by William Ng | August 31, 2011
Rapidly rising health care costs, coupled with the continuing tight fiscal environment, are compelling Corporate America to take a cold, hard look at incentivized wellness programs to motivate the U.S. workforce to become healthier and thus less costly to care for.

Consider these painful numbers for U.S. companies and workers: according to the Centers for Medicare & Medicaid Services, health care costs are expected to increase by 66 percent between 2008 and 2017. Last year, 77 percent of 2,117 U.S. employers surveyed for insurer Aflac’s “2011 Workforces Report” raised their employees’ share of health care costs, while 31 percent expected to raise employee insurance premiums again this year to help shoulder the escalating burden. 

Those working closely alongside the health care industry say the hikes will be unsustainable. Chris Boyce, president and CEO of Virgin HealthMiles, a Framingham, MA-based provider of incentivized wellness programs, and a unit of Richard Branson’s Virgin Group, says many human resource managers have told him health care costs could soon exceed the cost of wages in their organizations. “HR managers have got to get costs down,” Boyce urges. 

For the 4,233 working Americans surveyed in Aflac’s report, rising health care costs were right behind stagnant wages and job security in giving them insomnia. Behind this number is the potential disengagement of droves of distressed employees as they turn their attention toward financial survival instead of focusing on work. 

“Surely the economic climate has turned up the heat, and employers have taken to solving this challenge,” says Dr. Craig Keyes, chief medical officer and executive vice president of Atlanta-based Alere Health, which manages health and wellness programs for many Fortune 500 firms. Jeff Slay, founder and CEO of Neovia Integrated Insurance Services, a group health plan broker based in Pasadena, CA, which has added wellness services, notes that through positive impact on insurance premiums, a well-executed health program can counteract medical inflation (which he says is averaging 10 percent) by three to four percentage points. 

Health and wellness experts say the past litany of wellness programs that employers introduced while on the learning curve to tackle problems ranging from smoking and obesity to chronic diseases such as hypertension, diabetes, and cancer yielded mixed results because of the general absence of both incentives and proper measurement. With businesses still running on lean staffs in an uncertain economy, that lack of efficacy could become a critical condition. 

Employers with unhealthy or at-risk workforces incur not just medical costs but also equal or greater productivity losses, Keyes points out. Says Keyes, “We don’t have to talk about people going to the hospital. A person develops pneumonia and is out for a week. When you look at it, insurance costs are just the first piece of the overall picture.”

“There’s been a very noticeable shift to viewing employee wellness as a strategic business decision,” points out Tom Ciccotti, senior vice president of Chicago-based CHC Wellness, adding that the root of insurance hikes lies in medical claims for preventable conditions. Whereas many companies gauged just program participation rates in the past, Ciccotti notes that many now are seeking “retrospective analyses,” such as comparing the volume and types of insurance claims before and after the implementation of their wellness programs. “Those separating from the pack are quantifying the true dollar impact of their programs,” he says. 

Earning Their Way to Being Fit
More and more wellness program sponsors are leveraging the full array of available incentives, including merchandise, promotional products, gift cards, and travel. And they are implementing points programs for continuous engagement. These programs are being integrated into enterprise recognition and reward systems. 

Wellness companies, intending to be full-service suppliers, are getting into incentives, both administering them directly and partnering with incentive suppliers. CHC Wellness has formed strategic alliances with gift card and prepaid card suppliers. Neovia has managed two points-based wellness programs on its own and also partners with incentive houses. And Alere cites Hallmark Business Connections as a preferred partner, while noting that vendor choices are ultimately client decisions. 

Keyes says Alere’s clients have awarded gift cards to their employees for participating in voluntary health screenings, as well as merchandise items like big-screen televisions and even individual incentive travel opportunities as grand prizes in engagement programs. Ciccotti says CHC Wellness has fulfilled retail gift cards and gas cards and managed points-based programs using gift cards and branded awards. “The key factor is to drive participation and awareness, and incentives are a key way of doing that,” says Ciccotti.

At Neovia, Slay has witnessed program participation rates jump from about 30 percent to 80 percent once clients introduced incentive awards, including gift cards, raffle prizes, and promotional items (water bottles, yoga mats, etc). “We encourage companies to use incentives,” he says. “We counsel clients entering two- or three-year wellness initiatives to set aside budgets for incentives.”  

A 900-employee video game company that recently designed a new wellness program with Neovia set aside $10,000 for pedometers and high-end Camelbak water bottles for the program’s launch—about $11 per employee. The program will begin with a third-quarter companywide health fair event, where the firm will award the items to those who take voluntary health assessments. Slay, however, adds that the firm is looking to do raffles for flat-screen TVs, iPads, or other electronic merchandise to sustain its new program. 

