Healthcare Intelligence Network

Webinar Replay: Health and Wellness Incentives: Positioning for Outcome-Based Rewards

HIN spoke with Riedel prior to his presentation during the webinar, Health and Wellness Incentives: Positioning for Outcome-Based Rewards. Riedel discussed how the rise in the cap on how much employees can receive in 2014 will impact program participation, how to address those older employees who could have difficulty with outcome-based incentives, and if companies should move toward programs with only outcomes-based rewards.

HIN: The cap on how much employees can either receive as a reward or be penalized is set at 20 percent of the total healthcare premium, or about $1,120 for the average employee. When this limit is raised to 30 percent in 2014, how might this affect participation and adherence, and on the structure of incentive plans overall?

(John Riedel): It’s 20 percent now, going to 30 percent. And for smoking cessation programs it’s going to be at 50 percent. An increase from 20 to 30 percent is not going to make a big difference. Employers are going to have more leverage with their total dollars that they can offer for either incentives or disincentives on the extrinsic side of incentives and disincentives. Certainly, innovative companies are going to find ways to use the additional dollars in creative and unique ways. On the whole, I don’t think it’s going to make a big difference with participation — getting people into programs and keeping them engaged. But I do think it’s important.

One of the issues that we have to contend with is incentives, and extrinsic incentives are important. Keep in mind though that we don’t know much about the same power that extrinsic incentives provide. We know that incentives can get people engaged in programming. They typically do well when you’re trying to get someone involved in a discrete program, like completing a health risk assessment (HRA). Though, we don’t know if incentives have a strong impact on people who are now engaging in healthy behaviors. It’s a complicated relationship and we have to be somewhat cautious in how we look at that.

Also, be careful when talking about outcome-based extrinsic incentives. There are going to be some employees who are typically older and maybe less educated. There could be employees who are higher risk who may have a harder time getting to those incentives, and perceive the incentives in an unfair way. We want to be careful that we don’t alienate people. The whole point is to motivate people.

The amount of the reward is not always a predictor of healthy change. Kevin G Volpp conducted some research on smoking and found that a $750 incentive doubled the number of people in the incentive group in terms of quitting smoking, and that’s a great outcome. But 36 percent relapsed over the longer term, which is significantly higher than usual relapse rates. That’s something we need to take into account. The interesting thing in that research is that they asked the people who actually quit smoking if they would have quit for less money. Eighty-seven percent of the quitters said they would have.

So yes, I think that raising the limit is helpful. The larger incentives you have, the more creative you can get. But at the same time, we don’t know enough about extrinsic incentives to know how that’s going to play out down the road.

HIN: Should companies be moving toward a program of only outcomes-based rewards?

My notion is that it should be built into an overall incentives offering. I know that there are companies who are moving toward outcomes-based rewards and that makes sense. But again, we still don’t know much about the impact of incentives, especially on the moderate to longer term behavior change component. It’s a complex issue and it’s important for companies to keep their options open.

With outcome-only rewards, you may have more of an issue regarding those people who have a harder time getting that outcome. You don’t want to create a non-compliance issue on the part of people who feel that they can’t get where they need to be. Find a way to make the incentive program fair to all. Be creative with using incentives for basic participation and for progressed-based incentives as well as outcomes-based. Create a package; each has advantages. We know that small rewards can be very powerful and have an impact on individuals. So it’s important to keep options open. A good approach when talking about outcome incentives, is to say, “If you do this,” and we lay out the criteria, “this is what you’re going to get in return,” and that makes sense. People want to know what it means for them and what they can do in order to get a certain incentive.

At the same time, in the field of behavioral economics, it’s very interesting. They suggest that sometimes, now that you’ve done this, here’s a reward for you, without letting people know in advance what you’re going to get. There’s a power in that approach as well. In other words, make sure that you provide rewards that employees understand. They know they’re going to get something, but at the same time, try some unique and creative approaches as well.

Progressed-based is important. We’re trying to change people’s behaviors. If we focus only on outcomes incentives, our concern is that when you provide extrinsic incentives — money — people often make a change, but they are often making it for the dollar and not for their health.

Make sure that you create an incentive program that includes simple items — gift cards and t-shirts work in some cases — to help people move along. And then offer outcomes-based incentives for people who are taking their health seriously. Make sure that everyone can get something and make it more challenging as you go down the road.