Employers are getting in the business of keeping employees healthy. There are still those employers who will encourage employees to use the stairs instead of an elevator, position gym equipment in a hard-to-find old storage space or put posters up that tout the advantages of eating fruits and vegetables. But, those measures are considered tame by today’s standards.
Companies are developing not only attractive wellness programs, but creative incentives to engage employees to participate in them. Just how far will employers go to keep their employees healthy? Well, that all depends upon what those workers – or the programs that have been designed for them – return on the company’s investment.
For employers who choose to go the route of incentives – even those that include deterrents – the question then becomes not only which rewards or penalties, but which behavior or outcomes to target and influence employees.
Shape Up: Sign of Times
Most companies use incentives. Others go so far as to threaten employees who don’t shape up with penalties. Cash, gift cards, even discounts on health insurance premiums are some of the rewards employers are dangling in front of workers who are on the fence – or about to fall off – in the hope that they may grab hold of and embrace healthy lifestyle choices.
Fidelity Investment and the National Business Group on Health report that 90 percent of employers offer wellness incentives, or financial rewards, or prizes to employees who work toward getting healthy. That’s up from 57 percent of businesses in 2009. The immediate objective is noble enough: to improve the health of employees.
Not a bad intention, considering the findings of a Canadian survey, which reported that 83 percent of primary health plan benefit members claimed they were more likely to remain on the job if they believed their employer was seriously concerned about them maintaining good health.
Companies are putting their wallets where their mouths are as well. Fidelity Investment and National Business Group on Health also found that employers planned to spend an average of $521 per employee on wellness-based incentives within corporate programs.
Those dollar amounts mark an increase of 13 percent from the average of $400 reported for 2011, and double the per-employee average of $260 claimed in 2009. What’s more, Towers Watson reports that 84 percent of employers plan to up spending for workplace health and wellness programs over the next two years.
Investment in Health
Employers are banking that the investment they make in healthy attitudes will pay dividends in their ability to manage the escalating cost of healthcare benefit offerings – for both the employee and company.
While the benefits for employees can be both short- and long-term, a company that implements a wellness program should expect to see a reduction in healthcare costs over an extended period of time. The Rand Corp. reported in 2012 that participation in a wellness program over five years reduced annual healthcare costs by an estimated $157 per employee, about the same dollar amount the company typically spends on their wellness program.
Numerous other studies have indicated healthcare costs can be reduced or even contained by implementing wellness programs. The National Business Group on Health contends that companies that increase their support for wellness programs can save more than $1,600 per employee per year in healthcare costs.
For employers who choose to go the route of incentives – even those that include deterrents – the question then becomes not only which rewards or penalties, but which behavior or outcomes to target and influence employees.
Employers looking for added motivation beyond lower company healthcare costs will soon be able to turn to Uncle Sam. Beginning in 2014, the Affordable Care Act creates incentives – up to 30 percent tied to an employee’s total premium cost — for employers who encourage wellness programs and establish more opportunities to support a healthier workplace.
When done correctly – using company specific research and planning – wellness programs can not only lower healthcare costs, but offer employers:
- Reduced absenteeism;
- Higher employee productivity;
- Reduced workers’ compensation and disability-related costs;
- Reduced injuries;
- Improved employee morale and loyalty
Reducing Health Risks
The American Journal of Health Promotion reported that healthcare costs rose at a slower 15 percent rate among employees who consistently participated in wellness programs when offered than colleagues who did not.
Healthcare costs have become a key component in the calculation of a company’s operating income. The lower the company’s operating expenses are, the more profitable the business generally is. Although studies have linked healthcare costs to wellness programs, quantifying overall company success is much more difficult to pinpoint.
One study, in the Journal of Occupational and Environmental Medicine, did find a relationship between the number of employee health risks and productivity loss. Not surprisingly, employees with more health risks had seven times more lost productivity at work than those without conditions.
They also accounted for excess annual medical costs of about $887 per employee.
Wellness programs can – when designed effectively – play a part in reducing or eliminating employee health risks including common factors like high blood pressure, high blood glucose, depression, obesity, tobacco use, physical inactivity, poor diet and excessive alcohol use.
A Sanofi Canada Healthcare survey found 92 percent of plan members would likely participate in on-site health risk screenings for conditions, such as diabetes.While smoking cessation programs might not be high on the list of every employee, the data that the company collects from the metric might prove beneficial in reassessing other wellness initiatives.
Changing lifestyle behaviors is ultimately an individual decision. However, employers have a golden opportunity to ensure that their employees see the value of adopting healthy attitudes and fit lives.
Employers who chose to seize upon a workplace culture that sets the tone for healthy employees should design a wellness program by first:
- Establishing goals;
- Determining the company’s involvement in program;
- Establishing budget and expected return on investment;
- Effectively communicating program and policies;
- Choosing employee incentives.
Engine behind the Wheel
Incentives are the engine that can drive and maximize employee participation in any wellness program – some faster than others. Rewards can increase employee participation in the areas of:
- Prevention by fostering health risk assessments, health fairs and flu shots;
- Lifestyle changes, such as smoking cessation, weight loss and nutrition or stress-management classes;
- Managing specific conditions, such as help desks that offer advice on treating diseases and ailments including diabetes;
- Education including business websites or links that raise awareness in regard to wellness program initiatives; details and information; and health advice.