Virgin HealthMiles is a long-term engagement program in which participants earn points, dubbed HealthMiles, by walking and running. Virgin supplies pedometers that record participants’ progress, and enrollees can redeem their HealthMiles for merchandise and retail gift cards from an online awards platform. In addition, Virgin conducts special point-earning periods semiannually, under the Quest Challenge banner, when all HealthMiles clients compete for a single incentive travel grand prize. Past awards were trips to Napa Valley, New York City, and the Virgin Islands. 

The Cash Addiction
Perhaps to the chagrin of the incentive industry, cash and financial incentives are significant motivational drivers in wellness programs, in the form of insurance premium discounts (known as premium differentials), reductions in deductibles, and company contributed dollars to health savings accounts. 

At companies awarding premium differentials, participation in wellness initiatives is required, according to Ciccotti. And while some companies are awarding them on an annual basis, others are aggressively engaging employees with quarterly rewards. “If you reach a predetermined point total in the first quarter, you receive an insurance discount in the second quarter, and so on throughout the year,” says Ciccotti. 

Slay says Neovia has negotiated breaks in premium hikes with group health insurance carriers when their clients commit to wellness programs. Meanwhile, in a recent Virgin HealthMiles client survey of 750,000 program participants, 88 percent said financial incentives were “critical” in motivating them to use the program, according to Boyce. 

One HealthMiles user, Ochsner Health System, a New Orleans-area hospital organization with 12,000 employees, has saved $3 million in operating costs since 2008 mainly by motivating workers with cash and insurance premium reductions—$2,000 for participants with families and $500 for individuals.  

But Susan Piglia, Ochsner’s director of corporate programs, notes that the organization has the option of awarding gift cards of up to $500 from retailers like Target, Best Buy, and Home Depot through the HealthMiles platform. “We have discussed a travel prize with upper management and HR,” she adds. 

Inspired by Virgin’s Quest Challenge, Ochsner conducts two special point-earning periods each year that feature drawings for incentive awards. In the past, iPads and iPods were used. The organization also conducts monthly events. “We’re constantly coming up with challenges and contests to keep employees engaged and to push them past their health goals,” notes Piglia. “A big factor in our success is the incentives.” 

According to Virgin’s statistics, more than 50 percent of Ochsner’s HealthMiles participants qualified for premium discounts in 2010. The wellness program played a major role in limiting the cost increase of Ochsner’s group health plan to only three percent—greatly undercutting the national average. The program’s participation rate has been 85 percent, and the vast majority of enrollees have maintained or improved their health metrics. 

Charting Program Vitals
All of those who spoke with Incentive agreed that wellness program sponsors should not be satisfied simply with higher participation rates. They need to look at hard health metrics such as average number of provider visits, medical claims, and hospital visits, as well as chronic disease cases. 

Keyes says companies usually fall into two categories of commitment. “On one hand, some just want to get their employees’ attention, then interest, then involvement,” he says, “but getting results is worth a lot more. It depends on how much investment a company wants to put in.” 

If a company is conducting a weight-management program, Keyes says it should be looking at not only whether employees lost weight but whether medical expenses for joint and back pain went down as a result. “We’d look at health risk assessments and medical claim reports.” Alere has the technology to set up medical-claim monitoring for its clients.

Through partnerships with insurance carriers, Neovia can access and analyze its clients’ performance in 70 aggregate data categories, such as hospital bed days and emergency room visits per 1,000 people. “We see companies get better in every category,” Slay notes of wellness program adopters. Neovia’s analytical capability grew out of a beta project it pitched to several insurers and 14 group clients, touting benefits for both sides.

“More and more employers are pushing for that true-dollar impact, the dollar-per-day ROI analysis,” notes Ciccotti. “They want to prove that using wellness programs was a good business decision.” 

But Ciccotti stresses that incentivized wellness programs have intangible results, too. “There are morale and cultural changes. Employees get a greater sense that their company is appreciating and supporting them in getting fit,” he says. “Some people might initially join a program to earn rewards but later learn of life-threatening conditions. Then, they experience the impact of the program on their health—feeling better and more confident—and it becomes a behavioral change. The immeasurable value is the personal awareness the program created.”

At Ochsner, one HealthMiles participant lost more than 100 pounds and was chosen to speak in front of other program participants. “We definitely see a shifting culture,” says Dorothy Cain, Ochsner’s system wellness coordinator and a registered nurse, adding that many employees have been successfully weaned off long-term medications. Piglia reckons, “We’ve come a long way, but we still have lots of ideas for the future.”