By PETER ROUSMANIERE, an expert on the workers' compensation industry.
At Safeway, the giant food retailer, it started with a $3 salad dish -- compared to the purposely higher-priced $6 burger -- at the company's cafeteria. At Disney, it may have started with its $100 offering for its employers to perform a personal health assessment.
Today, a growing number of employers are pitching incentives for their staffs to change their health habits -- and they can mean big bucks for employees and big health care savings for companies.
These incentives are increasingly inventive, raising a flock of questions:
* How much financial incentive is enough?
* Is negative reinforcement ok?
* Who should be targeted: the well, the at-risk or the sick?
* Do financial incentives distract from what some experts say is the ultimate incentive, the employee's intrinsic desire for health?
While many employers may dislike using them, financial incentives may be a particularly American way of using free market practices to contain health care costs and health-related productivity loss.
The large, attentive audience at February's annual Integrated Benefits Institute conference in San Francisco absorbed message after message about health behaviors and incentives.
"We must become experts in the science of behavior change. We need to know the extrinsic and intrinsic levers of change," said Dr. Arthur M. Southam, executive vice president of health plan operations for Kaiser Foundation Health Plan Inc. and Kaiser Foundations Hospitals.
Later in the conference IBI board chair, Chris McSwain, vice president of U.S. benefits for Walmart, said that the households should equate healthy behaviors as "wealth enhancement."
A leading researcher in the application of financial incentives for health, Kevin Volpp, professor of medicine and health care management at the Wharton School, cautions that the design of financial incentives in health care is not well understood and that non-financial factors must be taken into account.
Companies, however, seem to already have their proof. After Disney enacted its $100 incentive for employees to take a health-risk appraisal, top executives removed the payment -- and usage almost vanished.
At Centrix Bank in New Hampshire, Human Resource Director Debbie Bremberg is "absolutely" convinced that cash awards of up to $250 have led employees to select lower cost providers of mammograms and colonoscopies.
For years, employers have long been using modest incentives to induce employees to be healthier, such as paying for health club memberships and smoking cessation programs. While the credibility of wellness incentives has suffered because it's tough to gauge their impact on productivity and health care costs, use of incentives has picked up. Sixty-one percent of employers offer wellness rewards in 2012 compared with 36 percent in 2009, according to Towers Watson's 2012 employer survey, conducted with the National Business Group on Health.
Stepped up use of financial incentives, experts say, arises from fundamental changes in knowledge, health-cost inflation and wellness strategies. Others say that poor health habits are causally related to health care costs and presenteeism.
Meanwhile, health care costs have surged every year. People pay more in co-pays and co-insurance and are hit with ever larger premium deductions from their paychecks. And they incur dramatically higher rainy day risks by taking on high deductible plans.
New employer and insurer-driven strategies have emerged. These strategies include wellness program redesign, health-plan redesign and health-consumer tools, often coordinated with large financial incentives. Jennifer Price, a consultant in Willis' Human Capital Practice finds in the firm's annual survey that "employers are moving from trinkets or gift cards to integration of wellness with their health plans."
And some corporate C-suites have begun to absorb the lessons from the field of behavioral economics. This term refers to the science of motivation and decision making by individuals. Sibson Consulting issued in April, 2012 a tutorial on the topic geared for benefit managers. The books Freakonomics and Nudge have also popularized those concepts.
Techniques for behavior change can be inventive. The website stickk.com helps registrants set up personal plans to forfeit escrowed money if they do not meet a specified goal, such as weight loss. Some experts think that such negative reinforcement can be more effective than positive, while others say that such negative reinforcement doesn't help and -- if pushed by an employer -- could lead to lawsuits.
Advocates of behavioral change will counsel employers to present clear choices to their employees -- giving them timely information, tools and reminders. For example, a company may frame for its workers a choice between health insurance plans. It could offer the financially most attractive plan available on the condition that the employee complete a health risk appraisal and have a biometric test.
Safeway, with its $3 salad and $6 hamburger, is widely credited as the first large employer to innovate. The company went on to offer incentives for good scores on biometric tests for things like body mass index.
The Federal government issued regulations in 2006 to guide employers in using wellness incentives. The Patient Protection and Affordable Care Act, will likely boost their use because it permits companies to vary health insurance premiums by up to 50 percent for covered employees who achieve specified targets. The employer has to customize wellness targets so that any affected employee has a fighting chance to meet them.
Harvard researchers, alarmed over the potential impact on lower income workers, have estimated that a 50 percent premium variance might be $2,412 a year for an individual and $6,688 for a family.
Delhaize, a grocery chain, introduced in 2007 a healthy behavior discount for insurance premiums. More recently it categorized its providers according tiers, and depending on which tier an employee choses, they pay a different percentage of treatment costs.
How receptive are employees to these creative and some might say intrusive strategies? Joanne Abate, Delhaize's director of health and wellness strategy, said there is a "true reluctance" to participate and earn credits by doing things differently.
Nonetheless, expect to see a lot more interest in financial incentives as employers attempt to bend the health care cost curve.
April 13, 2012
Copyright 2012© LRP Publications