Employers ready to raise the stakes for health incentives

Your employer wants you to stop smoking and lose some weight. And the boss is willing to sweeten the pot if you succeed.

There’s a new twist to corporate wellness programs: Increasingly, employers want to see concrete results before they reward you with premium breaks on your health benefits or with cash and gift cards.

In a September survey of 466 large to midsize employers by the professional services company Towers Watson, 65% of respondents said that for 2011 they’ll increase incentives to take part in these programs. And 62% said that by 2012, instead of offering employees incentives to participate in wellness programs like in years past, they’ll only pay up after they see demonstrated action and results.

Perhaps it’ll be agreeing to work with a health coach to better manage your high blood pressure. It could be enrolling in a weight management program or seeing decreases in cholesterol levels or blood pressure over time because of your efforts.


The expectation is that by knowing there are rewards for action and results, employees will find it more attractive to engage in healthier behaviors — and the company’s healthcare and productivity costs will decline as a result.

“Employers see unhealthy lifestyle as the biggest barrier to providing affordable healthcare coverage,” says LuAnn Heinen, vice president of the National Business Group on Health, a nonprofit association of large U.S. employers. That perception seems justified. A study by Duke University published in October’s Journal of Occupational and Environmental Medicine found that annual U.S. employee health and productivity costs associated with obesity alone are an estimated $73.1 billion. And there’s no sign of that expense decreasing.

Wellness programs have, so far, mostly brought employers only modest cost savings, if that. A historically low level of employee participation is the main reason experts cite. “You launch programs, and 10% or 15% of the eligible population participates. If you get to 20%, you’re doing really well,” Heinen says.

Yet despite the less-than-robust returns, employers are redoubling their efforts for the upcoming year. “Even with the economy, there isn’t a slowdown in these programs,” says Sheri Pruitt, director of Behavioral Science Integration at the Permanente Medical Group Inc., a division of Kaiser Permanente in Roseville, Calif.


A number of factors are driving this. One is the fact that businesses with higher levels of participation in their wellness programs do achieve cost savings. “Some companies have gotten there, and it has had a payoff,” says Mike Thompson of PricewaterhouseCoopers’ Health and Welfare Practice.

Another is that health reform has placed an emphasis on wellness and prevention. Starting next year, small companies can receive grants if they begin wellness programs that target smoking cessation, nutrition, physical fitness and stress management. And by 2014, employers can increase employee incentives for participating in a wellness program from the current 20% to 30% of the total premium. This has encouraged some businesses to jump into the game or refine existing programs.

The types of activities and incentives employees will see are likely to expand next year. “But you’ll have to do more to get them,” Heinen says. “It’s about doing something, rather than just taking a questionnaire.”

For example: If last year you received a gift card or money for completing a health risk assessment (an evaluation of your health risks and the lifestyle activities that contribute to them), this year your employer may offer you incentives to join a program (for diabetes management, say). And, increasingly, employers will require you to achieve the outcomes intended by the programs.

A 2010 annual survey of 507 employers by Towers Watson and the National Business Group on Health found that 42% of large firms will require employees to complete health coaching or a disease management program in order to earn a financial incentive in 2011. And 17% said they either had in place or were considering plans in which employees would have to maintain a healthy body mass index (BMI), normal blood pressure or cholesterol levels, or show improvement toward those goals to earn their reward.

In addition, 40% of employers said that in 2011 they are offering incentives for so-called biometric screening, in which blood pressure, blood sugar, cholesterol and other health parameters are checked.

Increasingly, employers are tying not only health insurance premiums but also benefits packages to their wellness initiatives. Many are offering two levels of benefits. Employees who engage in and sustain good health or are willing to take actions to improve their health may enjoy lower health insurance premiums and have access to a more robust package with fewer out-of-pocket expenses in the form of lower copayments and deductibles.

With all of this nudging to get workers to take better care of themselves, employers are quite aware of the fine line they walk between offering support for healthy choices and making inappropriate demands, experts say. Wellness programs don’t work if people think their employer is trying to get them to do things they don’t want to do.


“I’ve seen extreme concern and fear over issues around discrimination when you start doing things like rewarding for certain amounts of weight loss or biometric screens,” says Josh Klapow, chief behavioral scientist at Birmingham, Ala.-based ChipRewards Inc., which develops health incentive programs.

But will this new focus on results actually make employees more healthy? Some experts have their doubts. Pruitt, for one, thinks that rewarding people for an outcome without reinforcing all the steps needed to get there isn’t likely to be effective. “There is a real lack of understanding among very smart people that there is a science of human behavior,” she says.

Klapow agrees that by shifting rewards from participation to outcomes, employers are making a huge assumption that people will be able to figure out and engage in all of the behaviors that lead to the desired outcome. He argues that a successful program would reward people for every necessary step along the way to a goal.

His prescription for a stop- smoking program, for example: “Give points for enrolling, points for every time you participate in class, points for graduating, points for reporting nicotine-free,” he says. Sure, give the most points for passing a nicotine breathalyzer — but don’t save all rewards for just the breathalyzer.

All agree that figuring out the best way to motivate employees to get healthy and thereby cut costs is going to take time — and trial and error. “I think this is an evolutionary process, and some companies are more mature in that process than others,” Thompson says.