by Alex Palmer | November 17, 2015
Health has become a growing topic in the employee incentive and engagement market, both as health care continues to play a central role in the political conversation and as wellness programs have grown in popularity among organizations. According to a new white paper from Welltok, a consumer health rewards company based in Denver, CO, the average large employer spent $594 per employee on health rewards in 2014, a 15 percent increase over the previous year.

Incentive spoke with Michael Dermer, wellness program expert and chief incentive officer for Welltok about its findings, its analytical approach to heath care, and the direction of health rewards more generally.

Health incentives seem to be gaining interest among employers, but how can organizations ensure their incentive programs are actually effective? 

MICHAEL DERMER: We establish a health-reward program framework with four key components: audience (who is eligible to receive rewards), actions (what actions, behaviors or outcomes must a member of the audience achieve to earn the incentives), rewards (what rewards will the individual be able to receive) and incentive value (what is the dollar value of the rewards that the individual can earn if they perform the designated actions).
With this established framework, we can bring our data and experience into play to further optimize the reward design. 

How so?

DERMER: In particular, we focus on two key drivers: First, what behaviors can be selected that can drive a health result or a near-term ROI? For example, aligning an incentive to selecting a lower-cost MRI can deliver immediate ROI. Second, what is the dollar value of the incentive? We look at our millions of incentive transactions to select the incentive value that is expected and proven to drive a certain response rate. We do this by leveraging predictive analytics and consumer data insights to segment and target individual consumers based on their needs, receptivity, and impactability.
Where do you see non-cash rewards (such as gift cards, merchandise or promotional products) fitting in to a well-executed health rewards program?
DERMER: If you look at the research, approximately 70 percent of the "rewards" used in health programs are either premium reductions or health savings account deposits. Most interpret this to mean that these vehicles are preferred over non-cash rewards such as gift cards and debit cards. Actually, the main reason that 70 percent use these health rewards is that these items are not taxable, while non-health benefit items such as gift cards and debit cards are taxable. If you look at loyalty programs from other industries, when consumers are given a chance to select the reward of their choice, they choose cash rewards (that resemble premiums) 45 percent of the time, and gift/debit cards 45 percent of the time. I would suggest that if they were taxed the same, consumers would select cash (e.g., premium reductions) and gift/debit cards equally.
What do you think are some blind spots or common mistakes that are made today in designing consumer as well as employee health rewards programs?
DERMER: First, health promotion programs need to optimize the proper "mix" of near-term and longer-term return on investment (ROI). Most health promotion programs tend to focus on behaviors that only drive ROI over time. This includes programs that impact lifestyle such as nutrition, weight management, and exercise. While these are important, there is also the opportunity to align incentives to more immediate ROI behaviors, like using lower cost tele-health services over more costly office visits.
Second, health rewards programs need to align the dollar value of an incentive to a specific behavior. For example, a $50 reward can motivate a solid population into getting a biometric screening but is unlikely to drive a more complex behavior such as reducing Body Mass Index [or BMI -- a simple weight-to-height ratio commonly used to classify underweight, overweight and obesity] by 10 percent. Selection of the optimal incentive value is done correctly by evaluating key variables like the level of effort required for the behavior, the income level of the individual, the dollar values given for other behaviors in the program, the dollar values given during the last period in the program, and the dollar values given in the non-health reward programs the individuals use in their lives. If someone is given $200 by a bank for opening an account, would $150 motivate them to reduce their cholesterol?
Third is regulatory compliance. With the recent U.S. Equal Employment Opportunity Commission (EEOC) lawsuits, it is critical to understand the complicated regulatory framework between the various laws and regulations.
There are many other common mistakes, such as trying to focus on too many behaviors and spreading incentive dollars too thin, but these are the big three.
Finally, jumping off the news of Welltok's recent acquisition of Zamzee, where do you think gamification fits into the effective design of a health incentive program?
DERMER: Driving behavior change among consumers requires a combination of not only incentives, but engagement tools like gamification, personalized action plans, multi-channel communication, relevant content and programs, communities and social sharing in order to be impactful. Zamzee is an evidence-based program that uses gamification, rewards and behavior-change science to get kids moving more. Evidence shows that getting kids excited and engaged often triggers parents to get involved and make positive changes as well. So, as a component of a cohesive program, gamification can be powerful engagement tool.