection between healthy choices and healthcare cost. The credit is designed so those who participate pay less for their overall healthcare plan than they would have otherwise paid and those who do not pay more. TIMELINE 9 months from concept to launch. APPROACH We wanted a three year plan that would move our population from focusing on awareness, to participation, to results. We ve offered robust and comprehensive wellness programs for several years and the wellness credit program is one way to boost engagement and emphasize accountability. It is important to note that our tobacco portion of the credit began in 2011. On January 1, 2011, we also introduced a prior authorization requirement for tobacco cessation prescription drug coverage (in states where permissible). Year One: 2010 was our first year, and employees completed activities for credit in 2011. In this first year, we mostly focused on weight management. A total of $200 was available to associates only (in other words, spouses and domestic partners were excluded). The $200 was awarded for participating in a Know Your Numbers biometric screening and completing an online health assessment. Year Two: In 2011 employees completed activities for credit in 2012. A total $400 was now available to associates and their spouses and domestic partners. $200 was awarded for participating in a Know Your Numbers biometric screening and completing an online health assessment. $100 was awarded for certifying as tobacco free or completing at least four coaching calls in the Quit For Life Program. $100 was awarded for completing an eligible wellness program. Best Practices for Premium Differentials in Tobacco Cessation 11

Wellpoint, Inc. continued Year Three: We are currently in year three of the plan, and employees are working towards the completion of activities that will earn credits for 2013. A total of $600 is available to associates and their spouses and domestic partners. $200 is awarded for certifying as tobacco free or completing at least four coaching calls in Quit For Life Program. $200 is awarded for having a Body Mass Index of <30 or demonstrating a 5% weight loss. $200 is awarded for having blood pressure of <140/90. (Biometrics are measured at Know Your Numbers screenings). COMMUNICATIONS The wellness credit program was first communicated to all associates in 2010 with an e-card and a video from our executive vice president of human resources. The launch video featured the vice president and two of his executive leadership colleagues, who explained the connection between healthy choices and healthcare costs and introduced the concept that our associates would be rewarded for taking accountability for their health and wellness. Two associates were featured in this story, talking about the changes they have made to improve their health. Since the initial launch, all associate emails that I send out have explained the program to associates and given them direct links to the steps they need to take to earn the credit. We ve sent similar emails to spouses and domestic partners, as well as a home mailer. In the office, we have used posters and computer screensavers to promote the program. We developed a dedicated page on our intranet site for the program, and also included information on our dedicated health plan site so that associates and spouses and domestic partners could access this information from home. Specifically on the tobacco portion of the credit, Alere Wellbeing hosted one of our monthly wellness teleseminars to share more about the Quit For Life Program. LESSONS LEARNED Our associates want simple, direct communications that lead them to the steps they need to take to earn their wellness credit. For instance, we developed an online tobacco certification tool where our associates and their spouses and domestic partners could tell us they were tobacco free to earn the credit. If they are tobacco users, the tool takes them straight to the Quit For Life website where they can sign up and get started with the program. Our credit program is designed so that tobacco users can earn the credit by completing four coaching calls anytime during the year. But, from mid- July through mid-september, during the tobacco-free certification campaign, we saw a huge uptick in enrollment in the Quit For Life Program. One thing we would do differently is deliver all our online components of the wellness credit program under one platform so users could have an integrated, seamless experience. Best Practices for Premium Differentials in Tobacco Cessation 12

