Is a wellness incentive money well spent?

That depends on what you want to achieve and how you structure the incentive. Here are guidelines and actual employer experiences in maximizing the impact of worksite wellness programs.


Is a wellness incentive money well spent?

That depends on what you want to achieve and how you structure the incentive. Here are guidelines and actual employer experiences in maximizing the impact of worksite wellness programs.

By William Atkinson

Jump to:Choose article section... Incentive planning Quaker Oats Providence Everett Medical Center Ante up for wellness The legal ins and outs of wellness incentives

In theory, good health should be sufficient reward for participating in worksite wellness programs, but this is an imperfect world. Most employees need something more tangible to focus special attention on monitoring and improving their health. "Typical participation rates in health enhancement programs that do not offer special incentives tend to be quite low," reports Wendy Lynch, principal and senior consultant in health productivity management with William M. Mercer Inc. in Denver, Colo. "It seems that, as busy as people's lives have become, most of them don't want to add one more thing to their 'to do' lists."

Many employers agree. Surveys by Hewitt Associates of Lincolnshire, Ill., show that 40 percent of employers currently offer incentive-based wellness programs compared to 29 percent in 1994.

Why? "Without an incentive component, you can expect limited participation," suggests Ron Burt, manager of prevention services for Providence Everett Medical Center in Everett, Wash. "Some companies may claim to have 50 percent participation in their nonincented programs, but they define participation as someone showing up to one 'brown bag' lunch seminar a year. By offering incentives, we have a very real and active 55 percent participation rate. Without incentives, I estimate we would only have a 10 percent to 15 percent participation rate."

"Before we began offering financial incentives, about half of our eligible workforce signed up for our health risk appraisals," adds Joan Cantwell, manager of welfare and wellness programs for Quaker Oats in Chicago. "Since offering incentives, about 82 percent of eligible employees participate."

"With health care costs rising as they are, it is not a question anymore of whether to use incentives, but how to use them," states David Hunnicutt, PhD, president of the Omaha-based Wellness Councils of America. "Incentives are a part of getting people to adopt healthier behaviors and to do more to manage their own health."

Incentive planning

What is the best way to go about offering incentives to employees to participate in wellness programs?

1. The first step is to build the incentives around the company culture. Hunnicutt sees three basic cultures: In a "network" culture, people matter more than outcomes, so he recommends offering humanistic incentives that can range from T-shirts to extra time off. A "mercenary" culture values outcomes over people, and therefore responds to bottom-line-based incentives. A "communal" culture mixes the two sets of values, says Hunnicutt, and needs a fuller range of incentives.

Lynch agrees with the importance of assessing culture. She recalls one municipal employer that offered time off from work for participating in its wellness program, but notes that "if you were to offer this same incentive to employees in a high-tech company who already work long hours and never even take their vacations, it would be considered an insult."

2. Most employers find that "cash is king," whether it's actual greenbacks or credits toward gifts or payment of benefits. The main reason is obvious: Everyone wants money! Not everyone wants the best parking spot for a month. "Your goal is to reach out to all employees, especially those who are not already committed to improving their health," explains Camille Haltom, health care consultant with Hewitt Associates, and "monetary incentives tend to be very effective."

3. Regardless of the incentives you use, beware of what Hunnicutt calls "unintended artifacts"—negative consequences you did not anticipate. Example: "I know of situations where employers announced that they were going to offer cash to smoking employees who agreed to attend a smoking cessation program," he states. The result: "A number of employees started smoking so they could become eligible to participate in the program."

Shelley Farnell, senior health education consultant for Capital Blue Cross in Harrisburg, Pa., reports an unintended artifact of a competition among departments to see which group could lose the greatest total amount of weight. "The first problem is that rapid weight loss is not healthy," she notes, "and the second is that, once the contest is over, employees will probably just gain it all back again, which is also unhealthy."

4. Set realistic expectations for employee behavior. While you might one day see a sedentary junk food eater transformed into a triathlete, a more realistic goal is to have the majority of employees take "baby steps" toward better health.

Look for movement along the five steps of the "behavior change" continuum. Using the example of smoking cessation:

  • People in the precontemplation phase have never thought about quitting smoking.

  • Those in the contemplation phase have at least thought about it.

  • They make a commitment in the preparation phase.

