The effectiveness of wellness incentives and disincentives depends on a company's culture of health. While incentives are effective for initially gathering health data, disincentives work better for sustained engagement in health programs. However, both incentives and disincentives can fail if not aligned with company culture. Experts recommend employers consider culture, incentives/disincentives, and analytics together when designing wellness programs. Communicating the program clearly is also important for success.

1. May 2014 • employeebenefitadviser.com
Selling wellness that works
INCENTIVES OR DISINCENTIVES? CARROTOR STICK?
THE ANSWER: ITDEPENDS…
BY MELISSA A. WINN
Mention wellness programs to a client looking
to save money on health care costs and their
first response is typically, “How do I get my
employees to participate?”
For years this has been the great debate — incentives or
disincentives … the carrot or the stick? But the answer is not
as cut and dry as once thought. Many in the industry are now
saying what works depends upon a company’s culture of health.
“Often times we talk about incentives and disincentives
as if they live on their own, but a big piece about the
effectiveness of a wellness program is how it’s tied to a
company’s culture of health,” says Shawn Moore, senior
vice president of consumer engagement at ActiveHealth
Management, a wellness company located in New York.
“It doesn’t matter if an employer uses an incentive or a
disincentive because both can work and both can fail,” says Den
Bishop,abrokerandpresidentofHolmesMurphy&Associates
in West Des Moines, Iowa. “And when they fail, it’s because the
employer didn’t push it on the company’s culture of health.”
Tricia Johnson, director of marketing for Interactive
Health, a provider of outcomes-based wellness programs in
Schaumburg, Ill., agrees: “It comes down to what fits best
with your company’s culture.”
Psychologically, she says people are typically more afraid
of missing out on something when it comes to the stick, or
disincentive, approach. But if an employer is trying to enhance
the company’s culture, the carrot/incentive idea, works better.
Employers should first consider what they’re trying to
accomplish with a wellness strategy and “how does that fit
with the culture you already have and with the culture you’re
trying to establish,” Johnson says.
Know your client
Benefit advisers can play a big role in helping employers
flesh out a wellness strategy that fits with their company’s
culture, which makes it imperative for advisers to “know
your client,” Johnson says.
Aside from having a good understanding about what
wellness programs are out there and what they have to offer
employers, knowing what your client wants from a wellness
program is invaluable.
“Having an understanding about what’s important to an
employer in regards to wellness, their ultimate goal with
offering a wellness program and how it will strategically
impact their business, will help advisers determine what
programs are best to recommend,” Johnson says.
When deciding upon incentives or disincentives, advisers
can then help employers figure out what’s “in bounds and
out of bounds” for their company’s culture, broker Bishop
adds. “Because it’s different for every company,” he says.
“We like to think of any wellness program as a three-legged
stool; one that includes the company’s culture of health, the
incentives and disincentives, and clinical and consumer
analytics that are available to target the appropriate
messaging and incentives,” says ActiveHealth’s Moore.
Bringing all those pieces together will create an effective
wellness program, she says.
Many wellness experts agree analytic information gives
employers the knowledge to create a wellness program
appropriate to their members’ needs.
Without analytics, Moore says, a company is implementing
a wellness program using a “shotgun approach” and will have
a difficult time being effective.
“If you don’t take a look at your culture of health, your
analytics and your incentives together; and you just stick
an incentive out there, it’s probable the organization is just
wasting its money on the incentive,” Moore says.
Moore and ActiveHealth suggest implementing any
incentive program using the following phased approach tied
to the culture of health:
• Gathering information: Ease into incentives by
gathering information about employees, including through

2. biometric screenings or health assessments.
•Promote sustained engagement: Remind people that
wellness is a continual process, not just a once a year activity.
Creating sustained engagement can include having a challenge
for employees to walk 5,000 steps a day, participate in coaching
seminars or engage in other monthly activities, which in turn
earn points toward an incentive at the end of the year.
• Targeting outcomes: When incentives programs
have been adopted, the culture should be ready to target
outcomes, for instance driving body-mass-indexes under
27.5 or reaching certain cholesterol levels.
Incentives and disincentives can greatly influence the
effectiveness of each of these phases, Moore says, but you
have to know which ones to use.
Carrot vs. stick
“While we’ve found disincentives work with some of the
conditioned management pieces, they don’t work as well with
the wellness pieces,” Moore says, noting that there is a clear role
for disincentives later on in the process of a wellness program.
For instance, ActiveHealth Management found during
a five-year survey of 1.9 million health plan members, that
before being incentivized only 18% of members filled out a
health risk assessment known as an HRA, a common tool
used to gather employee health data. With incentives, 63%
completed the assessment.
“Using incentives, or the carrot approach, works really
well when you’re trying to gather information,” Moore says,
adding that the most popular ways to do so are through a
health assessment or biometric screening.
Popular incentives for completing assessments or
screenings can include anything from receiving a gift card,
merchandise or premiums placed in a health savings account.
As the employer moves toward sustained engagement,
research shows the stick approach is more successful.
ActiveHealth found individuals were 13 times more
likely to engage in disease management programs, such
as medication management classes or smoking cessation
programs, with disincentives versus incentives.
A typical disincentive or stick approach would be to charge
higher premiums for a smoker versus a non-smoker.
But, because the Affordable Care Act allows for substantial
outcomes-basedincentives,employersareincreasinglyexploring
incentivizing outcomes to help employees improve their health
through measures like smoking cessation, ActiveHealth says.
Moore adds employers are increasingly offering incentives
for sustained engagement, such as cash, gift cards, discounts
before incentives, only 18% filled out an
hra. After, 63% completed the Hra.

