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Financial Incentives to Get Healthy: A Diet Don’t


Are you getting a $25 discount on your monthly health insurance premiums for keeping your BMI between 22 and 25 or your cholesterol below 200?

If you haven’t been getting extra cash from your employer for keeping fit and healthy, just wait. More companies are rewarding workers – and penalizing others – based on their health habits.

As health care costs continue to take a bite out of corporate bottom lines, employers are aggressively trying to ease the burden. And more of them are turning to wellness programs as a possible answer to these escalating costs. But their potential to actually generate savings is coming under scrutiny.

The idea behind these programs: Healthier workers are more productive and carry lower medical costs than their unhealthy co-workers.

A win-win for both employer and employee, right? Maybe not. (More on that later.)

Climbing costs

Employers expect average total health-care costs for active employees to reach $12,136 in 2013, up 5.1% from $11,457 in 2012, according to a new survey by Towers Watson and National Business Group on Health released this week. Even though it was the lowest increase in 15 years, employees contribute 42% more for health care than they did five years ago, compared with a 32% increase for employers. And 80% of respondents plan to continue to raise the share of premiums paid by employees, according to the survey.

And starting in 2014, employers will be getting a bigger financial incentive to offer these wellness programs. Up until now, companies were allowed to make up to 10% of total insurance premiums (the employer’s and employee’s combined) conditional on the employee meeting certain health goals, be it losing weight or quitting smoking. A provision of the Affordable Care Act that will take effect next year bumped this ceiling up to 30%, and if approved by certain government agencies, it would go up to 50%.

Incentive-based wellness programs have been steadily rising: More than two-thirds of companies offer financial enticements to workers to encourage participation in health programs, up from just over half in 2010, according to the Towers Watson survey. Workers are rewarded for things such as taking a health risk assessment or enrolling in a smoking-cessation program.

In 2010 commercial real estate company Jones Lang LaSalle added a cash bonus to its wellness program, offering $50 to workers who get a physical and another $50 for each of four medical tests they take: weight, blood pressure, glucose and cholesterol, plus an extra $50 if they do all the tests, according to a 2012 Kaiser Health News report.

And tougher requirements are on the way, as more firms plan to hold workers accountable for meeting specific health goals. Now 18% of employers penalize workers (with higher insurance premiums and/or deductibles) who don’t complete requirements of a health management program, while 36% plan to do so in 2014, according to the report. Similarly, now 54% of companies require workers to complete a health risk assessment and/or biometric screening in order to be eligible for rewards.

Evidence to the contrary

Measures to get workers to take better care of themselves are admirable. But some new (and old) evidence suggests that incentive-based health programs don’t work for either employer or employee the way they’re meant to.

A study published in the March issue of Health Affairs questions the assumptions underlying the typical incentive-based program, among them that they are more cost-effective than other approaches, that financial incentives will induce workers to modify behavior and thereby improve their health, and that improvements in employees’ health will lead to cost savings for their employers.

The study, titled “Wellness Incentives in the Workplace: Cost Savings Through Cost Shifting to Unhealthy Workers,” notes that reliable conclusions about wellness programs’ financial returns are tough to come by. The researchers draw on the example of grocery chain Safeway, whose wellness program combines a high-deductible health plan with up to $1,040 (for individuals) in premium rebates for achieving goals related to smoking, weight and levels of cholesterol, blood pressure and glucose. Safeway credits its program with holding per-worker health care costs flat from 2005 to 2009, according to the paper.

But, the researchers say, often employers’ findings about cost savings are anecdotal. They note that the savings attributed to wellness programs may actually come from other sources, like a broader restructuring of benefits. Employer wellness studies “commonly suffer from insufficient controls, selection and inadequate data,” the researchers say.

Getting paid to lose weight

What about money as the ultimate motivator? Does the prospect of getting a freebie induce people to pick up – and maintain – healthier habits? You might think workers who stand to pocket, say, an extra $1,000 a year for getting their BMI to a certain level would be hitting the gym four times a week and upping their broccoli intake in no time. But here, too, the studies have shown that incentivizing people to lose weight or quit smoking works – but only in the short term.

The research cites a meta-analysis of seven trials with follow-up periods of at least 12 months. It found that financial incentives were associated with an average loss of 0.88 pound at 12 months and 1.5 pounds at 18 months, and an average gain of 2.42 pounds at 30 months. One study showed significant weight loss among participants after 16 weeks of the incentive, but no significant differences seven months after the incentive was over. They found similar results when they looked at reviews of incentives and smoking.

A 2011 paper published in the Journal of General Internal Medicine, titled “Financial Incentives for Extended Weight Loss,” found the same. “We saw the powers and perils of financial incentives in changing behavior,” says Leslie John, an assistant professor of business administration at Harvard Business School, and a co-author of the study. “They are extremely effective at getting people to lose weight, but when we remove them, people tend to revert back to old behaviors,” which is what happens with other weight loss programs too, she says.

The implication here is that, in order for workers to keep the weight off, they need never-ending financial incentives. But we also “know that people pretty readily adapt to new income… so with these incentives, I suspect they’d become less effective over time,” John says, adding, “maybe if you, every year or few months, switch up the incentive scheme to keep it fresh,” it would have a better chance of succeeding.