Employers use both so-called “carrots” and “sticks” to keep employees healthy and manage the costs of benefit offerings. The 2013/2014 Towers Watson Staying@Work survey found that both employers and employees view initiatives at the workplace differently.11
Even though employers can act as marionettes and pull strings that influence health insurance plans, employees are far from puppets. Most employers, in fact, believe their employees hold the keys to the company’s healthcare cost containment goals.
Employers are banking that the investment they make in healthy attitudes will pay dividends in their ability to manage the escalating cost of healthcare benefit offerings – for both the employee and company.
Towers Watson researchers found that 70 percent of employers say getting employees to take more responsibility for their health is job one.
These same employers say in the next few years they will use financial incentives and penalties to enforce employee accountability and dictate outcomes.
Almost four in 10 U.S. companies – or 36 percent – will use penalties, such as higher health insurance premiums and hefty deductibles for employees who decide against their employer’s judgment and opt out of wellness activities.
Most notably, Towers Watson predicted when the smoke clears next year, 54 percent of employers will have implemented outcome-based incentives that either reward or penalize employees based on tobacco use.
The following year, that number will jump to 71 percent.
Food for Thought
There’s more food for employees to give thought to.Rewards or penalties for other ideal biometric outcomes identified through body mass index, blood pressure or cholesterol level will dramatically increase from 26 percent in 2014 to 68 percent in 2015-2016. Outcome-based incentives can be effective in pushing employees to improve their health. A Mayo Clinic study reported participants lost nine pounds on average when they received $20 per month for achieving weight-loss goals; or paid $20 instead when they didn’t.
Almost half of all employers who offer small rewards for individual wellness achievements do so by means of cash or gift cards, according to Fidelity Investments and the National Business Group on Health.
These incentives can offer instant gratification for a job well done compared with insurance premium deductions that might minimally boost take-home pay on a periodic basis. Big payouts make bigger impacts and tend to motivate employees to take action sooner rather than later.
However, current psychology warns against any sustained outcomes related to immediate incentives. Plus, these rewards are taxable and while they may precipitate activity, they may not warrant changes in lifestyle behaviors for very long. In other words, incentives might help employees get off on the right foot and lose weight right away, but in the long run, the same workers may no longer have the motivation to keep the pounds off.
On the other hand, 61 percent of the companies in the Fidelity Investment and National Business Group on Health study offer lower premiums for employees who finish specific wellness tasks. The good news for employees is that these pretax incentives make maximum use of the full award promised by employers. The unfortunate outcome for employers is that when these assignments are fulfilled – generally prior to open enrollment – the employee behavior modification activity sometimes stops short.
Attention! Keep Options Open
Incentives inherently attract attention. The best incentives change up the design plan often enough to keep employees on their toes. That said, too many options can overwhelm employees and companies can waste money on programs that don’t address employee needs.
Engagement should be the moniker behind any incentive.
A company could believe to have designed the best wellness program, but if only a small percentage of employees participate, then the chosen reward is not an incentive after all.
Finding a one-size fits all incentive can be challenging for any company. Incentives must meet the ardor of employees from all walks of life and include options to satisfy demographics, interests, needs and lifestyles.
The prerequisite for satisfying multiple tastes makes gift cards or cash an ideal incentive for even the most difficult to please. Gift cards – from popular retailers and restaurants to Visa- and MasterCard- branded offerings — tender variety to recipients. Gift cards can be shared by family and friends, are easy to customize and administer, and fit a multitude of corporate needs. Best of all, employees want gift cards.
It’s in the Cards
The Incentive Research Foundation and the Incentive Gift Card Council reported that 8 of 10 employees prefer gift cards over all incentives because they can be used when and where they want to be. Plus, cards can also be awarded for multiple levels of rewards – in any denomination up to $500. When it comes to rewards valued at $50, 83 percent of recipients prefer some type of gift card. Just 17 percent polled preferred cash.
Dialogue is inescapable if gift cards are to be optimally effective. Think of the embarrassment engulfing an employer who awards a gift card for a steakhouse to an employee who happens to be a vegetarian. But, gift cards can be powerful incentives for employees who are more likely to be motivated by a guilt-free spending spree rather than by a cash reward that might be more suited for household necessities.
Cash not always King
Cash does not necessarily have to be king behind the success of a wellness program if employers are willing to go an extra mile to encourage participation. Excel as, a Cleveland based medical consulting firm with 44 employees, offers staff one extra hour of paid time off for every 33,000 steps they walk during the first three months of the year, for up to three extra days of paid leave.
The company also makes charitable donations based on each employee milestone walked. No wonder, employees are motivated to walk laps around the company parking lot at lunch or take an extra stroll at night after work.
Another company, AstraZeneca Pharmaceuticals, invited employees at their Wilmington, Del., site to take health cooking classes hosted by local celebrity chefs.
