Fitness Pay for Play: Monetary Incentives Encourage Corporate Wellness Participation

Jan 24, 2014

Photographer: Scott Eells/Bloomberg

Corporate wellness programs can help reduce healthcare expenses, but will employees actually use them? To enhance the effectiveness of these programs, a growing number of companies are offering monetary incentives for participation.

A cash payment or reduction in the employee's health insurance premium can be a powerful motivator, says Dr. Fik Isaac, vice president for global health services at Johnson & Johnson, the world's sixth-largest consumer health company.

"We need to change the conversation from viewing health as a cost to viewing it as an investment in human capital," said Isaac, who was awarded the Leadership in Health Care Award by the U.S. Chamber of Commerce in October. Offering money "shows you are taking health seriously," he said.

Johnson & Johnson started paying employees incentives for participation in wellness activities in 1995, and within a few years, participation rose from about 30% to more than 90%. In 2008, the company launched Wellness & Prevention, a subsidiary that assists other companies with wellness initiatives. Isaac serves as chief medical officer of that business, as well.

Struggling with low participation

Staying healthy may be in everyone’s best interest, but that doesn’t tend to translate into strong participation in wellness programs. Fewer than half of employees take advantage of clinical screenings or health risk assessments, which help identify the interventions each employee needs, According to a recent report by RAND Health for the U.S. Department of Labor, Moreover, only one-fifth of employees participate in interventions offered by their company, which may include fitness, smoking, weight control or disease management.

The biggest barriers to participation are employees' lack of trust and concerns about privacy, says Isaac. Employees understand the company is trying to save money, and asks, "What's in it for me?"

Mixed messages can also have an impact. For example, a company can spend a lot of time talking about healthy behavior, but the effect will be blunted if leadership shows no interest in the initiatives or if vending machines are still full of junk food.

One common focus of incentives is employee participation in a health risk assessment. An earlier RAND study cited in the report found that health risk questionnaires coupled with follow-up interventions — such as support activities or health promotion programs — raised the likelihood that the programs would be beneficial. Convincing employees to provide information for the assessment can be challenging, so the incentive is needed.

Johnson & Johnson pares $500 off the annual premium for employees who submit health information, which is then used to create an individual health risk profile and recommend activities for the employee, such as a diabetes management program. The company also wants to make sure employees act on their health information, so it offers an additional $100 to $250 for participation in a recommended activity.

More and more companies are introducing wellness incentives, with a recent study by Mercer found that implementation has increased each year since 2010. The cost to employers does not have to be prohibitive, either. The average annual value of incentives was estimated at $100 to $500 per employee, according to the report by RAND.

In fact, wellness programs can produce savings in the form of fewer sick days and lower healthcare costs, as well as less quantifiable benefits, such as greater focus on one's work. The RAND study could not verify that wellness programs significantly reduce company health costs, partly because screenings may identify health problems that prompt a doctor's visit. Johnson & Johnson estimated that its worksite health promotion program rendered $565 in annual savings per employee from 2002 to 2008.

Tailoring programs to company needs

Every company has its unique approach. At KI, a furniture company in Green Bay, Wis. with more than 2,100 employees, a nurse comes on-site to perform assessments, says Jodi McWilliams, the company’s benefit manager. Employees receive a contribution of up to $2,500 in their health savings accounts for taking the assessment. Those who do well on the assessment qualify for a second incentive, a reduction in insurance premiums by up to $1,500 a year, depending on the score.

While it’s impossible to know for sure, McWilliams says there is evidence that participation in the assessment program improved employees' health. KI has yearly savings of $1,300 to $3,300 per employee over the benchmark plan. Meanwhile, the RAND Health report linked online health promotion tools, coaching, counseling, and health management classes to reductions in direct medical costs ranging from $176 to $1,539 per participant per year.

Companies have to comply with federal limits on how much they can pay in wellness incentives, but in most cases, there appears to be little danger of exceeding those limits. The incentive can amount to as much as 20% of the total cost of the employee's healthcare coverage, and on Jan. 1, the limit will rise to 30% for all programs except tobacco programs, which will have a 50% limit. In comparison, average company wellness incentives made up just 3% to 11% of the total cost of coverage in a recent study, according to the RAND Health report.

The holy grail of wellness activities is engagement: how many employees can be convinced to switch to a healthier lifestyle. Estimates suggest that fewer than 20% of eligible employees participate in wellness interventions.

At KI, McWilliams says, the goal is to make wellness fun. Employees are encouraged to join teams that compete with each other for prizes over a period of a few weeks. As much as 30% of employees participate.

If it’s fun, good for you, and saves money, why not participate?


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