Being Healthy May Be its Own Reward, But a Little Cash Can Also Help Keep Workers Fit

By Jessica Marquez

Sep. 1, 2005

T wo years ago Sprint found itself at a loss about what to do to stem rising health care costs. After aggressively trying to control the expenses through cost-sharing and changes in its benefits, the company, which has 59,000 employees, had thought it was ahead of the curve: In the previous two years, Sprint had managed to avoid $90 million in health care increases. But before there was time to celebrate, Sprint’s benefits team discovered that the company was still facing a $45 million to $50 million annual increase in health care costs if it didn’t do more.

    “If we did nothing, it would have meant that our salespeople were going to have to come up with $500 million more in revenue,” benefits manager Collier Case says. “That was significantly higher than the 12 percent growth rate for our industry.” Case knew that the only way to address the rising costs was to go to the root of the problem and get employees to adopt healthier lifestyles. It would mean taking more drastic action than just having fitness centers on company grounds, which Sprint already did. Case realized that only people who already were health-conscious would go to the gym. The trick would be to encourage other groups of employees to be healthier.

    Case and his team went to work on a wellness program, devising one in which employees would take health risk assessments, either online or on paper, and would receive follow-up calls discussing any conditions or potential risks found. To increase participation, Sprint gave every employee $45 to take the assessment. Additionally, the company raffled off 25 $500 American Express gift cards to employees and dependents who took the assessment.

    Sprint is one of a growing number of companies that are realizing that simply offering wellness programs is not enough to change employee behavior. As more CFOs and CEOs put pressure on benefits managers to reduce health care expenses, wellness programs are evolving from a nice employee perk to a tool that employers use to pare costs, says Jack London, executive director of patient advocacy at Apex Management Group, a health care consulting firm based in Las Vegas and Princeton, New Jersey.

    The problem with merely offering wellness programs is that the employees who typically participate are those who are already healthy, says Bruce Kelley, a senior consultant at Watson Wyatt Worldwide. Employees who are obese or who smoke often do not want to get a health risk assessment only to be told that they have to change their lifestyles. But these are the very employees that companies most want to reach. They are key to reducing the company’s health care costs. And that’s where the incentives come in, Kelley says.

    By offering incentives, employers hope that more of the smokers, the overweight and the chronically ill employees will participate in their wellness programs. “These programs have completely changed in nature,” Kelley says. “They now are more focused on targeting the higher-risk population and bringing effective solutions to those groups.”

    Delta last year began raffling off gift certificates and full-year paid health premiums to employees who signed up for an online health risk assessment. The effort came after the Atlanta-based airline realized that a small number of employees were driving the majority of the company’s health care costs, says Lynn Zonakis, director of health strategy and resources at Delta.

    “We saw that one-tenth of a percent of participants were responsible for 10 percent of our health care costs and that 1.4 percent was responsible for nearly 33 percent of our cost,” she says. By offering incentives for its wellness program, Delta hopes to get that small group of high-risk employees into its program as the first step in living healthier lives.

Creating incentives
While Sprint saw 40 percent of employees sign up for a health assessment, it wants to do more to reward long-term behavioral changes, Case says. Sprint is considering offering incentives to employees who take action to address unhealthy behavior. For example, the company might give cash to employees who participate in an exercise program. Sprint hopes to save $2 in health care costs for every $1 spent on wellness by 2007.

    Zonakis agrees that providing cash to employees for taking health risk assessments won’t change behavior in the long term.

    “Just paying $100 for a health risk assessment doesn’t take it to the next step,” she says. The airline last year had its first raffle, awarding 50 $50 gift certificates and four full-year paid health premiums. In response, 6,384 of its 52,000 employees participated.

    Rather than just entering everyone who had a health risk assessment, only those participants who agreed to an analysis of the results and follow-up could participate in the raffle. Any participant whose results indicated that there was even a moderate risk of a health problem would be contacted by a nurse to discuss how they could improve their health, Zonakis says.

“The nice thing about cash incentives versus a discount is that when you do an exercise program and get cash, there is an immediate reward. That is behaviorally more motivating.”
–Craig Weber, director of
well-being services and
clinical care initiatives at IBM

    The program cost $18,509, well below what it would have cost if the company gave $100 to each person who took a health risk assessment, she says. “By only offering incentives to those participants that allow their results to be analyzed, we feel the program is more meaningful,” she says.