  • In the active phase, they are trying to quit or have tried to quit before but not succeeded.

  • When they have quit and have stuck with it, they're in the maintenance phase.

"A realistic goal for a wellness program is to move employees from one step to the next, not necessarily from the first step to the fifth," states Farnell. For example, if you are able to move someone in the precontemplation phase to contemplation, that person is still smoking, but is at least theoretically closer to quitting.

Lynch agrees: "If your incentive program is successful in motivating employees to take preliminary steps toward health improvement, such as participating in a health risk assessment or screening, this has value." First, it improves their readiness to take future steps. Second, it will help identify employees who require follow-up attention and encouragement to take appropriate steps.

Finally, being realistic means "you cannot assume that, if you just offer enough money, everyone will participate," cautions Lynch. Just accept the fact that some employees will never participate in any way, shape or form.

One of the most popular wellness incentive structures offers "points" for participation. Farnell is a proponent: "This allows flexibility to the degree that each employee can select what he or she considers valuable," which might be cash, prizes or even time off.

When setting up a point program, "stack the deck" by offering the least points for popular programs and the most for less popular but valuable programs. "If you're going to offer classes in massage, feng shui, aromatherapy and acupuncture, consider offering one point, because people will probably show up anyway," suggests Farnell. "However, if you plan a program on medical consumerism, which can be challenging for employees but will provide a lot of positive results for you if they participate, consider offering 10 or 15 points."

Quaker Oats

Quaker Oats, with 6,000 employees nationwide (plus 7,000 worldwide, not eligible for program), is a longtime leader in incentive-based wellness programs. "We have been offering a number of health promotion programs since 1983," reports Cantwell. "These include health risk appraisals, lunch and learn seminars and fitness programs."

In 1993, the company introduced a flexible benefits program that gives employees "universal credits" for purchasing health insurance, life insurance, vacation days and other benefits. During focus groups in the program design phase, some employees suggested adding "healthy lifestyle credits" that would work the same way. "It was an excellent idea," states Cantwell.

Here's how it works: The wellness program is voluntary, and there is no penalty for not participating. Any employee who is eligible for the flexible benefits program can participate (That's about 75 percent of the workforce, with the rest excluded by union contracts or other negotiations.), even if that employee is not signed up for the company's health insurance. Spouses can also sign up for the wellness program if they have the health insurance.

Each employee and spouse can earn up to $300 in credits, for a total of $600 per family that can be used to pay for benefits. "If a family does not need all of the $600 for benefits, they can receive the remainder back in cash on their paychecks," states Cantwell.

Participants can earn $100 in credits for participating in the company's health risk appraisal (a comprehensive, confidential lifestyle questionnaire administered by a third-party provider). They can also get $50 in credits for participating in the company's health screening (blood pressure, cholesterol, and weight).

Finally, they're entitled to $50 in credits for taking each of three lifestyle pledges:

1. I will not misuse or abuse alcohol, drugs or prescription medications.

2. I have not used any tobacco products in the last six months and will not use them in the future.

3. I will follow the American College of Sports Medicine recommendations for exercise (30 minutes a day of moderate activity five days a week or 20 minutes a day of more aggressive aerobic activity three days a week).

Employees are on the honor system, and Quaker Oats is comfortable with the results. "Approximately 90 percent of the eligible employees take the first pledge," she notes. "About 80 percent take the second, which is in-line with statistics we have seen stating that about 80 percent of the general population does not smoke."

Results of the overall program? "Research conducted by a third-party medical claims company shows we are paying far less than the industry norm in lifestyle-related health care claims," replies Cantwell. "Their research also projects that our employees in the program who have moved from the high-risk category to the moderate- or low-risk category are saving us about $2 million annually."

Providence Everett Medical Center

When this health care facility launched its "Wellness Challenge" 10 years ago, its goals were to improve employee health, improve recruitment and retention among its 2,800 employees and encourage them to be wise health care consumers.

There are 10 criteria related to such issues as exercise, blood pressure, smoking, seat belt use, nutrition, injuries, absences for illness and usage of health care. Employees who meet eight of the 10 criteria receive a $250 cash bonus the first year, $275 the second year and $325 the third year and beyond. There's also a "nice try" bonus of $50 for employees who meet four to seven of the criteria.

