Wellness Incentive: Tips for an Effective Program

News Updates
Major corporations are doing it. So are universities. And even state legislators are proposing it. The "it" is providing incentives to motivate individuals covered by health insurance to participate in wellness programs.
 
According to a United Benefit Advisors' survey released in May 2007:
 
  • 10.5 percent of U.S. employers have in place, and an additional 7.6 percent are likely to add next year, incentives to encourage employees to improve their personal health. 
  • These incentives include lower premiums, lower co-pays, flex credits, cash contributions to health reimbursement arrangements (HRAs) or health savings accounts (HSAs), gifts, and merchandise discounts.
Among the largest U.S. employers, the trend is even more pronounced. A Hewitt Associates surveyreleased in April 2007 reveals that nearly half (48 percent) of major U.S. employers now offer or plan to offer incentives next year to employees who participate in wellness or other health-related initiatives, compared with just 38 percent in 2006.
 
The sharp increase is based in large part on the rising cost of health care, especially for those with chronic illness. "Employers are applying a risk management mind-set to the asset that is employee health," says Jim Winkler, practice leader of Hewitt's health management consulting practice. Wellness programs, by promoting healthier employee behaviors, provide companies with significant opportunities for short- and long-term cost savingsbut only if employees actually participate in them.
 
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Wellness programs provide significant opportunities
for short- and long-term cost savings—but only if 
employees actually participate. 
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This view is shared by other wellness program advocates. "Lifestyle factorssmoking, a sedentary lifestyle and poor nutritionplay a prominent role in the development of chronic disease," says Michael Dermer, president and chief executive officer of IncentOne, which specializes in administering incentives for employer-based health and productivity programs. "Improving employee health lowers costs and increases productivity is a tangible financial benefit for anyone watching the bottom line."
 
Incentive Choices
 
"Health care costs have been rising at an alarming rate for over 20 years. The best strategy to contain costs long term is to keep employees healthier so that they'll use health care services less," said Michael F. Carter, vice president and regional director at Hay Group, at WorldatWork's 2007 Total Rewards Conference in Orlando in May (view his presentation slides).
 
Employers can make their wellness programs more effective, he advised, by encouraging participation through financial incentives. "Anything that the organization can do to make services easier for employees to access is helpful, but more important, providing financial incentives will increase the likelihood that employees will participate in the program," Carter said.
 
Common incentives are cash contributions, gift certificates and merchandise discounts, he said. "But we feel the most effective incentive is lowering [health insurance] premiums for employees who participate in wellness initiatives, because it provides a direct linkage with the message you're sendingthat you want employees to be healthier," he advised.
 
Carter noted that "a good track record" on cost savings has been documented in the American Journal of Preventative Medicine. "There have been over 200 studies conducted scientifically that show that wellness programs save money and provide a good return on investment, and that financial incentives improve the cost savings of those wellness programs," he said. (To learn more about wellness programs' return on investment, read The ROI of Wellness Programs: From 'Perk' to Priority Investment.)
 
Tips for HR
 
When developing financial incentives for wellness programs, Carter recommended, "Make sure you comply with government regulations, and that your incentives are tied to behaviorsthat is, to participation in the wellness program rather than to health status itself." Other tips include:
 
  • Make the incentive significant enough that it is meaningful to employees. 
  • Take a long-term focus. Short-term diets don't work, and short-term wellness programs don't work, either. 
  • Find a senior-management champion in the organization to ensure that the program continues on a long-term basis.
 
Steps to an Effective Incentive Program
 
An issue brief published by IncentOne, The Art and Science of Health Incentives, identifies six steps organizations should take when implementing incentives for a wellness program:
 
  1. Identify what type of behavior you're trying to incent. "Clearly defined goals are critically important," says Sue Lewis, senior vice president of health and productivity solutions for IncentOne. "A company needs to identify what exactly its trying to achieve and why."
  2. Understand what will motivate your employeesand what won't. Some employees value a $100 gift card, but others will more likely appreciate a $250 contribution to a health savings account.
  3. Identify your preferred method of incentives. Monetary or non-monetary? Health-focused awards or debit cards?
  4. Choose a vendor smartly. You want somebody who can integrate all of the program data, track participation, goal achievement, engage the end-user over time and grow with you as your program evolves, Lewis says.
  5. Communicate. Employees need to know exactly what theyre being encouraged to do.
  6. Adopt a culture of health in the workplace. Offer healthy cafeteria options. Allow flexibility so employees can use their gym membership. A good health and productivity program must allow employees to actually do the things that incentives are encouraging them to do, Lewis says.
 
More Communication Tips
 
The Hay Group's Carter shared additional advice on communicating with employees about incentive programs. Among his recommendations:
 
  • Show how these are positive incentives for participating rather than penalties for not participating. 
  • Communicate early and repeat the message often. 
  • Communicate in a variety of media.
 
"If you're a company where everybody has a computer at their desk, then obviously communicating via the computer is a very efficient and effective way," Carter noted. However, "If you have a lot of employees without computer access, you're going to want to look more toward paper-driven, newsletter-type communications."
 
He added, "If you use different ways to communicatepayroll-stuffers, posters, a table outside the cafeteria where people explain the programyou're going to have more success with employees getting the message."