Carrots and Sticks

by Clive Riddle, March 18, 2010

Carrots and Sticks.
Will employee health behaviors they fix?
Or are they just a fad, pulled from employers’ big bag of tricks?
Should incentives or penalties be preferred, oh what’s the right mix?
Surveys may tell us the answer, about Carrots and Sticks.

On Saint Patrick’s Day, while others were reveling and feeling festive, Hewitt Associates released results from the annual health care trends survey, in which they conclude “Companies [are] increasing the Use of Both Incentives and Penalties to Motivate Employees, Improve Outcomes and Reduce Costs.”

Hewitt’s Cathy Tripp tells us "the economy and continued escalation of health care costs have driven many employers to be a little more bold and demanding of their employees, making disincentives an increasingly attractive option. As companies learn more about their workforce, they're realizing that some people may be more motivated to take action if they risk losing $100 versus gaining $100. The key for each employer is to find the right mix of strategies and plan designs that will motivate employees to be healthier, but not go so far as to drive the wrong behaviors."

The Hewitt survey tapped 600 large employers representing 10 million+ employees. Here’s what they found:

Penalties for non participation in health improvement programs

• 47% either already use or plan to use financial penalties over the next three to five years
• 81% of those using/planning penalties will impose higher premium contributions; 17% will apply increased deductibles; and  17% will design higher other out-of-pocket cost sharing
• Of those using/planning penalties, the behaviors that will trigger penalties were: smoking (64%); non-participation in disease management/lifestyle behavior programs (50%); non-participation in biometric screenings (45%); non- participation with a health coach (25%); failure to  achieve applicable biometric improvements (17%)

Incentives for participation in health improvement programs

• 58% offer incentives, with 24% of them extending incentives to spouses and/or family members
• 63% of those offering incentives provide cash for completing a health risk questionnaire (35% in 2009)
• 37% of those offering incentives cash incentives for participating in health improvement and wellness programs (29% in 2009)
• 14% of those offering incentives cash incentives for participating in condition management programs (17% in 2009)

Towers Watson Findings

Hewitt isn’t alone in seeing a trend is in the works. Towers Watson last week released additional findingsfrom their 15th Annual NBGH/Towers Watson Employer Survey on Purchasing Value in Health Care which covered 507 employers of 1,000 or more employees, representing 11.5 million employees, also concluding that employers are going to be putting much greater emphasis on incentives and consumerism.

Ted Nussbaum, senior consultant with Towers Watson tells us "employers are frustrated by their employees’ low use of expensive health improvement programs. As employers continue to empower workers to be more health focused, they are beginning to target and reward those workers who demonstrate a real commitment to making positive lifestyle changes.”

Here's what Towers Watson found:

• 53% offer financial incentives for employees enrolled in health engagement activities
• 37% reward only employees who meet the company’s requirements for completion of a health engagement activity,
• 29% only reward members who participate in multiple activities