Had Enough of Incentives Yet?

June 14, 2016

By Greg Vachon, MD, MPH

How the wellness industry got it wrong with outcomes-based incentives.

Fidelity and the National Business Group on Health recently published their 7th annual survey of employers on the topic of health and wellness. The survey indicated a serious retreat away from outcomes-based incentives: a predicted 45% drop! Large though this is, it really shouldn’t be surprising that employers are moving away from the punitive and ineffective outcomes-based programs now offered in the market. Any behavioral economist worth their salt could have told you before these programs were ever implemented that they would not work to improve health. Reducing premiums next year for changing behavior this year is a recipe for failure.

In fact, there are wellness companies out there that built their businesses knowing that their outcomes-based incentive program wouldn’t work and didn’t even need to work; they only needed to shift costs to the unwell to claim success and savings. The CEO of one well-known wellness vendor has been quoted as saying, “[Our] plans are typically designed to incent participants who choose healthy lifestyle behaviors and increase costs for those who do not” (emphasis ours). A program that is intentionally designed to shift costs to the unwell? That’s a sure way to alienate a workforce. And the company’s early marketing materials hardly veiled their intent to help companies knock unhealthy employees out of plans. For these types of punitive outcomes-based programs let us say, “Good riddance!”

Despite the industry’s missteps, we know that economic incentives can help us make good choices. Federal regulations allow these incentives because good science already exists showing that well-designed incentive programs have powerful, positive impacts on behavior. Good design means: (1) fairness across the spectrum of wellness, (2) relatively large rewards for individualized incremental improvements, (3) individual choice, (4) continuity of incentives over time, and (5) use of cash incentives instead of premium differentials. Doubt these? Look to the Guidance for a Reasonably Designed, Employer Sponsored Wellness Program Using Outcomes-Based Incentives Paper, published by the Health Enhancement Research Organization, the American Cancer Society, the American Diabetes Association and the American Heart Association. Wellness incentives CAN be done right, enhancing the financial, emotional and physical health of employees. Fair and effective progress-based incentives boost the wellness efforts of employers and employees by harnessing the power of behavioral economics.

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