Getting Paid for Staying Well

To hike participation in wellness programs, should an employer reward or punish?

By Susan J. Wells Feb 1, 2010
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February CoverEmployers are upping the ante when it comes to wellness incentives, relying on them more frequently and in fresh ways to fuel the dual goals of participation and behavior change.

"Incentives are red-hot right now—and they’re increasing," says David Hunnicutt, president of the Wellness Council of America (WELCOA), a nonprofit workforce health promotion organization based in Omaha, Neb. There’s good reason for the trend: "If used effectively," he says, "wellness incentives can significantly increase participation and improve the likelihood that employees will embrace, and ultimately adopt, healthier behaviors."

Employers seem to agree. Consider these measures:

More than half of 1,313 employers surveyed in 2009 by Chicago-based HR firm Aon Consulting expect to expand wellness programs in 2010, and 34 percent will add or increase incentives tied to them.

Employers of all sizes hiked spending on wellness incentives from an average $204 per participant in 2008 to $329 in 2009, according to a 2009 study of 372 companies by the Vienna, Va.-based communications and market research firm Health2 Resources. Incentive values range from $1 per pound for weight loss to annual health care premium reductions valued at more than $1,500. The most common incentive was premium reduction, followed by merchandise and gift cards.

Does Size Matter?

Companies that offer incentives report significantly higher participation in lifestyle management and wellness programs, according to a 2009 survey by global consulting firm Watson Wyatt and the National Business Group on Health, an association of more than 300 mostly large employers.

Even moderate incentives can help engage employees in healthy behavior, the data show. Incentives from $51 to $100 can boost participation in smoking cessation and weight management programs and encourage workers to get biometric screenings. Higher participation in health risk appraisals is associated with incentives greater than $100.

"The relationship between the amount of the incentive and the level of program participation among employees is strong," says Sherri Potter, Watson Wyatt’s senior group and health care consultant.

That’s why more employers are offering incentives for completing assessments, she says. Sixty-one percent of employers surveyed offered them in 2009, up from 53 percent in 2008. Incentives for weight management are offered by 34 percent of employers surveyed, up from 31 percent in 2008, and full coverage of preventive services is offered by 73 percent, up from 53 percent in 2008.

Company size influences the complexity of wellness programs, but it doesn’t necessarily dictate the value of incentives.

Among large employers responding to the study by Health2 Resources, a bigger percentage offer programs and incentives when compared to small and mid-size companies. But some organizations with as few as 210 employees are offering wellness incentives valued at $1,450 per employee per year—well above average.

Still, some experts recommend setting incentives—especially cash—at as low a level as possible. In theory, larger amounts can create greater dependency and more likelihood that behaviors will cease when perks end.

Rewards "should be just enough to tip the balance," advises Hunnicutt of WELCOA, whose 3,200 members are mostly employers. To identify that point, find the amount and types of incentives that:

Solicit the highest participation and help sustain positive "buzz."

Show identifiable results, whether anecdotal or statistical.

Are commensurate with what employees are asked to do. An incentive for completing a self-assessment questionnaire might be lower, for example, than that for participating in biometric checks of blood pressure, cholesterol, glucose, body fat and other indicators.

Setting Rewards

Analysts at IBM Corp., the Armonk, N.Y.-based technology giant that pioneered healthy living rebates in 2004, are constantly assessing and refreshing wellness enticements.

In 2010, they will add an incentive dubbed the "Personal Vitality Rebate" to encourage lifestyle changes to build energy, better health and vitality through personal well-being. The program joins four similar rebates fostering physical activity and nutrition, preventive care, childrens’ health, and new-hire healthy living. Each offers $150 cash incentives available to all 120,000 full-time U.S. employees. Employees choosing to participate in any two programs receive up to $300 in cash per year.

"We’re always in the mode of looking at employee feedback, current research, our environment," says Dr. Joyce Young, IBM’s director of well-being. It’s "a culmination of regular surveillance that helps us determine where we focus and invest." Monitoring includes revisiting company and individuals’ goals, readjusting incentives, or targeting incentives to issues that affect employees.

Both IBM and its employees have yielded significant savings through investments in wellness and preventive care: From 2004 to 2007, IBM invested $79 million in wellness programs, saving about $191 million attributable to lower health costs for participants compared to nonparticipants, Young explains.She also sees "results from employees’ own personal stories, trends from health risk assessments where actual improvements have been logged, and in reduced medical claims costs among participants."

While each of IBM’s five wellness rebate programs works on an honor system, they require employees to register and fill out activity logs. The physical activity rebate, for example, seeks a weekly minimum of three 30-minute exercise sessions for 10 of 12 consecutive weeks to qualify for the payout.

Targeting Long-Term Gains

Opinions vary on whether incentives drive sustained health behavior change. However, evidence seems to show that some incentives motivate discrete changes, such as medication compliance, completing a health assessment, or participating in weight loss, smoking cessation or cholesterol reduction.

In 2009, for example, nonprofit Cleveland Clinic launched "Lifestyle 180," an employee wellness program aimed at reversing the effects of common diseases, including hypertension, high cholesterol, diabetes and obesity. Components include one-on-one coaching by health professionals about nutrition, cooking, exercise and stress management.

The incentive? The free six-week program includes 50 hours of guidance from a team including dietitians, exercise physiologists, stress managers and yoga instructors.

Average findings from pilot classes held at the clinic’s wellness campus in Lyndhurst, Ohio, showed that after the six weeks, participants reduced body weight by 4 percent, reduced body mass index by 4 percent and reduced LDL cholesterol levels by 6 percent.

