By Karen O’Hara
Research suggests employers need occupational health professionals to help them design targeted workforce wellness interventions, encourage healthy behavior, and develop meaningful rewards.
Whether financial incentives will improve workforce health and cut medical and benefits costs, in the long run, is a subject of academic debate.
Meanwhile, employers facing the immediate prospect of health reform impacts and rising health insurance premium costs in 2011 seem disinclined to sit on the sidelines waiting for proof. Instead, a growing number are experimenting with incentives to encourage healthy behavior.
For example, in a recent study of 450 U.S. companies, the Integrated Benefits Institute (IBI) found a significant number of employers are connecting rewards with wellness, health, and productivity management (HPM) interventions “despite a general lack of empirical data on the outcomes of these efforts,” said Thomas Parry, Ph.D., president of the San Francisco-based research organization.
Employers also seem to have an increasing appetite for penalizing employees for unhealthy behaviors, reports AON Hewitt, a global consulting and outsourcing company. In Hewitt’s 2010 healthcare trends survey of nearly 600 large U.S. companies representing more than 10 million workers, 47 percent of respondents said they already use or plan to use financial penalties over the next three to five years for employees who do not participate in certain health improvement programs. (See Table 1 on page 5.) Of those companies using or planning to use penalties, 81 percent said they would do so through higher benefit premiums. Other strategies include increasing deductibles and/or out-of-pocket expenses. When asked what they would penalize, 64 percent of employers cited smoking, half indicated not participating in disease management/lifestyle behavior programs, and 45 percent identified not participating in biometric screenings.
The apparent interest in “sticks” rather than “carrots” suggests that employers are increasingly challenging employees and their dependents to be accountable for the decisions they make regarding their health, AON Hewitt analysts said.
Two Faces of Incentives
Population health management is a complex matter, Robert H. Haveman, Ph.D., University of Wisconsin-Madison, Department of Economics and La Follette School of Public Affairs, observes in a September 2010 article.2 While both are available to encourage efficient behaviors and discourage costly and unproductive ones, evidence of their beneficial effects is slow to emerge, in part because the evidence must demonstrate how behaviors have changed in response.
“Nevertheless, the potential for incentive programs in health care seems large, and research should support their design and assess their effect,” Dr. Haveman said.
“There is some evidence that financial incentives can affect simple behavior changes such as medical compliance,” concedes Adam Oliveris, a senior academic fellow in health economics and policy at the London School of Economics and Political Science in a commentary – Do Wellness Incentives Work?3 “For example, in a systematic review of 11 randomized controlled trials that used financial incentives, 10 demonstrated a positive effect.” However, he goes on to note: “For complex behavior change of the type often included in wellness programs, such as smoking cessation and weight loss, there is almost no good evidence for a sustained, positive effect. For example, in a systematic review of 17 studies on financial incentives for smoking cessation, none of the studies found significantly higher quit rates after six months among people who had financial rewards compared to those who did not.”
The economist concludes that given the current lack of supporting evidence, “governments should be cautious in endorsing financial incentives as a means to encourage complex behavior change.”
In an article in the New England Journal of Medicine, researchers from the Harvard School of Public Health and the Harvard University Program in Ethics and Health offer a perspective on wellness incentives in relation to national health reforms.4
“Incentives for healthy behavior may be part of an effective national response to risk factors for chronic disease,” they said. “Wrongly implemented, however, they can introduce substantial inequity into the health insurance system. It is a problem if the people who are less likely to benefit from the programs are those who may need them more.”
For instance, in some cases “incentives are really sticks dressed up as carrots,” the Journal authors said. While proponents emphasize that wellness programs are voluntary, “voluntariness can become dubious for lower-income employees, if the only way to obtain affordable insurance is to meet the targets” that may not be feasible for them to attain.
Insurance Drivers
Medica, a regional health insurance company with 1.6 million covered lives, provides an illustration of how rewards are being integrated with wellness programs. While employees stand to benefit, so do their employers, who have the opportunity for healthier, more productive employees, rate guarantees, and reduced premiums, the company says in an October press release.
As part of the Minneapolis-based company’s fall open enrollment period, it is making an effort to engage its members (i.e., consumers) in their own healthcare decision-making. Medica’s offerings include biometric screening in the workplace, customized health information, and rewards such as gift cards, lower premium contributions, and richer benefits for healthy behaviors.
However, while studies show many employers are on board with such strategies, the majority are not yet effectively measuring their impact. In interviews with 1,503 employers conducted recently by GfK Custom Research North America on behalf of MetLife, an international insurance and benefits company, 69 percent of respondents said they recognize the return on investment associated with wellness programs, but they are not necessarily measuring it. In that survey, participation in wellness-oriented strategies ranged from 10 percent with financial penalties to 38 percent with employee assistance/counseling programs.
By comparison, according to a recent National Business Group on Health (NBGH) survey, 41 percent of respondents representing large companies said they offer premium discounts for completing health assessments while 22 percent offer premium discounts for participating in tobacco cessation programs.5
In Working Well: A Global Survey of Health Promotion and Workplace Strategies, a 2009 study conducted by Buck Consultants, 64 percent of companies surveyed said they have a wellness strategy that incorporates a variety of financial and non-financial incentives to encourage positive behavior and reward achievements.6 The survey features responses from 1,103 employers from 45 countries representing more than 10 million employees. Buck Consultants is an international human resource and benefits consulting firm owned by Xerox Co.
