Wellness Incentives - Give or Take?

Four or five years ago I went to the SHRM conference in San Diego to launch a product for my old company (if you were there we were the guys with the Donald Trump look-a-like in our booth.)  While there I bounced around the floor checking out the booths.  There were a couple of companies touting their "wellness" incentives.  Not too many.  So back then it was a good idea but not quite mainstream.

Fast-forward to today and you can't swing a cat without hitting someone selling a wellness incentive idea.  Getting employees to care and act on their health is big business.  

Big but elusive.  The interwebs are awash in analysis and information on what will work and what won't.  Much of it contradictory.

(BTW - for a great resource and commentary on wellness communications check out my buddy Fran on freerangecomm.com - follow her site and her personally on twitter - she's good people.)

The Hard Truth

My own opinion is that wellness programs won't work long-term for a variety of reasons...

1. The personal health rewards (or penalties such as death) are typically far into the future so we discount them to almost nothing.  It is hard to be motivated to achieve a big award granted in the future when I can get a small, quick award today (ie:  that Big Mac or that cigarette.)  I posted on this phenomena here.
    
2. Companies in their heart of hearts really, really don't care about their employees' health - they care what affect their employees' health has on their bottom line.  Cash not compassion is their motivation - and employees pick up on it and dismiss the wellness program du jour.  The few companies that have senior leadership involved and invested in wellness are the ones succeeding.  Not just because they see a monetary benefit - but because they also care about their employees.  I posted on this here.
    
3. People will change if and when the majority makes changes.  Consensus and social proof are powerful influencers.  If the majority of the company isn't playing along - failure is assured.  Social network analysis has shown that weight gain actually follows your network.  If you have heavy friends in your network you are more likely to gain weight.  Weight becomes a norm for your group.  Health can work the same way. How consensus works in social networks was the focus of this post a while back.
    
4. Employees don't really have skin in the game.  I can run all the programs in the world - but if I don't really feel the pain of my behavior I won't make the change.  Most employees believe health insurance and the rates they pay are entitlements of the job (see post yesterday.)  Until employees have something to lose - they have no investment in the change.  It is sound psychology that people are more influenced by the potential loss of something than the potential gain of an equal amount.  In other words - increase their premium based on their lack of participation and you'll get more participation than if you give them a reward after the fact via incentives, rebates, merchandise, travel or good health.  It's just human nature.
    

What Would Incentive Intelligence Do?

Make sure that there is some compassion in the program.  If you're doing it purely for financial reasons there are other ways to cut costs - renegotiate the contract or get some other deal.  Increase co-pay, deductibles, whatever.  Spending money on a wellness program without caring is a waste of money.  If you don't care about your employees stop reading... the rest of the post won’t matter to you.

If you do care, start by honestly communicating the true costs of health insurance in your company.  People need to know the big picture and where they fit in that picture.  Your efforts with being transparent now will pay big dividends later - start the communication with honest, transparent discussions on what you're doing.  While costs aren’t the only thing you care about – employees need to know that their behaviors impact others and that their individual behavior important and will impact their co-workers.

Communicate that everyone starts at the same place and their future behavior dictates the outcomes.  The individual employee behavior will determine the individual’s premiums in the future.  And by extension, everyone’s behavior in total will influence the individual premiums as well.  I specifically mention behaviors - this isn't penalizing someone because of a fluke of DNA.  Diabetes can be a DNA issue or a value-meal issue - Doctors can separate the wheat from the chaff on that one.

Communicate that going forward you're changing the rules.  The employees need to know this won’t be a program of the month – this is a fundamental change in how the company will handle the health care issue.  Make sure the compassion is there - this isn't just a business decision alone - it is a human decision.  

Now, here’s where some of the psychology of loss aversion comes in...

Create a grace period before the real stuff starts where everyone’s premiums for the next six months will be at the lowest possible level for the plan in place.  This might mean the company takes a bit of a risk since you're only charging premiums as if everyone was perfectly healthy. But hey... you said this was a human decision not a bottom line one right?  You need to put your corporate money where your corporate mouth is too.  

After 6 months premiums will be adjusted and the company will adopt something like this:

Tiers of premium rates based on behaviors (example only):

• If don't or won't take a health risk assessment you pay the highest premium rate.
• If you take the assessment, regardless of the outcome, you get the second highest rate.
• If you get a bad assessment - you get the third highest rate.
• If your assessment is good - you get the fourth highest rate.
• If you participate in behavior modification efforts (diet, smoking cessation, etc.) You get your rate reduced.  Number and type of interventions would have more effect on how many tiers you move up/down.  This isn't about goals right now - just participation.  You need to break behavioral inertia.

Note On Strikethroughs:  See input in the comments section @akabruno caught some flaws in my logic. I was in a hurry and combined a couple of thoughts - the idea is that if you take the assessment you get a lower rate - the rate at this point isn't based on the outcome - just the fact you did it.  If you have a great assessment you won't have any issues later - if you have a bad one your level of participation will determine at what rate your premiums will be calculated.

This is only an example - the concept is to let the employees see the effect being healthy and doing healthy things has on their paycheck.  That’s the part where they get to see their skin in the game.  By reducing everyone to the lowest level – they now have something to lose - namely their own cash – if they don’t change behavior.  

