Good Baseline Assessment Key to Success
by George B. Delta, General Counsel, the Incentive Federation Inc.
No one can doubt that the ever-rising costs of health care are a drag on the economy and hurt the competitiveness of American business. Employers pay higher premiums every year, and they often are unable to give employees adequate raises (assuming that they can even provide raises) because health care costs are absorbing an ever-increasing amount of an employee’s total compensation (wages and benefits).
If national health care costs keep rising at their current pace, they are estimated to exceed 20% of the gross domestic product by 2018, unless we take steps to reverse the trajectory.
The United States is ranked 45th in the world in life expectancy, with an average of about 78 years. The low life expectancy is probably due to the lack of health insurance, high obesity rates, poor dietary habits, high infant death rates, disparity of care by race, and a focus on treatment rather than prevention. Even worse, each year Americans spend $7,290 per person on health care, or $568,620 in lifetime medical costs, far more than other Western democracies. For example, Spaniards live an average of 81.2 years while spending about $2,670 per person or about $351,000 less over a lifetime than we do in America. In Portugal, where folks live to be 79 on average, they only spend a total of $169,850 on health care during their lives, or $2,150 per person per year.
Get a Grip on Risk Factors
Fortunately, there are several steps we can take to improve our national health. First and foremost, we can reduce costs by improving our behavior. We can take care of ourselves by reducing or modifying risk factors associated with various chronic conditions, taking medicines as prescribed by doctors, improving our data and record-keeping processes, and reducing mistakes by the health care system (i.e., keeping patients safer). None of these additional steps is exactly a mystery to us. We know that doing some or all would reduce health care costs and make people healthier. Yet, it can be difficult sometimes to persuade people to do what is in their interests. This is where wellness programs, incentives, and the incentive industry can help.
In this environment of runaway health costs and poor health outcomes, wellness programs can play an important role in improving the health of Americans, thereby reducing the amount spent on treatment. Wellness programs have been around for many years, and they have generated uneven results. Some folks question whether wellness programs contribute to a company’s profitability and argue that they are used as placebos to improve employee morale.
These criticisms are not completely misguided, but they overlook the success of well-designed wellness programs in improving employee health and reducing health care expenditures. Recent research shows that a properly designed wellness program can help companies reduce employee health care costs, increase productivity, improve profitability, and help create a healthier and happier work force.
For example, a 2007 report from the global professional services firm of Watson Wyatt, now Towers Watson, asserts that a majority of companies that offer wellness programs see improved employee morale, higher revenues per employee, and higher profitability.
Barb Hendrickson and Stacie Pinnavaia of Design Incentives Inc. identify several important characteristics of a well-designed wellness program in a white paper titled, Bottom Line Booster Shot: A Study of Corporate Wellness Programs. Upper management must understand the wellness program and its benefits and be its advocate. A good wellness program must start with a baseline assessment of employee health risk factors so it can measure improvement. Thus, a wellness program should start with how many employees smoke, drink, or are overweight and delve into family health history in a nonthreatening and nondiscriminatory manner.
Accurate Measurement Vital
Understandably, employees often do not trust insurers or employers with sensitive private health records and information and have to be convinced that the data will be used to help improve their lifestyles and not to discriminate against them. A good wellness program will also measure results as accurately as possible.
Without accurate measurement, employees may also be encouraged to embellish their progress. A good wellness plan should be able to measure decreases in sick days, weight lost, numbers of people who quit smoking, and so on. There are other important characteristics for a successful wellness program, but being able to get employees to commit to the program, to change their behavior in a healthy manner, and to measure the results are among the most important.
Yet, even with the success of various wellness programs, the commitment of employers, and the usually apparent benefits to workers, sometimes it can be difficult to entice workers to participate. This is where incentives can play an important role. A good incentive program can be an invaluable tool to motivate workers to participate in wellness programs. Thus, as everyone seeks ways to reduce health care costs, incentives are a key to driving better behavior and reducing costs, especially if they are coupled with well-designed wellness programs that can improve the overall health of American employees.
Incentives Prove to Be an Investment
According to a recent study by The Incentive Federation, the United States Incentive Merchandise and Travel Marketplace Study, businesses spend approximately $46 billion on merchandise and travel incentives annually. Incentive end-user executives have begun to view incentives as an investment rather than a cost, because they can quickly and easily measure the financial return of these initiatives as compared with other types of business development programs. Incentives have been shown to work in a variety of areas. They can also entice employees to participate in wellness programs.
While participating in a wellness program should generate its own rewards, we know that is frequently not the case. Incentive professionals know that employees may need to see an immediate and tangible benefit for their efforts. Therefore, a wellness program alone may be incomplete, and companies offer incentives for employees to enroll in the program, to reach important levels, or to meet goals that are set out. The incentive programs that are coupled with wellness programs can vary. In many respects, they would not be appreciably different from well-designed reward and recognition programs. The incentives and awards that employees receive can range from merchandise (whether or not health-related) to gift cards, travel, events, or other company perks.
There is some research that has been conducted around wellness programs and incentives recently, and results are encouraging. For example, a study by Johnson & Johnson conducted by Med-Stat USA indicated that health care costs were $225 less for each employee who participated in a wellness program during a period of four years, and that voluntary participation increased from 26% to 90% when the employer offered incentives. While the amount of the incentive offered is not critical, the awards should have more than nominal value. It would also be helpful to allow employees to save and earn value awards as they progress through the wellness program. As the value of the incentives increases from a nominal amount to something more significant, perhaps to $100 or more, employee participation should also increase.
It is clear that a well-designed wellness program should be coupled with an incentive program to increase participation. Incentives are a powerful tool in motivating workers to take part in a wellness program. That is but the first part of an employer’s effort to control health care costs, however. A good wellness program must be designed properly to achieve lasting changes in the behavior of its participants. As an added benefit, by providing incentives to reward individuals and to recognize their good conduct, an employer can help embed and nurture a wellness program and make it part of its corporate culture and a critical component of its success.
George B. Delta is general counsel for The Incentive Federation Inc., an umbrella organization founded to promote, protect, and research the incentive fields. He has expertise in various aspects of the incentive, promotion, and recognition fields, including gift cards, escheat law, employee achievement awards, sales taxation, and the taxation of awards and incentives. George can be reached at gdelta[at]garyreg.com or 703-848-7588.