Family Dollar Implementing a Surcharge on Tobacco Users Since 2012 Laura Gray, Manager of Benefits Strategy & Compliance OVERVIEW We surveyed our employees to better understand what would motivate them to participate in a wellness program. The results showed that our staff believed a tobacco surcharge would make the biggest impact. LAUNCH CRITERIA We have offered incentives for other wellness type benefits in the past so we looked at participation in these plans and what we could learn from them. We knew we wanted to offer something that would increase participation. From here we looked at what incentives were prevalent and meaningful in the marketplace to see what was working for other organizations. We knew we needed to offer something meaningful without hitting employees pockets too hard. TIMELINE Concept to launch: About 4 ½ months. APPROACH We understand that overcoming the addiction to nicotine and the use of tobacco products can be extremely difficult, so we wanted to remove as many obstacles to treatment as possible especially financial obstacles. We wanted to make sure our employees had all tools available to overcome their addiction so we provided access to the Quit For Life Program at no cost to them. The Quit For Life Program includes nicotine replacement therapy, so we wanted to cover that cost as well. COMMUNICATIONS We communicated about the premium differential launch in a similar method to the way we communicated about the Quit For Life Program in general. We used the traditional forms of home mailings and internal emails. We also had help through the use of customized promotional materials provided to us by Alere Wellbeing, our tobacco cessation vendor. LESSONS LEARNED We promoted the program prior to annual enrollment in hopes our employees would enroll in the program in enough time to avoid the surcharge, however we received feedback that our employees did not have enough time to enroll in the Quit For Life Program and complete the requirements we had laid out for them before January 1 to avoid the surcharge. Looking back, we would have tried to implement the Quit For Life Program a month earlier than we did. Finally, we ve found that removing financial barriers to quitting like providing the Quit For Life Program and NRT to participants free of charge gives tobacco users an extra incentive to enroll in the program and get started. Best Practices for Premium Differentials in Tobacco Cessation 13

Conclusion If you want to implement a premium differential that will achieve maximum results, you must tailor your plan specifically to the needs, goals, and limitations of your organization. Make a clear assessment of the resources available to you as well as the interests of your leadership team. Survey your staff to determine which implementation strategies they believe will work to best support them in making healthier decisions. Offer your tobacco cessation program before you implement a premium differential and give your employees enough time to engage. Make communications about incentives clear, specific, and actionable, and leverage external campaigns like the American Cancer Society Great American Smokeout and events like Open Enrollment to your advantage. Ask your tobacco cessation vendor if they have customizable promotional materials that highlight your tobacco cessation offering as well as your premium differentials program. Most importantly test it out! If you commit to improving employee health, lead the initiative with a positive, encouraging message, and offer support to your tobacco users through an evidence-based tobacco cessation program, you will find that offering incentives like premium discounts, wellness credits, and tobacco surcharges can promote positive behavior change and positively impact your bottom line. This white paper is based on a webinar presentation given by Alere Wellbeing Vice President of Client Services Yuki Yang and human resource professionals from Sherwin Williams, WellPoint, Inc., and Family Dollar. To view this webinar, please visit http://www.alerewellbeing.com/clearinsights/webinars. To learn about working with Alere Wellbeing to set up a premium differential, smoke-free worksite, or to implement nicotine testing, visit www.alerewellbeing.com/working-with-us Best Practices for Premium Differentials in Tobacco Cessation 14

About Us Alere Wellbeing Alere Wellbeing brings together science, technology, and personal interaction to help people recognize and modify unhealthy behaviors to avoid chronic illness and live longer, more vital lives. Alere Wellbeing s evidence-based programs address modifiable health risks that contribute to chronic disease: tobacco use, poor nutrition, physical inactivity, and stress. Current clients include 27 state governments and more than 675 health plans and employers, 76 of which are in the Fortune 500. Alere Wellbeing is known and respected for its pay-for-performance business model, intense focus on scalable service quality, dedicated account management, continuous program improvement, and transparent reporting of measurable outcomes at the individual participant and aggregate population level. Alere Wellbeing has contributed to more than 100 published research studies and maintains collaboration with the American Cancer Society and an active research program funded by the Centers for Disease Control, American Legacy Foundation, and the National Institutes of Health. Learn more about Alere Wellbeing Quit For Life Program Offered in collaboration with the American Cancer Society, the Quit For Life Program has been the nation s leading evidence-based tobacco cessation program for more than 25 years. The Quit For Life Program employs an evidence-based combination of physical, psychological and behavioral strategies to enable participants to take responsibility for and overcome their addiction to tobacco use. Learn more about the Quit For Life Program Best Practices for Premium Differentials in Tobacco Cessation 15