Rethinking Rewards – Using Incentives to Improve Wellness Program Results

A common refrain in health care reform is that containing health care costs will require more shared responsibility from consumers. It’s reasonable to anticipate that as employees bear more of the financial costs of unhealthy choices, the more motivated they will be to stay well.

Still, the problem with shifting costs to those with poor health is that it may merely become a financial penalty for being sick rather than an incentive for preventing illness in the first place. As a result, forward-thinking employers are using a well-positioned carrot to motivate employees and to support effective behavior change. So, what are the most appropriate and effective uses for financial incentives? What are the most savory carrots and how have these incentives affected wellness participation and program outcomes?

We’ve garnered enough industry intelligence and experience now to have pretty good answers to these questions, and that allows us to work from an evidence base that provides us with reliable guidelines.

The bottom line

Leading research from StayWell and others has demonstrated that if employee health is not well managed, an employer can see significant increases in health care claims costs and insurance premiums, not to mention feeling the effects of absenteeism and lost productivity. In the past three decades, StayWell Health Management has helped advance the growth of population health – and in particular, wellness programs – based on the ability of these techniques to improve employee health outcomes and decrease health care costs.

But the stakes are higher now than ever before, as employers continue to face double-digit premium increases and struggle to maintain a competitive edge and a qualified workforce. And once again, employers are turning to population health as a solution to this problem because of its potential to change the behaviors of a greater number of employees, and produce tangible financial results.

There are many strategies that have been proven to increase employee participation in wellness programs. However, the use of incentives has gained significant traction in recent years because it has demonstrated the potential to be more effective than other methods. Current studies indicate that 17 percent of companies with 500 or more employees offer incentives to encourage participation in their workplace wellness programs, and 23 percent of companies with 20,000 or more employees use incentives.

Wellness programs in general have been found to generate a return on investment of $4 in health care costs and $5 in reduced absenteeism for every dollar invested within three to five years of the program launch. This alone is impressive. However, by incorporating the use of incentives into a wellness program as a way to drive participation – particularly for program elements like employee health assessments – employers can see dramatic increases in their program ROI.

Case in point

Consider, for example, the Wachovia Corporation, a national banking and financial services company with 110,000 employees in 49 states. Wachovia launched its wellness program in 2004 and encouraged completion of the health assessment by conducting a drawing for a $50 gift certificate, with multiple winners. In year one, only 10 percent of incentive-eligible employees completed the assessment. In 2005, Wachovia dropped the incentive and likewise, saw their program participation rate drop to just 5 percent of eligible participants.

Then, in 2006, the company began offering a $75 cash incentive for all eligible employees who completed the health assessment, with the incentive delivered through the employee’s paycheck. Participation reached an all-time high of 66 percent. Wachovia expanded its incentive program in 2007 to include all benefit-eligible employees, spouses and domestic partners. Employees received a $75 incentive for completing the assessment and an additional $50 incentive if their covered spouse or domestic partner completed the assessment.

According to Donna Shenoha, vice president and senior consultant of health and welfare for Wachovia, the company’s success is a result of its ability to understand their employee population and corporate culture, as well as their strategic use of employee communications and program monitoring.

“We really wanted our employees’ first experience with an incentive of this type to be positive and easy to understand,” said Shenoha. “The participation level shows that our employees have been pleased with the incentive amount and type, and the aggregate results from 2006 allowed us to refine our health management strategy so it truly fits our culture and demographics.”

Shenoha added that Wachovia has supported its wellness program with a comprehensive communications strategy that includes intranet articles, desk-top videos, employee newsletter articles, and e-mail announcements and reminders. In addition, employees who started, but did not complete, a health assessment received a separate, tailored communication. Wachovia will continue to build and refine its program in 2008 by focusing its incentive strategy on the “next steps” to a healthier lifestyle; namely, participation in lifestyle change and disease management programs.