Employees not only became versed in meals that would keep them and their families fit, but also earned points that could be later redeemed for gift cards.
Another idea is to provide space at work for a farmer’s market to set up shop during the summer months to make fresh produce convenient and affordable for employees to purchase.
Thinking outside the box can work, but only when the thoughts appeal to employees. Naturally then, engaging employees to participate in the reward selection process can be a healthy step toward ensuring that incentives are meaningful to all.
So what incentives might work best? Probably those that employees say they like best. Some ideas include:
- Name-brand merchandise;
- Corporate-identified merchandise, such as tote bags and apparel, when used in exchange for registration;
- Increased company contribution to Health Savings Accounts;
- Additional benefits to health plans;
- Gym memberships;
- Perks unique to company including prime parking spaces, preferred vacation times;
- One-on-one time with company CEO or other executives;
- Reduced co-pay or deductibles.
Keep It Simple
About half of all U.S. employers with 50 or more employees offer workplace wellness programs, according to a study by the Rand Corp. Larger companies, generally, tend to have more complex wellness programs. Simple activities can be a good means for introducing employees to engage in healthy behavior and a mechanism to figure out what their needs are as well.
The National Business Coalition on Health reports 90 percent of eligible employees at Caterpillar Inc. complete a company health-risk assessment and enjoy the $75 a month reduction in insurance premiums in return.
As more employers of all sizes struggle with healthcare costs, small companies are choosing to pool their resources to cut expenditures associated with both their insurance plans and wellness programs. But, to join these pools, employers have to agree to take on measures that will work to make employees healthy and reduce claim costs.
To reap the benefits of lower healthcare costs, employee buy-in and participation in wellness programs becomes imperative.
Many employees are already on board. Those that are – about 62 percent – say they see the benefits of a health conscious lifestyle in reduced medical risks, improved health, and more energy and motivation at the workplace, according to the Principal Financial Well-Being Index for American Workers. Some of the benefits cited in the account include:
- 51 percent of participants say they work harder and perform better;
- 59 percent say they have more energy and are more productive;
- 45 percent say that health-related programs encourage them to stay in their current position;
- 43 percent say they miss fewer days of work as a result of wellness programs.
So, why then do 34 percent of employees disregard wellness programs and refuse to participate? Many say they lack incentives. To earn rewards, employees are sometime required to take action, like joining a weight-management program.
Those who don’t participate sometimes face penalties. The prospect of penalties may be enough to motivate employees to pursue wellness activities.
Legal Dilemmas
Employers concerned about playing paternalistic roles and infringing on personal health habits of their employees might be hesitant to adopt penalties. More employers than don’t use a combination of penalties – like garnishing pay or premium surcharges — and rewards for participation in wellness programs, according to a survey by Aon Hewitt.18
Experts say the process of sidestepping penalties has three times the motivating power of a reward. Take Johnson & Johnson, which recoups the company’s $500 wellness incentive from paychecks when employees don’t heed the advice from health assessments.
No one likes to feel like they are getting punished. Some say penalties can dampen employee morale. Perhaps, a softer approach is to allow only employees who complete certain assignments – like smoking cessation – to enroll in the company’s most appealing health plans.
Unhealthy workers who set the tone for increased insurance premiums can put a financial strain on frustrated employees who consistently meet company health targets. However, monetary incentives aimed at slashing rising healthcare costs for everyone can create a backlash.
Faculty at the University of Pennsylvania revolted this year over the school’s plan to have nonunion employees visit a doctor, complete biometric screening measures and fill out a lengthy online health risk survey. Non-compliance resulted in a $100-a-month payroll deduction.
Following protests from professors who claimed the policy violated their privacy, the university shelved the plan.
Privacy, anti-discrimination and insurance laws differ from state to state and at the federal level. Rewarding an employee – especially monetarily — for lowering cholesterol may seem like a harsh penalty for those who don’t.
In some jurisdictions, employers must offer workers who don’t hit targets an alternative method to earn an incentive, such as a doctor’s note. A good idea is for employers to first consult legal advice before pursuing eligibility incentives.
Inside Job
Cost-conscious employers determined to offer employees healthcare benefits, maintain wage scales and keep their doors open for business should remain committed to wellness programs. Just how much information about personal health habits that employees are willing to share with their bosses will go a long toward making or breaking these initiatives.
If healthcare costs continue to escalate – despite what might be the government’s best intentions – and employers consider shifting expenses to employees, perhaps, the greatest incentive for the most vulnerable employees to get fit and stay in shape may come from themselves. Satisfying the bottom line – for both employee and employer – then becomes an inside job.
About the Author
Jonathan Edelheit is CEO of the Medical Tourism Association® and assistant editor of the Medical Tourism Magazine. With a long history in the US health insurance industry, including running a national healthcare administrator, Mr. Edelheit was the first person in the US to implement medical tourism into health insurance plans.
Mr. Edelheit is also editor of several leading US health insurance magazines and organizes one of the largest US healthcare conferences in the US for employers and health insurance companies, the Employer Healthcare Congress. Mr. Edelheit can be reached at: Jon@MedicalTourismAssociation.com
