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THE ROLE OF FINANCIAL INCENTIVES IN DRIVING EMPLOYEE ENGAGEMENT IN HEALTH MANAGEMENT

Anderson, David R. Ph.D.; Grossmeier, Jessica M.P.H.; Seaverson, Erin L. D. M.P.H.; Snyder, Don M.P.A.

ACSM's Health & Fitness Journal: July-August 2008 - Volume 12 - Issue 4 - p 18-22
doi: 10.1249/FIT.0b013e31817bf643
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LEARNING OBJECTIVES • The purpose of this article is to demonstrate that (1) the use of incentives for health assessment participation is a recommended element of worksite health management programs, (2) financial incentives are superior to nonfinancial incentives, (3) integration of incentive strategies within a health plan design is an innovative way to reduce the organizational cost of an incentive while increasing the perceived value to employees, and (4) a supportive organizational culture and effective communication strategy may increase the effectiveness of incentives in driving participation.

This feature provides evidence that fi nancial incentives are an effective way to increase health assessment participation in employee populations, particularly when incentives are integrated into employee health plans.

David R. Anderson, Ph.D., is vice president of Program Strategy & Development for StayWell Health Management, where he has led strategic research and development initiatives since 1985.

Jessica Grossmeier, M.P.H., is director of research at StayWell Health Management. She provides primary oversight for process, impact, and outcomes studies for self-insured employers, managed care organizations, and other providers. Ms. Grossmeier is a member of the Northland chapter of the American College of Sports Medicine (ACSM) and has presented at past ACSM conferences.

Erin L. D. Seaverson, M.P.H., joined StayWell Health Management in 2005 as a senior analyst with more than 6 years of experience as a public health epidemiologist. She serves as research manager and lead analyst for impact and outcome studies and is a member of the Northland chapter of ACSM.

Don Snyder, M.P.A., is the director of Global Benefits & Health Services at Alcon Laboratories, Inc. He is responsible for the oversight of employee benefits, workers' compensation, disability management, occupational health, wellness, and the company medical clinic. He also provides design review for benefits programs around the world.

With health care costs continuing to rise despite two decades of containment efforts focused on the provision and price of health care services, employers are turning to health management and other employee-focused strategies to try to bring their costs under control. Although worksite health management programs have been shown to be effective in improving employee health and having a beneficial impact on health care costs (1,2), there is consensus on the need to motivate more employees to participate in such programs (3).

Incentives are a promising tool for increasing employee engagement in worksite health management programs. A recent survey by Mercer Health & Benefits (4) indicates that 17% of businesses with 500+ employees and 23% of businesses with 20,000+ employees used incentives to encourage employee participation in health assessment (HA) initiatives. In the past, these incentives were either tokens (e.g., hats, t-shirts, water bottles) or small monetary rewards (e.g., $25 checks). However, more substantial financial incentives are beginning to be used to engage employees in health management programs.

Incentives have played a vital role in driving awareness and participation in worksite health management programs for many years, and their use is commonly cited as an element of "best practice" programs (5-7). The growing popularity of incentives for health program participation has led practitioners to ask how the type and monetary value of incentives affects program participation rates. Most experts agree that financial incentives are the most effective incentive. Specific financial incentives have included cash and "cash equivalents" such as gift cards, debit cards, and rebates (Table 1).

TABLE 1

TABLE 1

Photo courtesy of Mather LifeWays

Photo courtesy of Mather LifeWays

In recent years, some employers have opted to integrate incentives into employee health plan designs through reductions in health plan premiums or contributions to health reimbursement accounts, flexible spending accounts, and health savings accounts (3). Incentive value has received much less attention in the industry literature, but recently published studies suggest that there may be a threshold ranging from $100 to $150 beyond which increasing incentive values begin to have less impact on participation (3,8).

This study was conducted to better understand the role of incentive type and financial value on HA participation. This analysis focused on HA participation because HAs often serve as a gateway and recruitment tool for further health management program engagement and because this is the most widely used financial incentive strategy across most worksite health management programs.

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STAYWELL INCENTIVE STUDY

The study's intention was to replicate and expand upon a previous study that explored various strategies for engaging employees in worksite health management initiatives (8). Although incentives have evolved into a core engagement strategy, high incentive values for HA participation may impact the overall cost-effectiveness of health management programs. Accordingly, it is important to better understand what incentive monetary value yields the greatest benefit and which financial incentives are the most effective.

The analysis included data from 36 employers (n = 559,988 employees), representing primarily large companies across a broad range of industries including finance, services, retail, manufacturing, utilities, and mining. To be included in the analysis, the employer must have offered a financial incentive to employees specifically to encourage the employee to complete the HA. None of the companies included in the analysis mandated participation in the HA; participation was voluntary. Companies were excluded from the analysis if they required both the employee and covered dependent to complete the HA to earn an incentive or if they required participation in both HA and follow-up health improvement programs to earn the incentive. Generally speaking, employees were eligible to participate in the HA based on employee status and/or eligibility for employer-sponsored health care benefits.

