With the rising cost of health care, employers are quickly learning that strong, healthy employees reduce the cost of health care and provide the company with a competitive workforce. Many companies are offering incentives to help employees get healthy.

Here are some statistics from Cornell University for Health and Productivity Studies about the annual productivity losses per employee for some health conditions:

• Heart Disease - $368
• Hypertension - $392
• Arthritis - $327
• Mental Health Problems - $348
• Allergies - $271

Obesity has become an overwhelming problem in America. The Trust for America's Health research group reports that adult obesity has risen from 15 percent in 1978-80 and to 32 percent in 2003-04. Of course living a healthy lifestyle is completely up to the individual, employers can offer employee incentives to promote a healthy lifestyle. Health management programs have been shown to reduce health care costs and increase the workforce productivity.

By giving employee incentives for living a healthy lifestyle, you might motivate those employees who would not participate otherwise. Some of the employees you want to participate are those who are at risk for chronic conditions. Studies have shown that a $25 incentive will motivate up to 30 percent of your employees to join in a health fitness program. A wellness program will only be effective if your employees participate in the program.

Employee incentives should offer a variety of rewards that will interest and motivate all different types of personalities. Some employee incentives you can offer are gift cards, cash, or merchandise with a wellness focus. Some other employee incentives are health savings account or health reimbursement accounts.

What is a health savings account? Most people switch to a health savings account to save on the cost of large premiums. Health savings accounts have a large tax advantage, versus to paying out-of-pocket for health insurance. In order to qualify for a health savings account, you must participate in a high deductible health insurance plan. The funds deposited in the health savings account are not subject to federal income tax at the time of deposit. The funds in the account can only be used to pay for qualified medical expenses at any time without having a tax liability. If you withdrawal money for personal use, the money is treated like an IRA account.

Many people who participate in health savings account feel they are reducing the growth of health care costs and are increasing the efficiency of the health care system. Health savings accounts allow people to save money for future health care expenses and the patient has control over their health care needs. The patient can select the doctor and the type of care they need without being told they need to be pre-qualified or referred by another doctor before they can seek medical assistance. Health savings accounts are not perfect yet; many opponents of health savings accounts argue that they are worsening the health care system's problems. Their thinking is that the healthy individuals will participate in health savings accounts and the un-healthy participates will continue to abuse the health insurance plans.

Many companies have switched to health savings account plans because they do not include the high premium costs as traditional health care. A health savings account works by making deposits into the account. The policyholder or the employer can make deposits into the health savings account. Employers are able to deposit money on a pre-tax basis and the employee has this advantage as well, as long as they make contributions to their health savings account through their employer. The advantage to making pre-tax deposits is because there is a 7.65% savings to the employer and the employee.

All the money deposited into the health savings account becomes the property of the policyholder. Depending upon which type of health savings account you have, the funds not withdrawn each year will carry over into the next year. If you end your health savings account plan, you will not be able to continue depositing money into the account, but you will be able to exhaust the remaining money.

The money in a health savings account cannot be used to open an IRA or 401k account. All health savings account contributions belong to the account holder and are only deposited into the health savings account. A large benefit to health savings accounts is that participants do not need approval to use the money in the account. The funds will not be subject to income taxation if they are used for qualified medical expenses. Quite often health savings accounts come in the form of a debit card or checks. They work similar to a debit card or checking account. The funds can be withdrawn for any reason; however you must provide documentation that they are for medical purpose. If you use the money for other reasons, the purchase is subject to a 10% penalty and income taxes. You are required to retain documentation for all qualified medical expenses. If you fail to do so, the IRS can rule that the purchases you made were not for medical purposes and you are subject to a penalty and taxes.

Health savings accounts are a great way to off-set health care costs because they benefit both types of health care needs; the healthy and those who have large monthly expenses for medications. The main reason this occurs is because everything that one party spends on medications and office visits will be credited toward the deductible. Therefore, once you have met your deductible, your health savings account will pay for your medications at the same co-payment of your other medical expenses.

Health savings accounts generally have a lower premium than traditional health insurance. When you have a higher deductible, it lowers the premium because the insurance company is no longer responsible for paying routine health care expenses. The economic theory behind health savings accounts is to begin having the patients see this money as their own and they will consume less medical care and they will shop for bargains and be vigilant against fraud in the health care industry.

Flex Spending Account

Flex spending accounts are quickly catching on with several companies. Many employees are worrisome about health savings accounts due to the fact that a large deductible worries them. A flex spending account also provides a tax advantage to the account holder. An employee will set aside a portion of their earnings to pay for qualified medical expenses. It is similar to donating money into your 401k or simple IRA. The money will be deducted directly from your paycheck and will not be subject to payroll taxes.

A flex spending account is similar to a health savings account, but the main difference is that it is offered with more traditional health insurance plans instead of high deductible plans. Also similar to the health savings account, you will have a debit card or a "flexcard" for health care expenses. You will also need to keep documentation of your purchases for tax purposes. A main difference with a flex spending account is that whatever money you don't use at the end of the year, you will loose.

Health Reimbursement Account

Health Reimbursement Accounts are IRS-sanctioned arrangements that allow an employer to reimburse their employees for co-pays, coinsurance, deductibles and other health care services. An employer may have different plans in place and vary with different health care plans. The employer is not required to prepay into a fund for reimbursements, instead they pay for reimbursements for qualified claims that are tax deductible for the employer.

Health reimbursement accounts are tax free as long as they are tied to qualified health care expenses. With a health reimbursement account, the employer can roll over the funds from year to year.

What incentives can I provide to my employees?

After you have decided upon a healthy lifestyle program, you need to begin promoting it to your employees. Many employers place electronic messages on their employee's computers screens to inform their employees about the new program.

Some employers send home printed mailings because it reaches not only the employees, but their families as well. This encourages the family of the employee to support them and encourage them to work hard at participating in the program.

Employers who offer health and wellness programs with incentives gain a productive workforce and their employees will grow together to achieve the same fitness goals. Employers who offer employee incentives will also help to control the spiraling health insurance problems in America. The key to making employer health incentives work is to motivate your employees. It comes down to personal responsibility on the part of your employees. Personal responsibility will need to be tracked and measured. There are several internet-based applications you can purchase to track the progress of your employees.

Some companies have their employees fill out health evaluation forms. Beginning each quarter you will have your employees fill out a statement sheet at to what they are going to do to improve their lifestyle. You can determine what is considered healthy, such as quitting smoking, walking for 30 minutes a day, removing caffeine and extra sugar from their diets. Then, offer them an incentive like a cash bonus if they complete their goal.

Increasing the health of your employees will benefit everyone, not only will we be living in a healthier society, the rising cost of health care will start to decline and those who cannot afford insurance will be able to participate in health care plans.