The hospital offers sign-up incentives as well, especially for health risk assessments. "Then, to maintain interest throughout the year, we offer other bonuses, such as T-shirts, sweatshirts, jackets or executive bags," says Burt. The hospital also schedules events that feature giveaways or drawings for cash, gift certificates and other prizes. All of these efforts draw about 55 percent of employees into the program, Burt reports.

Results? Providence Everett Medical Center, which is part of a larger health care system, has had the lowest health care costs per employee in the network for the last 10 years. "We saw an average of 28 percent reduction in health care costs our first four years," he adds.

Since some of the components deal with performance on the job (being injury-free, not being absent for health reasons, etc.), the facility has also seen a reduction in workers' compensation costs. "Employees who participate in the program have 83 percent less workers' compensation cost than those who do not participate," reports Burt.

Overall, Burt estimates a three-to-one return on investment for the total cost of the wellness program. "The ROI is obviously much greater on just the cost of the incentive component alone."

Ante up for wellness

Shelley Farnell of Capital Blue Cross in Harrisburg, Pa., recalls one company that actually got its employees to pay to play: "They purchased a number of decks of playing cards and removed all of the aces of spades except one." Each employee attending a wellness program paid one dollar to receive a card. Anyone who drew the ace of spades would receive all of the money in the pot. No one got the ace during the first program, which was specifically chosen to have broad appeal. Over the course of the year, the programs became more challenging but of more value to the employer, yet employees continued to show up in record numbers as the pot increased. "The last session was a 'self-care' program," she states. "The pot had risen to $6,000, and the program was standing room only."

The legal ins and outs of wellness incentives

One common question about incentive-based wellness programs is: Should you pay for participation or for results? If you elect the latter, there are some HIPAA regulations you must consider, cautions Mark Major, senior attorney and principal with William M. Mercer in Denver. "Group health plans cannot discriminate with respect to employee eligibility or premiums on the basis of health status factors," he states, but "employers may implement a 'bona fide wellness program,' also called a 'program of disease prevention or health promotion' without being in violation."

There are four criteria for a bona fide wellness program:

1. Any incentive, reward or discount cannot exceed a fixed percentage of the planned cost of the employee's health coverage for the year. "Regulators are still looking at this, but the percentage will probably be somewhere between 10 percent and 20 percent," reports Major.

2. The program must be reasonably designed to promote health and prevent disease. Part of this requires that employees be able to earn whatever incentives are offered within one year. Another part requires open enrollment in the program at least once a year.

3. The rewards must be available to "similarly situated employees." Another term for this is "bona fide employment-based classification." For example, you may legally allow full-time employees to participate but exclude part-time employees. You may also classify by length of service and disallow new (probationary) employees from participating.

When it comes to something like a smoking cessation program, though, you must have an alternative standard of success for people who cannot comply with your behavioral objectives due to a medical or physical condition. "Smoking is considered an addiction, so it is a medical condition," explains Major. "As such, if you offer an incentive to quit smoking, you must offer an alternative standard of success so that smokers can have access to the reward on an equivalent basis." An example here would be allowing all participants to be eligible for the reward simply by completing all of the weeks of the program, even if they don't end up quitting smoking.

4. Finally, the alternative standard of success must be disclosed to the same extent as the general standard of success.

Is it a good idea to incent employees with reduced health care premiums or lower deductibles? Many experts believe this is one of the best incentives. "I see it starting to happen that employers are offering reductions in their health care premiums," states Wendy Lynch of William M. Mercer in Denver. "Doing so makes a statement of how seriously you consider health improvement."

David Hunnicutt of the Wellness Councils of America in Omaha agrees, and is even more emphatic: "About 20 percent of employees participate in health risk assessments, screenings and health promotion programs when they are offered," he states. "That leaves 80 percent who do not. However, 10 percent of the population contributes to 80 percent of the health care costs. I believe we will get to the point where participation in benefits plans will be linked to participation in health promotion programs. In other words, if you want to sign up for health insurance, you must participate in health risk appraisals, health screenings and health promotion programs."

William Atkinson has been a freelance business writer for 25 years, specializing in workplace safety and health.


William Atkinson. Is a wellness incentive money well spent?. Business and Health 2001;5:23.