Mention wellness programs to a client looking to save money on health care costs and their first response is typically, “How do I get my employees to participate?”

For years this has been the great debate — incentives or disincentives … the carrot or the stick? But the answer is not as cut and dry as once thought. Many in the industry are now saying what works depends upon a company’s culture of health.

“Often times we talk about incentives and disincentives as if they live on their own, but a big piece about the effectiveness of a wellness program is how it’s tied to a company’s culture of health,” says Shawn Moore, senior vice president of consumer engagement at ActiveHealth Management, a wellness company located in New York City.

“It doesn’t matter if an employer uses an incentive or a disincentive because both can work and both can fail,” says Den Bishop, a broker and president of Holmes Murphy & Associates in West Des Moines, Iowa. “And when they fail, it’s because the employer didn’t push it on the company’s culture of health.”

Tricia Johnson, director of marketing for Interactive Health, a provider of outcomes-based wellness programs in Schaumburg, Ill., agrees: “It comes down to what fits best with your company’s culture.”

Psychologically, she says people are typically more afraid of missing out on something when it comes to the stick, or disincentive, approach. But if an employer is trying to enhance the company’s culture, the carrot/incentive idea, works better.

Employers should first consider what they’re trying to accomplish with a wellness strategy and “how does that fit with the culture you already have and with the culture you’re trying to establish,” Johnson says.

Know your client

Benefit advisers can play a big role in helping employers flesh out a wellness strategy that fits with their company’s culture, which makes it imperative for advisers to “know your client,” Johnson says.

Aside from having a good understanding about what wellness programs are out there and what they have to offer employers, knowing what your client wants from a wellness program is invaluable.

“Having an understanding about what’s important to an employer in regards to wellness, their ultimate goal with offering a wellness program and how it will strategically impact their business, will help advisers determine what programs are best to recommend,” Johnson says.

When deciding upon incentives or disincentives, advisers can then help employers figure out what’s “in bounds and out of bounds” for their company’s culture, broker Bishop adds. “Because it’s different for every company,” he says.

“We like to think of any wellness program as a three-legged stool; one that includes the company’s culture of health, the incentives and disincentives, and clinical and consumer analytics that are available to target the appropriate messaging and incentives,” ActiveHealth’s Moore tells EBA.

Bringing all those pieces together will create an effective wellness program, she says.

Without analytics, Moore says, a company is implementing a wellness program using a “shotgun approach” and will have a difficult time being effective.

“If you don’t take a look at your culture of health, your analytics and your incentives together; and you just stick an incentive out there, it’s probable the organization is just wasting its money on the incentive,” Moore says.

Employers have to be thoughtful and understand the environment of their workplace and develop incentives appropriate to that, she says. “So, if we see there’s not a strong culture of health at the company, we start there.”

Moore and ActiveHealth suggest implementing any incentive program using a phased approach tied to the culture of health:

  1. Ease into incentives by gathering information about a company’s members: including through biometric screenings or health assessments.
  2. Add ways to promote sustained engagement by reminding people that wellness is a continual process, not just a once a year activity. Creating sustained engagement can include having a challenge for employees to walk 5,000 steps a day, participate in coaching seminars or participate in other monthly activities, which in turn earn points toward an incentive at the end of the year.
  3. When adoption of incentives programs has been established, the culture should be ready to add targeting outcomes, for instance, driving body-mass-indexes under 27.5 or reaching certain glucose levels or cholesterol levels.

Incentives and disincentives can greatly influence the effectiveness of each of these phases, Moore says, but you have to know which ones to use.
Carrot vs. stick

“While we’ve found disincentives work with some of the conditioned management pieces, they don’t work as well with wellness pieces,” Moore says, noting that there is a clear role for disincentives later on in the process of a wellness program.

For instance, ActiveHealth Management found during a five-year survey of 1.9 million health plan members, that before being incentivized only 18% of members filled out a health risk assessment known as an HRA, a common tool used to gather employee health data. With incentives, 63% completed the assessment.

“Using incentives, or the carrot approach, works really well when you’re trying to gather information,” Moore says, adding that the most popular ways to do so are through a health assessment or biometric screening.

Popular incentives for completing assessments or screenings can include anything from receiving a gift card, merchandise, premium reductions or funds placed in a health savings account.

As the employer moves toward sustained engagement, however, the stick approach has proven to be more successful.

ActiveHealth found individuals were 13 times more likely to engage in disease management programs, such as medication management classes or smoking cessation programs, with disincentives versus incentives.

A typical disincentive or stick approach would be to charge higher premiums for a smoker versus a non-smoker.

But, because the Affordable Care Act allows for substantial outcomes-based incentives, employers are increasingly exploring incenting outcomes to help employees improve their health through measures like smoking cessation, ActiveHealth says.

Moore says employers are increasingly offering incentives for sustained engagement, such as cash, gift cards, discounts on merchandise and coupons or Groupons, with the understanding that “a consumer is a consumer.”

“If marketing companies have changed people’s behavior to eat potato chips like crazy, maybe we can use some of those same techniques to get people to be healthier,” she says.

That approach gets people to be more loyal to themselves and to their health, Moore says, calling it a “win-win situation for everyone.”

Advisers looking to engage employers about implementing any wellness program and include the use of incentives or disincentives need also focus on measurability, Holmes Murphy & Associates’ Bishop tells EBA.  

Employers are interested in knowing what diseases are costing them money and what needs to be measured to have an impact on those diseases, he says. Without a significant measurable clinical item, the wellness program fails, he adds.

“When you tell an employer the goal of the wellness program is to have a certain number of the employees walk in a 5K, the CFO is inevitably going to ask ‘Okay, what’s my return on investment?” Bishop says.

When an adviser uses specific measures and says, “We’re going to take this many people who have elevated triglyceride levels and move that number from up here to down here in the next 12 months and in the next 24 months we’re going to move your pre-diabetics from this level down to this level, the CFO will embrace it,” he says.

To help determine return on investment, ActiveHealth Management calculated potential savings for each of the approaches it studied. In the end, the stick method yielded the highest savings at $249 per person, per year.

The pros and cons

While disincentives can bring higher savings, Moore says they can also bring more employee resistance.

Disincentives can go overboard, she cautions. “There’s a fine line between a successful disincentive and one that becomes frustrating for the average person,” she adds.

“It’s got to be simple and easy to understand and the activity has got to be easy to do for the individual,” she says. Setting a goal for employees to be able to run a four-second mile is, obviously, unattainable, she jokes. If the incented activity is too difficult for individuals to do, “you end up with low morale and hurt productivity,” she continues.

Likewise, too few or too many incentives or disincentives coming from too many voices within the company can also hurt the success of a wellness program.

Too many options can confuse and overwhelm employees while too few may drive down interest and participation, ActiveHealth found.

The company’s survey found organizations that offered between six and 11 incentive choices (ways to engage, as well as incentives for action) drove the highest employee engagement.

Today, many organizations implement a too narrowly defined incentive plan, which reduces the program’s impact on savings, the survey found.

How an employer communicates the wellness program to its employees is also a key component for its success.

“We’re trying to do something good for the company and good for the people in it by extending the quantity and quality of life, but if we don’t communicate it in a way that people can receive it that way, then it’s a failure,” Bishop says.

Whether offering an incentive or a disincentive, Interactive Health’s Johnson agrees it all comes down to how an employer communicates it.

The message is “either I am missing out on something or I am gaining something,” she says. And that message will depend upon what works in a company’s current culture of health or the one the company’s trying to create.

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