Remember, you’re not really raising their rates – you’re lowering them for a period of time so they get accustomed to the extra money – then you’re taking it away based on their behavior.  

I know this is contrary to the normal program structure of giving awards for behavior but it should have a much greater long-term effect.  After all – how many pedometers can you really use?

And the big one…

Communicate, communicate, communicate the effect the program is having on people’s lives - not the cost savings, not the awards, not anything but the effect it is having on the well-being of your employees.  Remember, this is mostly about making your employees' lives better.  That is the thing you communicate.  

Leverage social proof - communicate the number of people playing the game to show how widely it has been adopted.  If you're getting low numbers then communicate the growth not the absolute numbers.  Whatever the situation, spin it so that the employee base sees this as part of your corporate identity.

That's it.  Simple and I believe, effective.  It addresses what I feel are the big stumbling blocks of wellness programs...

1. It’s based on things the employees can control
2. It comes from a compassionate and human place not just the CFOs office
3. It brings the impact and the motivation for being healthy from something in the future into the now - to things that influence me today - paying higher premiums next month if I don't do something (or lower if I do)
4. It applies the principle of social proof and consensus so I'm influenced to be part of the crowd.

What say you – is this structure better?  

Should we, as Nick Lowe said “be cruel to be kind” and focus on taking away money in the form of higher premiums for NOT doing something instead of giving out tchotchkes for losing a few pounds? (BTW – email subscribers may need to click through here to see video)

Interested to hear your thoughts.

Comments

[Laura Schroeder]

I agree with you about incentives v. penalties. People already have incentives to live in a more healthful way, like living longer, feeling better, perhaps looking better. If they still don't do it with amazing incentives like that, a complicated benefits plan is unlikely to change them. Whereas if you charge, say, smokers a higher premium, you both reward non-smokers (reinforcing that behavior) and give smokers an immediate financial incentive to comply.

As you said, a minor negative incentive that is immediate carries more weight than a major incentive (negative or positive) that is far out. One of my graduate professors had a nifty theory about that that I blogged about in a recent post at the cafe: http://www.compensationcafe.com/2010/07/it-actually-is-personal.html. I didn't do it justice - he wrote a whole book about it - but I think it's interesting how people gravitate toward short term gratification at the expense of their own long-term interests.

[Paul Hebert]

Thanks Laura for the comments. The issue of long vs. short is something called Temporal Discounting and we all do it whether we like to admit it or not. It plays out in 401K decisions as well as health benefits.

The other point you made me think of is that even though I know my behavior affects others I ignore it - sort of a reworking of the "tragedy of the commons" idea.

There is a lot of psychology at play here and I don't believe offering a few bucks and some keychains is enough of a effort. I think we need to get down and dirty here. Changing health behaviors isn't as simple as getting folks to do their time sheets on time and the long-term ramifications are much more important.

[akaBruno]

Great article, Paul. We are starting a wellness initiative at our school (I am on the committee), and I forwarded your post to my fellow committee members. Hopefully, they will take your points to heart.

One point in your tiered example....shouldn't taking the assessment and getting a bad outcome be the 2nd highest rate? If someone takes the assessment, they will either get good or bad results (and I assume we don't have an "indifferent" category).

[Paul Hebert]

Oops... darn you for reading so close. The second bullet negates the need for the next two. I'll update - thanks for being smarter than the author!

[Steve Boese]

Loved it Paul - am forwarding the link to some folks I know that are looking at wellness plan design right now.

[Paul Hebert]

Thanks Steve - appreciate it! Looking forward to the show tonight - you have me interested!

[WhenWellnessSucks]

There is so much out there about incentives and most of it points to the fact that few things that actually matter to health behavior change (people eating better, moving their butts and lowering their stress) are straightforward enough to be positively impacted by incentives. The act of taking an HRA for pay is a no-brainer (http://www.youtube.com/watch?v=u6XAPnuFjJc). Unfortunately for behavior change, HRAs don't accomplish much. They are a decent way to measure behavior change, but a sedentary, pack-a-day smoker isn't likely to learn anything new or change behavior based on some HRA report.

I think the issue here is that the comanies who are really driving the content of most wellness programs tend to be vendors who need a straightforward revenue model (a product, an incentive system, software) and to be truly great wellness need to be like any strategic initiative in a company - vital to the fabric of the culture, well-planned, measured and tactically spotless in its implementation i.e. not "off the shelf."

Most wellness programs are anything but. They are generic, show poor understanding of the workforce, not supported meaningfully by management and almost none are measured or linked to business goals.

Nearly 80% of wellness programs have less than 50% participation. http://tinyurl.com/39gwxnp
87% of companies do not know the return on investment for the $ they spent on wellness.

If we looked at ways to innovate wellness delivery like we look at ways to innovate employee engagement, product delivery or sales we might have a valuable key to a total employee engagement strategy. Instead we just have one more useless flavor of the month that doesn't speak to the interests or motivations of those working for the companies that attempt to use these programs.

[Paul Hebert]

Great comment. I agree 1000% that wellness - if a company want's to take it on -must treat it as strategic. When it's just the flavor of the month - you get the watered down versions you've mentioned.

Thanks for being part of the conversation.