A common problem with employer wellness programs is that they don’t really drive behavior change that improves health outcomes.
In a typical homegrown wellness program, an employer incentivizes their employees to complete basic health activities like an annual physical and lab work. The rewards often range from $150 to over $2,000 per year in some cases. The downside is that if people aren’t sufficiently educated on their lab results or motivated to listen to their doctor and improve outcomes, they can just go through the motions in order to get the incentive.
That leads to this common lament from employers: “We’re just giving money away while our population remains unhealthy and our premiums continue to increase.”
An alternative approach, i.e., a new incentive model, is in order – one that lets employers stratify the rewards based on actual health outcomes rather than solely rewarding action.
For example, imagine an employer currently offers its employees a $500 reward just for completing their annual physical and labs. With 50% of their 200 medically enrolled employees participating in the program, they would spend $50,000 in rewards.
But with the alternative approach, the employer could stratify the reward amount so that the higher the health level, the higher the reward. For simplicity, the employer would contract with a wellness program provider that can assess employee health in one of three tiers: high risk, moderate risk, and low risk.
The rewards could be as follows: High Risk: $100, Moderate Risk: $250, and Low Risk: $500.
In this case, assuming the employees are split evenly across these three risk buckets, the employer’s total reward payout would only be $28,333, a savings of $21,667 ($50,000 – $28,333).
For the employer, their $21,667 in savings helps to partially (if not fully) subsidize the wellness program that assesses employee health risks. In other words, if your wellness program cost less than $21,667 annually, and you had to pay out $28,333 in rewards, you would’ve restructured your wellness incentives at no additional cost.
But there’s even more benefit than that.
Remember, money is a strong motivator for most, if not all, participants. Therefore, the High and Moderate risk employees who are not receiving the full reward will now be motivated to improve their health risk profile in order to earn the maximum reward (and also improve their health!). And encouraging coaches can take that motivation to the next level.
This health improvement is where both employer and employees can enjoy the intended results. Modifiable health risk factors such as smoking, high blood pressure, high blood glucose, and stress have all been shown to have a negative effect on healthcare costs, productivity, and absenteeism. So if an employee is sufficiently motivated to improve their health behaviors and modifiable risk factor(s), they not only get healthier, but they also boost their employer’s bottom line.
The economic impact of improving modifiable risk factors typically far outweighs the cost of an effective wellness program.
As an example, 20.8%1 of the U.S. working population uses tobacco, and each U.S. worker who smokes costs on average an additional $5,816 a year2 in excess health care spend and lost productivity (not including absenteeism).
In our earlier example, if 20% of the population of 200 medically enrolled are using tobacco (i.e., 40 people), the estimated excess healthcare cost is $232,640 (40 medically enrolled using tobacco x $5,816 per user). If just four of these individuals were persuaded to stop using tobacco, that would yield more than the cost of the program. Similar improvements with other risk factors would help even more.
Given those compounding effects across numerous modifiable risk factors, it makes eminent sense to invest in an approach where you can stratify health risks and use those to also stratify wellness rewards (instead of just doling out money) and encourage real behavior change
One last word
To be clear, there are several regulatory considerations (ACA/HIPAA, GINA, ADA) that affect the design of wellness programs. These cover such topics as reward amounts, how to make the full reward available, ensuring the availability of reasonable alternative standards to earn the reward, and paying out the full reward.
We recommend speaking with legal counsel to ensure you have all your regulatory ducks in a row.
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