The Loop

Can you Dis-incentivize Wellness?

Filed under: Wellness

The 2010 health care legislation authorized group plans to offer health and wellness incentives for workplace wellness programs. Premium reductions, rewards, and rebates are allowed contingent upon the participant satisfying a standard related to an employee health status factor. In other words, the employee can't just exercise three times a week; he must reach a measurable outcome such as reducing body mass index (BMI).

Prior to this legislation, there was evidence that incentives could be effective at getting employees to engage in certain activities – but there wasn't measurable proof that these activities actually moved the bar on workplace health. Just a few years into this era of new incentives, the evidence is trickling in.

According to an Aon Hewitt survey, 83% of respondents (representing nearly 800 American employers and more than 7 million workers) currently deploy some form of incentive. Only 5% of employers use disincentives, but 53% say they plan to begin doing so in the next three to five years.

Which is more effective? Research – not to mention common sense – definitely stacks to the incentive side for wellness health. However, one interesting fact is that financial incentives are not all that effective at long-term engagement. In other words, a modest financial incentive may tilt a worker who is on the fence to engage in a certain behavior to give it a try. But long-term engagement – the kind that actually changes behavior – calls for personal buy in. In short, you can't pay someone to do something they don't want to do, such as quitting smoking.

The common practice is to introduce disincentives in the third year of a wellness program. The first year generally gets the employee engaged. With that success, the second year tends to solicit the employee's dependent. By the third year, enthusiasm starts to wane, so introducing a disincentive can help rejuvenate engagement. A sample disincentive may be to announce a 2% across the board increase in employee-paid premiums for corporate health insurance. However, if the employee (and spouse, respectively) meets the stated health objective, he can retain the original premium as a reward. This way the employees who don't become engaged do not suffer from a disincentive, they simply miss out on the reward.

A new wellness program at Pennsylvania State University put in place a disincentive of choice: Employees could either undergo a health risk appraisal or pay a $1,200 penalty. Interestingly, the program may actually serve to increase health costs, as previously undiagnosed conditions may require treatment and prescription drugs. Most wellness programs are designed to prevent more costly conditions in the future. However, this type of disincentive could end up creating two unintended results: Higher costs and lower morale.

According to a study by Midwest Business Group on Health, among employers offering incentives in 2013, 62% reduced premiums, 38% used gift cards, and 35% offered merchandise. The most prevalent activities they rewarded included biometric screenings (70%) and health risk assessments (78%).

On the flip side, among employers that use disincentives, 43% increase employee share of premiums for non-compliance and 14% have higher plan deductibles or out-of-pocket fees. The most popular behavior they try to modify with disincentives (78%) is tobacco use.

At the end of the day, is it effective to dis-incentivize employees to help meet corporate fitness and fiscal goals? And does this strategy sync with your corporate culture? In a highly competitive work environment, where workers don't mind losing because they enjoy the opportunity to beat out other co-workers for sales commissions, bonuses and other perks, it may be possible.

But in other environments, in which nurturing, support, and confidence-building is a slow but vigilant process, perhaps not so much. It's important to research wellness options, study their past effectiveness in other organizations, and evaluate how similar those organizations that achieved success are to your own.

Another option is simply to ask your employees. Post a survey comparing various types of incentive and disincentive options, and ask to which they would more likely respond. Every organization is different; the key is to discover what type of wellness program will work best for yours.

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