Photo courtesy of Mather LifeWays

Photo courtesy of Mather LifeWays

Information on incentive design and HA participation was collected through StayWell standard reporting and confirmed by program managers assigned to each client. Using this information, researchers plotted participation rates by incentive value and computed weighted averages for participation by incentive type.

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STUDY FINDINGS

Of the 559,988 employees who were eligible to take the HA across the 36 companies represented in the sample, 49% (n = 275,100) participated in the HA. The impact of incentive value on HA participation rates across the 36 companies was explored using regression analysis, with a series of regression models (e.g., linear, polynomial) being applied to determine which best described the relationship between incentive value and participation rate. Because the primary research objective was to describe the impact of incentive value on participation as accurately and usefully as possible and no single regression model best fit all the data, the final step in the analysis was to plot a "blended" curve through the various regression plots to achieve a single curve that best fit the participation rate data along the entire range of incentive values. This blended curve is presented in Figure 1.

Figure 1

Figure 1

The greatest rate of improvement in HA participation occurred in the range of incentive amounts up to about $100 (Figure 1). On average, a $100 incentive drove HA participation rates up to the 50% to 60% range, a $200 incentive drove participation closer to 65%, and incentives valued at $400 increased participation up to the 80% range. A study conducted several years ago determined that a $100 incentive yielded a participation rate of about 75% (8). These new findings suggest that a higher incentive amount is necessary to achieve the same participation rate. In addition, the average value of incentives being used has increased over the years, with maximum values reaching well over $500.

The incentive these employers used also was strongly associated with participation rates. This study compared three broad categories of financial incentives: noncash, cash, and benefits-integrated. Examples of noncash-based incentives include duffle bags, t-shirts, and DVD players, whereas cash-based incentives are actual dollars or a cash equivalent such as gift certificates. Health plan premium reductions were the most popular form of benefits-integrated incentive designs used by companies in this study sample, but other examples include contributions to employee health savings accounts or health reimbursement accounts.

Noncash/token-based incentives had nominal monetary value, generally less than $25, and resulted in an average participation rate of less than 40%, which was much lower than participation rates for either cash equivalent or benefits-integrated incentives (Table 2). Cash-based incentives ranged from approximately $25 to $100 in value and resulted in an average participation rate of about 45%. Conversely, financial incentives integrated into a health plan design generally had the highest monetary value, ranging from $50 to $600, and also yielded the highest participation rates.

TABLE 2

TABLE 2

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NO MAGIC FORMULA

Although financial incentives can play an important role in driving participation in health management activities, Figure 2 illustrates wide variation in HA participation at most incentive values. For example, at an incentive value of about $150, HA participation rates ranged from less than 40% to nearly 80%, whereas a minimal $5 incentive was linked to a 50% participation rate. These examples clearly illustrate that factors other than incentive value are at play in determining participation rates. In addition to the role of employee demographics, two additional factors can profoundly affect the success of an incentive regardless of financial value. These factors include how the incentive is communicated to the eligible population and the culture of the organization. The authors are pursuing future research to quantify the impact of these "no-cost" factors relative to the impact of financial incentives on health management program engagement. For now, anecdotal evidence, such as the case study of Alcon Laboratories, Inc, demonstrates how combining integrated incentives with comprehensive communication and a supportive organizational culture can achieve best practice participation rates.

Figure 2

Figure 2

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WHAT IS A COST-NEUTRAL INCENTIVE STRATEGY?

A cost-neutral incentive strategy reallocates rather than adds costs to the employer's health budget. The vehicle is typically the health plan. Although quite simple in design, this strategy may be challenging for some organizations to implement quickly. For example, union contracts usually require such design changes to be negotiated in a future contract. Although requiring skillful communication, a cost-neutral incentive strategy can be positioned in a positive way and powerfully convey the message to employees that their personal health care costs are linked to their everyday lifestyle choices and decisions. In addition to reinforcing the link between lifestyle choices and health care costs, there also are financial advantages to using this strategy (Table 3).

TABLE 3

TABLE 3

As an example of a cost-neutral strategy, suppose an employer wants to use a $200 incentive for HA participation through health plan "premium discount," and assumes this incentive amount will yield a 65% participation rate (currently about average for a $200 incentive). The average annual employee contribution would need to be increased by $130 (i.e., $200 times 65%) to capture the dollars to exactly cover the cost of the incentive. In practice, most employers will probably choose to increase contribution rates by different amounts for different levels of coverage (e.g., employee-only rate by $100 and employee plus family rate by $175, with 60% of employees have family coverage) to get to the overall average of $130 per enrollee.

In the previous example, the incentive would be cost neutral only if the participation rate is 65%. If participation were higher, the employer's costs would increase; and if the participation were lower, the employer would save money. However, these marginal cost variations would be small relative to the overall yield.