    Delta’s health care costs are currently $5,208 per employee annually. The airline’s goal is to keep its cost increases below 5 percent per year. If Delta can keep health care costs flat this year, as it did last year, it might begin offering reductions in premiums to employees who sign up for the assessment, Zonakis says. She says that the company’s wellness program has helped keep health care costs down, but it’s too early to say by how much.

    Craig Weber, director of well-being services and clinical care initiatives in the Americas for IBM, says his company has decided against offering premium discounts because cash can often be a more effective motivator. IBM, which has had wellness incentives since 2003, started out offering prizes such as pedometers, books and towels to participants in its various fitness challenges.

    But last year, the company decided to change its strategy and began offering a $150 cash rebate to employees who participated in one of the company’s physical activity programs. Participation rates jumped from about 10,000 employees to 100,000, Weber says. “The nice thing about cash incentives versus a discount is that when you do an exercise program and get cash, there is an immediate reward,” he says. “That is behaviorally more motivating.”

    Dell, which launched its wellness program in the fall, tied a cash incentive to plan participants’ medical expenses. Any employee or dependent who takes a health risk assessment can earn $50, which goes into a health reimbursement account. These accounts are set up by employers to reimburse employees for qualified medical expenses.

    Employees are invited into a follow-up program to address any risks or potential risks identified in the assessment. Employees who participate in those programs can earn up to $200 a year for their health reimbursement accounts.

    “We chose to offer incentives through the health reimbursement account instead of just giving them cash because we wanted to tie in the cost of healthy behavior to employees,” says Tre McCallister, manager of health and welfare programs at Dell. “Also, it was much easier from an administrative point of view.”

The stick approach
Most managers would rather reward good behavior than punish bad behavior, but with health care costs so high, some companies have taken a harsher stance. Most notable is Weyco, an Okemos, Michigan-based health plan administrator with 200 employees. It made headlines last year when it announced that it would fire workers who were smokers. CEO Howard Weyers defends the company’s stance on smoking, noting that Weyco started out offering incentives but did not get the results it wanted. Also, Weyco gave employees months of notice before it began implementing the program, Weyers says.

    Eight years ago, long before wellness programs were fashionable, Weyco began offering a plan in which employees could earn cash for taking steps toward good health. An employee who took a health risk assessment would get $45 per month toward a health club membership. The program, which is still in effect, offers $105 per month for various healthy behaviors, including not smoking.

    But in 2003, Weyers decided that the company needed to do more to stop unhealthy behavior, particularly smoking. When he learned that there was no Michigan statute preventing an employer from banning employees’ use of tobacco, he implemented a new program: Prospective employees would have to be tested for smoking before they were hired.

    A few months later, the company banned the use of tobacco on company property. Finally, starting this year, Weyco implemented a policy requiring all employees to be tested for smoking. If they tested positive, they would lose their jobs. Four people refused to take the test and left the company.

    Weyers says that if he is going to pay for his employees’ health care, he should have the right not to hire smokers. Weyco pays $330 per participant in monthly health care costs, up from $300 a few years ago. “The fact is the incentives weren’t working,” he says. “Anybody who emphasizes health in the workplace is going to get push-back, I don’t care who it is. Some people say I used a baseball bat, but I say I used a fly swatter.”

    For now, most companies are going to continue with positive incentives, if only because it is administratively difficult for companies to ensure compliance with programs such as Weyco’s, says Delta’s Zonakis. The Weyco approach also runs counter to Delta’s culture, she says.

    Sprint has adopted a kind of negative reinforcement: It charges smokers higher health premiums than nonsmokers. On the other hand, any participant who is a nonsmoker or signs up for Sprint’s smoking-cessation program gets a 6 percent discount in health plan premiums.

    Now the company is looking at extending that program to reward other healthy behaviors. For example, Sprint could provide discounts to employees who participate in exercise programs. “We want to move beyond singling out smokers,” Case says.

Workforce Management, September 2005, pp. 66-69Subscribe Now!

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