As in most debates, especially those that aim to make significant changes in policy, balance is a key to success, and that could not be more true than in answering the question of how best to change individual behavior from unhealthy to healthy through wellness programs.

There is a long line of corporate programs that are making a difference in the lives of their employees including Johnson & Johnson, Pitney Bowes, Caterpillar and yes Safeway. Using incentives and rewards, these companies and many more are improving the health of their employees by helping them quit smoking, lose weight, exercise more and better managing disease. The key to success is the employer providing incentives and rewards to their employees to participate in these wellness programs.

However, allowing variation in premiums based on behavior is another idea to try and get people to change their behavior. Current proposals before Congress limit the variation in premiums to 7.5 to 1. This variation includes basing it on smoking status, a proven harm to health. In fact, participation in a worksite wellness program could be another rating factor, like smoking, but it would need appropriate limits to protect those who cannot or choose not to participate (which is why you also need “carrots”). While the “stick” of charging higher premiums can be effective, it must be limited.

All of this leads to the importance of balance. While “sticks” can and are effective in changing behavior, carrots work best, which is the experience of most employers who lead in implementing successful wellness programs. Therefore, as Congress considers how best to change individual behavior from unhealthy to healthy there are a few best practices to follow. First, employers are the best place to implement wellness programs, and in doing so, companies must have flexibility to carry them out. What works for a large company like Johnson & Johnson with over 80,000 employees around the world will not work for 12 person printing company with one office.

Examples of good ideas to promote wellness include Senator Tom Harkin’s Healthy Workforce Act that provides a 50% tax credit to employers that provide comprehensive wellness programs for their employees and Senator Cornyn, Harkin and Reps Kind and Blumenhauer’s Workforce Health Improvement Program Act that equalizes the tax treatment for on and off site fitness memberships provided by employers to their employees.

Does money spent to encourage wellness pay for itself? Probably not.

But why would you want to spend your money to encourage me to live a healthier lifestyle? Why do you care whether I do 50 sit-ups a day or 25 or zero? It’s only because we have a dysfunctional insurance system that allows me to impose the costs of my bad behavior on you. And vice versa.

So you can plead, cajole, lecture, fine, and harass me. And I you. Or we can both try to create an insurance system in which people pay the full costs of their bad behavior and reap the full benefits of their good ones.

This is another example for which both God and the Devil are in the details. No one disputes that some behavioral choices - smoking, diet, regular exercise, age and condition-appropriate screenings - affect health status, expected health costs, and therefore, our collective average premiums. It seems perfectly reasonable, especially to economists and to those who make good choices already, to use incentives to encourage socially responsible choices and to discourage those that impose costs on others. At the same time, smoking is addictive and extremely hard to quit for some people who really want to, obesity can be caused or exacerbated by genetics and often comes with co-morbidities like depression that make financial incentives ineffective, and some people can only afford to live in neighborhoods with no stores that sell fresh fruits and vegetables and with little safe walking space. So how to reward good behavior without punishing the unlucky?

Two thoughts occur to this economist. First, if everyone in the country got their insurance through an exchange and/or pure community rating across all people and "groups" were the norm, then employers would not worry about differential health costs of their workers' vs. others (they would still care about average costs, appropriately) and one great fear of workplace discrimination would be erased. So we should develop reform proposals that move us toward this type of insurance system eventually.

Second, and more practically for the short run, why not allow reasonable and income-related incentives for good choices, or penalties for bad, but acknowledge our less than perfect knowledge about exactly how to accomplish smoking cessation and weight-loss etc., (otherwise, wouldn't we all be skinny and no one would smoke?) so that a person is exempted from the penalty if they engage in the remedy program chosen by the employer or health plan in the exchange, and such a program must be made available where behavioral incentives are in place This should encourage plans and employers and the government to hone and disseminate practical research on what behavioral programs work best, it will encourage people to take behavioral steps to address their problems rather than simply punish those who "fail" to cure themselves, and it will punish those who refuse to try and help themselves. That last is the behavior that breeds resentment among those who feel like they are otherwise forced to pay more for those who do not take proper care of themselves. Compassion demands we present alternatives and limit the penalties, but basic fairness says it is ok to expect effort in exchange for cross-subsidies from the community.

I would do enabling legislation very carefully. There is a great danger of penalizing preexisting conditions. Just as important we would need much more information about an employee’s health status than any of us currently have or necessarily should have. As an employer we give discounts on the fees at our wellness centers for those who come in a certain number of days a week. In addition we also have higher premiums for employees and their covered dependents who smoke. I would love to explore premium discounts for immunizations( including flu shots), and case management for those with chronic conditions, etc. Particularly, the latter which is now voluntary in most places and the one place where we might save serious money. You can see for the most part I like positive incentives…except for smoking.