Watch ... and learn

The term “best practices” exists for a reason. We watch and learn from the success of companies like Wachovia, and try to apply similar principles or practices to our own situations. When it comes to best practices for using incentives, there is clearly a pattern forming. At StayWell, we’ve identified four key strategies that are present in health management programs that successfully use incentives:

• Use incentives as a reward for completing a health assessment
• Use incentives as a reward for completing related follow-up activities to the assessment (e.g. health behavior change programs)
  
• Use a points system that’s tied to a menu of program activities, giving employees opportunities to participate in activities that are appropriate for the stage they’re at in the process of change
  
• Reward healthy behaviors like attending smoking cessation classes, rather than rewarding health outcomes, such as weight loss

The types of incentives that have been used in these campaigns include things like:

• “Cash equivalents,” a.k.a., money
  
• Company-branded merchandise like tote bags and jackets
  
• Health plan premium reductions
  
• Increased company contribution to the employee’s medical spending account
  
• Opportunity to enroll in a richer plan design

Other incentives that are often used, and that appear to have the potential to be effective are:

• Culturally significant “tokens,” such as the chance to win a prime parking spot
  
• Employee recognition by management and peers
  
• Reduced copay or deductible

And, those incentives that have proven to be the least effective include stand-alone drawings, and healthy rewards with limited choices (such as cookbooks or water bottles). These incentives typically don’t work because they appeal to people who are already in the healthy segment of the population, and not those who need the most help. Granted, what works in one setting may not work in another, so the key to effective incentives is identifying a meaningful reward for your employees.

Putting best practices to work

So, how do you go about identifying the most appropriate incentive strategy for your company and then, rolling that out to your workforce? Your wellness partner will ultimately provide guidance regarding the use of incentives as part of your overall program. But at StayWell, we’ve identified five key guiding principles for incorporating incentives into a wellness program:

• Make the reward – and what the employee has to do to earn the reward – easy to understand and easy to communicate. Like Wachovia found, a simple cash reward delivered via the employee’s paycheck may be the most appropriate and appealing incentive.
• Choose a reward that has a perceived value by all or most employees.
  
• Make sure the effort or activity that’s required in order to receive the reward is reasonable compared to value of the reward.
  
• Test the program to make sure employees can’t beat the system to get the reward without full program participation.
  
• Choose an incentive and an approach that can be sustained. Remember that it’s much easier to add to an incentive rather than reduce it over time.

Perhaps the most important rule when using incentives is to remember that incentives are just one part of the equation. Ask yourself these questions: What is your objective for using incentives? How would an incentive fit into your overall long-term wellness program? What do your employees value? Are you able and willing to maintain the incentive?

In addition to these thought starters, here are some things that you can do when rolling out your wellness program to make it more effective and increase participation.

1. Direct the program to all employee mindsets, from the program champions to the grassroots supporters and even the detractors.
2. Assess your program on a regular basis.
3. Nurture a culture of health within your workplace.
   
4. Position your program so everyone, from leadership to front-line employees, realizes the value of the effort.
   
5. Target your employee communications.
   
6. Conduct one-on-one employee outreach.
   
7. Offer a menu of intervention options to reach employees at all stages of change.
   
8. Use incentives wisely.
   
9. Track key participation indicators regularly.
   
10. Establish specific program goals and measure against them.

Through the looking glass

So, what does the future hold for employers who are currently using incentives and those that are looking to adopt incentives in the coming years? Incentives will undoubtedly continue to hold a significant place in wellness and population health management. The key to ongoing success with incentives will be to approach this strategy as part of the overall wellness package and to use incentives in ways that make sense within a positive and healthy company culture.

As I mentioned earlier, it’s likely that incentives with long-term staying power will increasingly emphasize a carrot, rather than a stick approach to engaging employees. We’ll see tools and technology that better tie incentives to specific participation goals and requirements. For instance, at StayWell we offer an online point’s tracker that allows employees to track their program participation and their progress toward their goals. What’s more, we’ll get more sophisticated about having just the right incentive at just the right time to support just the right goals in the behavior-change process.

In the end, good health is its own reward. Still, with a well-chosen reward here and a nicely presented recognition there, before we know it our spending on incentives will pay dividends in employee health and productivity that will make us feel like very smart investors.

StayWell is a registered trademark of The StayWell Company. All rights reserved.

Paul Terry, PhD, is president and chief operating officer of StayWell Health Management. For more information about StayWell programs and services, visit www.staywellhealthmanagement.com.