Employers typically work with their health plan providers or consultants each year to set employee premium contribution levels for the coming year, and there is usually some increase in these rates each year. The additional amount collected to fund the incentive would be added to any other increase the employer is planning. The positive message to employees, however, is that they can reduce their annual contribution by $200 (or some other incentive amount) by participating in relevant components of the health management program.

An effective communications effort can help employees understand that by participating in the health management program as required to earn the incentive, they are holding down both their health care costs and the company's costs.

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BEST PRACTICES CASE STUDY: ALCON LABORATORIES, INC

Setting

For the past 9 years, Alcon Laboratories, Inc. (Alcon) has been one of Fortune magazine's "100 Best Companies to Work For." The company has about 12,500 employees who work at locations across the United States and 75 foreign countries. Alcon recently designed and implemented an integrated health management program called, My Health-ENJOY! Major components of the program include HA, onsite biometric screening, targeted behavior change, disease management, nurse line, self-care, mental health, care coordination, and onsite and virtual fitness centers.

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Goal

Because the HA serves as a baseline evaluation of population health status and an important device for ongoing program evaluation and targeting employees and spouses with appropriate follow-up health improvement programs, Alcon set the ambitious goal of engaging all of its 6,000 domestic employees and 4,600 benefits-eligible spouses to participate in the HA program. They also wanted to engage at least 30% of the HA participants in targeted behavior change programs.

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Strategy

To encourage participation, Alcon integrated the My Health-ENJOY! program into their health plan. All employees and their covered spouses were required to complete an HA to be eligible for the premier EPO or PPO benefit plan. This plan represented a richer, more comprehensive health plan. If an employee or their covered spouse failed to complete the HA within a specified enrollment period, they were defaulted to a basic plan that offered less coverage and higher out-of-pocket costs. To encourage participation in preventive health improvement programs, Alcon added another incentive. For employees who participated in health behavior change programs, Alcon deposited up to $200 in a health reimbursement account. To receive the additional incentive, both employees and covered spouses had to complete one of two programs within a specified time. These options were to participate in a telephonic health coaching program if they were eligible or to track their physical activity on a virtual fitness Web site for 20 minutes at least three times a week for 10 out of 12 consecutive weeks.

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Results

In the first year of the program, 97% of eligible employees and covered spouses initiated participation and eligibility for the preferred health plan by completing an HA. When the same opportunity was offered the following year, 95% of eligible employees and spouses repeated the HA. A 40% participation rate in targeted behavior change programs also exceeded the goal of 30%. These high participation rates resulted in significant risk reduction for Alcon's population. The My Health-ENJOY! program demonstrated an 11% decrease in the average number of health risks for the population after only 1 year of implementation.

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SUMMARY

This study provides evidence that financial incentives are an effective way to increase HA participation in employee populations, particularly when incentives are integrated into employee health plans. Incentive values of $200 to $600 are associated with the highest HA participation rates, and benefits-integrated designs may be the only cost-effective way to offer incentives of this magnitude. However, the use of incentives alone may not yield the participation rates demonstrated in this study. Additional research is needed to identify and quantify the role of other factors such as communications and culture on HA participation. Furthermore, this research must be expanded to consider the impact of incentives on participation in and completion of follow-up programs, as well as mediating behavior change. Much more research is needed for researchers and practitioners to adequately understand the role of incentives in achieving health promotion goals.

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CONDENSED VERSION AND BOTTOM LINE

Financial incentives have a positive impact on HA participation rates, particularly when they are integrated into an employer's health plan design.

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References

1. Aldana, S.G. Financial impact of health promotion programs: a comprehensive review of the literature. American Journal of Health Promotion 15(5):296-320, 2001.
2. Pelletier, K.R. A review and analysis of the clinical and cost-effectiveness studies of comprehensive health promotion and disease management programs at the worksite: update VI 2000-2004. Journal of Occupational and Environmental Medicine 47(10):1051-1058, 2005.
3. Serxner, S., S.P. Noeldner, and D. Gold. Best practices for an integrated population health management (PHM) program. American Journal of Health Promotion, The Art of Health Promotion 20(5):1-10, 2006.
4. Mercer Health & Benefits. National Survey of Employer-Sponsored Health Plans. 2006.
5. Goetzel, R.Z., A. Guindon, L. Humphries, et al. Health and Productivity Management: Consortium Benchmarking Study Best Practices Report. American Productivity and Quality Center International Benchmarking Clearinghouse, July 1998.
6. Health Enhancement Research Organization (HERO). Employee Health Management Best Practice Scorecard. 2006.
7. O'Donnell, M.P., C.A. Bishop, and K.L. Kaplan. Benchmarking best practices in workplace health promotion. Art of Health Promotion 1(1):1-8, 1997.
8. Serxner, S., D.R. Anderson, and D. Gold. Building program participation: strategies for recruitment and retention in worksite health promotion programs. American Journal of Health Promotion, The Art of Health Promotion 18(4):1-5, 2004.
Keywords:

Motivation; Worksite; Health Assessment; Participation; Health Promotion

© 2008 American College of Sports Medicine