According to the global survey, the majority of incentives reward participation in or completion of certain activities or screenings. In many instances, to receive a reward an individual must attain specific health-related goals, such as not smoking or maintaining cholesterol levels or body weight within healthy ranges.
“In this way, employers seek to tie the rewards back to the actual reduction in risk,” Barry Hall, an actuary and principal with Buck Consultants, reports in the January/February 2010 edition of Contingencies, a publication of the American Academy of Actuaries. Gift cards or merchandise, raffles, and cash payments are among the most popular rewards worldwide. Discounts and subsidies for preventive health services, such as annual physicals and screenings, and membership fees for fitness facilities or wellness classes are prevalent. Reduced healthcare premiums and cash contributions toward healthcare-related spending accounts also are gaining popularity, especially in the United States.
“These practices help employers emphasize to employees a strong connection between healthy living and their ultimate objective of reducing the cost of health care,” Mr. Hall said.
“These practices help employers emphasize to employees a strong connection between healthy living and their ultimate objective of reducing the cost of health care.”
Benefits Trends
Buoyed by the expectation that wellness programs will help reduce risk and control costs over time, “educated” employers, in general, appear to be more willing to invest in a comprehensive approach to the management of workplace exposure hazards, health risks such as obesity and tobacco use, and chronic conditions such as diabetes, asthma, hypertension, and depression – all contributors to higher health care costs and recurring absences.
Collectively, employers of all types constitute a promising target market for occupational health programs with a solutions-driven portfolio. An occupational health program or medical practice capable of providing work-related and group health care to employers is well positioned to reduce client costs, improve workforce productivity, and generate direct and indirect benefits for its parent organization, industry observers say.
Benefits trends serve as a barometer for the gradual shift from a reactive, episodic orientation to one that embraces prevention and population health management. For example, 53 percent of large U.S. employers plan to change their 2011 health care benefit programs in response to national health reforms and expected health benefit cost increases next year, reports the NBGH, a non-profit association of large employers. The NBGH’s 2010 survey on benefits trends features responses from 72 of the nation’s largest corporations representing more than 3.7 million employees.
“While the health reform law has forced employers to evaluate their health care benefit strategies, they haven’t lost sight of the fact that controlling rising costs remains one of if not their highest, priority. They have to foot the bill,” said Helen Darling, NBGH president. “In fact, with cost increases expected to accelerate next year, many of the plan design changes employers are making are being done to help curb those increases, as they have to do every year.”
According to the NBGH survey:
- 70 percent will remove lifetime dollar limits on overall benefits;
- 64 percent will offer a high-deductible plan combined with a health savings account;
- 63 percent will increase the percentage of employees who contribute to the premium;
- 61 percent will offer a consumer-directed health plan;
- 46 percent will raise out-of-pocket maximums; and
- 25 percent plan to raise the co-pay or co-insurance for retail pharmacy prescription drug benefits.
Productivity Enhanced
One of the Integrated Benefits Institute’s primary objectives is to follow employer adoption of prevention, wellness, disease management, and disability-management/return-to-work (RTW) programs. In a study conducted earlier this year, IBI researchers found:
- Health and productivity management practices have a particularly strong, positive impact on employee satisfaction. While employee satisfaction is not a traditional outcome measure, this finding indicates that an HPM program is an important investment for employers interested in attracting and retaining workers by building a culture of health.
- Certain practices have high impact across several outcomes. Six practices – nurse case management, transitional RTW, health risk coaching, on-site providers, participation incentives, and weight management – have positive impacts on at least two important health and productivity outcomes and should be considered an essential part of an effective HPM program.
- No single HPM program area has a lock on high-impact practices. Among the top 10 high-impact practices, four are associated with disability management/RTW, four are related to health promotion, and two are associated with disease management.7 “Results show that employers vote with their pocketbooks to sustain HPM programs,” even though financial validation is lacking, IBI researchers said. “For organizations that have not yet implemented an HPM strategy, the experiences of our sample employers can provide a starting point for evaluation.”
The 8th Annual MetLife Study of Employee Benefits Trends8 corroborates the IBI results. While employers and employees may not always see eye to eye, they agree that wellness programs help improve productivity. The study also suggests wellness programs can reduce medical costs, and that participating employees are more likely to benefit from prolonged good health and financial security.
“It is noteworthy that most employers and employees are on the same page when it comes to seeing value in health and wellness programs for improving employee productivity.”
“It is noteworthy that most employers and employees are on the same page when it comes to seeing value in health and wellness programs for improving employee productivity,” MetLife reports. “It stands to reason that a healthier workforce can not only help control medical and disability costs but also decrease absences and presenteeism.”
According to MetLife researchers, going forward, benefits strategies may be shaped by an increased focus on health and wellness as well as financial security; research shows a correlation between physical well-being and being in control of one’s financial situation. MetLife advises employers to use incentives such as health insurance credits and gift certificates to encourage employee participation in wellness programs as opposed to penalties for non-participation. Other recommendations include:
- Focus on wellness programs with proven success rates such as weight loss and increasing exercise.
- Seek “off-the-shelf” wellness programs from local health organizations.
- Incorporate oral health initiatives as a way to reduce medical costs.
- Provide access to onsite or offsite health screenings (blood pressure, cholesterol checks, and health education). Give employees time to access screenings during business hours.
- Check with healthcare providers to see if there are discounts available for implementing a wellness program to help offset costs.
“There is still ample opportunity for employers to leverage health and wellness programs as they strive to improve cost control and productivity,” MetLife researchers said. “Wellness programs with reported high success rates, such as smoking cessation and weight loss, can be inexpensive to implement.”