Three participants no longer needed five prescription medications after the six weeks—and about one-third were able to come off at least one drug within 10 weeks of starting the program.

The clinic began offering employee wellness programs in 2006 at all locations and has, over time, added to the mix of incentives offered to 27,000 employees in its health plan.

Along with a $100 annual award paid to employees in the health plan who attend a fitness center owned by Cleveland Clinic 10 times a month for 10 months, the health system added incentives in 2008 including no-cost Weight Watchers options and access to Curves fitness centers.

Getting rid of common roadblocks to healthy behavior—including price and hassle—may hold the key, advises Joe Patrnchak, chief human resources officer.

Carrots vs. Sticks

Incentives come in many forms, but they’ve traditionally been "carrots," positive rewards, or "sticks," negative consequences.

Recently, "carrots" have been preferred as employers strive to project a positive, upbeat message around wellness. "A heavy-handed approach is usually viewed negatively," Hunnicutt says. "Wellness programs are something we do with and for employees, not something we do to them."

Clarian Health, a large, nonprofit hospital and health center system based in Indianapolis, chose a carrot-only, incentive-based wellness program in 2008 after convening a planning committee of physicians, wellness and legal experts, and HR and employee benefits leaders.

The plan was devised after executives considered, but rejected, an earlier design that would have charged each employee a $5 per-paycheck penalty if they didn’t follow and meet certain wellness goals. After employees expressed concern, "We changed course," says Brian O’Connor, executive director of employee benefits.

Employees in Clarian’s health plan can earn a $5 per-pay-period rebate on health insurance costs—a total of $720 a year—by completing an assessment, staying tobacco-free and meeting four healthy targets relating to body mass index, cholesterol, blood pressure and random glucose.

So far, O’Connor says, more than 71 percent of enrolled employees participate in the rebate program.

That said, "sticks" may have a place by leveraging negative consequences to curb certain behaviors.

Garry Mathiason, senior shareholder in the San Francisco-based law firm Littler Mendelson, predicts that business needs will lead more employers to go beyond voluntary programs that only dangle carrots.

He predicts an "inevitable evolution toward mandatory wellness plans. The culture in most organizations aligns with the idea that it works better with a positive motivator," he says. "But it only works up to a point."

Indeed, some employers offer tough love: In 2009, North Carolina became the second state to tie disincentives to health insurance plans. Officials increased out-of-pocket expenses for workers who smoke and don’t try to quit or who are morbidly obese and won’t try to lose weight.

In 2008, Alabama officials—already charging tobacco users $25 per month in insurance premiums—announced that in 2010 they would charge additional monthly premiums for employees who choose not to participate in a wellness program.

Managing Downsides

Besides the sheer cost of wellness payouts and perks, employers have to dodge disadvantages inherent in incentive offers and their structure, experts say. Some incentives may inadvertently reward unhealthy behaviors—for example, a per-pound weight loss incentive with no limits may encourage unhealthy weight loss practices.

And, incentives could create dependency—when the reward ends, the behavior stops. For example, an incentive for attending a fitness center that expires after one year may result in employees ending their regimens. "A key consideration in incentive design is maintaining desirable behaviors without unwanted challenges to the program," says Hunnicutt. Another risk: Participants may figure out how to cheat.

"Most corporate wellness programs still stand by the honor system," says Aaron Hardy, president and founder of Integrated Health & Wellness, a wellness program development firm in Reno, Nev. "You would hope that people don’t lie and falsify information, but it happens."

For example, if at the end of a $100-incentive wellness initiative, employees lie about participation, "they can walk away with some serious money. On the other hand, if someone lies and they get a month free at a local gym, they still might do what you want them to do," Hardy says.

Bottom line: Expect attempts at rule-bending. To address them, Hunnicutt says many planners incorporate simple language into registration forms that says something like "I will abide by program requirements and will honestly take part in this program."

"Let employees at least know what your expectations are," he urges.

Find the Sweet Spot

Employers continue to craft a mix of incentives. While one size doesn’t fit all, the march toward corporate wellness requirements—and the incentives to drive them—is moving ahead.

Most employers are aiming for the simplest, most cost-effective rewards that lead the largest number of employees to move from thinking about improving their health to actually doing it.

Further, the best incentives indeed spur long-term lifestyle changes so when rewards are gradually reduced or removed, healthy behaviors continue.

According to Hunnicutt, "Incentives may not be necessary forever."

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The author, a contributing editor of HR Magazine, is a business journalist based in the Washington, D.C., area.

Web Extras

SHRM article: Wellness for the Well (HR Magazine)

SHRM article: Finding Wellness’s Return on Investment (HR Magazine)

SHRM article: Size and Scope of Wellness Incentives Grow Larger(SHRM Online Benefits Discipline)

SHRM resource: Wellness benefits resource page

SHRM video: Nancy Blough, executive VP of the American Health Data Institute, offers advice on ways to encourage participation in wellness plans

SHRM video: Alan Momeyer, vice president of HR for Loews Corp., says the rewards are worth the risk of initially overpaying for wellness incentives—especially if you plan to reduce incentive payments at a later date

SHRM survey: 2009 Employee Benefits

Web site: Wellness Council of America

Survey report: 2009 Benefits and Talent Survey (Aon Consulting)

Survey report: How Employers Use Incentives (Health2 Resources)

Toolkit: Financial Incentives for Healthy Lifestyles: Who’s Doing It, What’s Legal and Where’s the Evidence? (National Business Group on Health)

Report: Employer-Mandated Wellness Initiatives: The Continuum from Voluntary to Mandatory Plans, 2008-2009 (The Littler Report, Littler Mendelson)​

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