3. on merchandise and coupons or Groupons, with the
understanding that “a consumer is a consumer.”
“If marketing companies have changed people’s behavior
to eat potato chips like crazy, maybe we can use some of
those same techniques to get people to be healthier,” she says.
That approach gets people to be more loyal to themselves
and to their health, Moore says, calling it a “win-win
situation for everyone.”
Advisers looking to engage employers about implementing
any wellness program and include the use of incentives or
disincentives need to also focus on measurability, Holmes
Murphy & Associates’ Bishop says.
Employers are interested in knowing what diseases are
costing them money and what needs to be measured to have
an impact on those diseases, he says. Without a significant
measurable clinical item, the wellness program fails, he adds.
“When you tell an employer the goal of the wellness
program is to have a certain number of the employees walk
in a 5K, the CFO is inevitably going to ask ‘Okay, what’s my
return on investment?’” Bishop says.
When an adviser uses specific measures and says, “We’re
going to take this many people who have elevated triglyceride
levels and move that number from up here to down here in
the next 12 months, and in the next 24 months we’re going
to move your pre-diabetics from this level down to this level,
the CFO will embrace it,” he says.
To help determine return on investment, ActiveHealth
Management calculated potential savings for each of the
approaches it studied. In the end, the stick method yielded
the highest savings at $249 per person, per year.
The pros and cons
While disincentives can bring higher savings, Moore says
they can also bring more employee resistance. Disincentives
can go overboard, she cautions. “There’s a fine line between a
successful disincentive and one that becomes frustrating for
the average person,” she adds.
“It’s got to be simple and easy to understand and the
activity has got to be easy to do for the individual,” she says.
Setting a goal for employees to be able to run a four-second
mile is, obviously, unattainable, she says. If the incentivized
activity is too difficult for individuals to do, “you end up with
low morale and hurt productivity,” she continues.
Likewise, too few or too many incentives or disincentives
coming from too many voices within the company can also
hurt the success of a wellness program.
Too many options can confuse and overwhelm employees
while too few may drive down interest and participation,
ActiveHealth found.
The company’s survey found organizations that offered
between six and 11 incentive choices (ways to engage, as well as
incentives for action) drove the highest employee engagement.
Today, many organizations implement a too narrowly
defined incentive plan, which reduces the program’s impact
on savings, the survey found.
How an employer communicates the wellness program to
its employees is also a key component for its success.
“We’re trying to do something good for the company and
good for the people in it by extending the quantity and quality
of life, but if we don’t communicate it in a way that people can
receive it in that way, then it’s a failure,” Bishop says.
Whether offering an incentive or a disincentive, Interactive
Health’s Johnson agrees it all comes down to how an
employer communicates it.
The message is “either I am missing out on something or
I am gaining something,” she says. And that message will
depend upon what works in a company’s current culture of
health or the one the company’s trying to create. EBA
Health and wellness programs are
virtually meaningless if a workplace
culture is bad, according to Jeffrey
Pfeffer, a professor of organizational
behavior at Stanford University.
Speaking during the annual Great
Place to Work conference in New
Orleans, Pfeffer said unhealthy
workplaces can cause up to 125,000
employee deaths each year and add
up to $130 billion in excess annual
company costs.
“Many of the individual behaviors
you are focusing on in your health
and wellness programs [such as]
stop smoking, eat better, exercise
more, are in fact the consequences
of the environments in which they
[employees] are working,” Pfeffer
says. “If you work people to death,
of course they are going to smoke
more, drink more and eat worse.”
Pfeffer outlined his concept of “social
sustainability,” where companies
invest more in making their human
capital sustainable.
“Work organizations ought to
be measuring the health of their
workforce,” he said. “Just as many
places today measure carbon,
renewables and environmental
impacts, we ought to measure human
sustainability just as much as we
measure environmental sustainability.”
When determining well-being
and longevity of workforces, Pfeffer
said that most company wellness
programs — which conventionally
promote individual health and
wellness through biometric
screenings and smoking/drinking
cessation programs — do fall short
of really instituting change. Indicators
like work-family conflict, lack of job
control, perceived fairness at work,
layoffs and economic insecurity, all
play a huge role in workforce health,
he added.
“The higher you are [in the
organizational structure of your
company] the more control you have;
the lower you are, [the] more flows
downhill,” Pfeffer said, noting that
low control over one’s work increases
the likelihood of a cardiovascular
event.
“This should not be surprising to
you: stress kills,” he said. “Nothing
is more stressful than being in a
workplace where you do not have
control of the pace of what you are
doing.”
In addition to offering health and
wellness programs, Pfeffer said that
a full revamp of workplace culture
is also needed. Stanford University
research finds that when employees
avail themselves of wellness
programs, there is only a $157
reduction in cost per individual.
“Because if I offer you health and
wellness programs, and diet and
exercise assistance, but I do not
change the conditions in which you
work, I am fighting a losing battle,”
Pfeffer said.
According to his research, some
European countries report, on
average, 22.4% less in workplace
health care costs than U.S.
companies. If the U.S. were to take
up similar European approaches to
workplace health and health care, it
would result in a $42 billion health
care reduction. — Michael Giardina,
EBN
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