More Carrot Than Stick

Pronk advises client organizations to begin any wellness program with a carrot-based approach and to consider moving to a stick approach only if they begin to see diminishing returns from their incentives. “The focus on behavior generates an enormous amount of positive impact,” he says. A good wellness program targets four key lifestyle choices that impact an employee’s health, including excessive drinking, smoking, physical inactivity, and poor nutrition. “You can do an enormous amount of improvement across a group of people when you just look at those four factors,” he says.

As an alternative to an outcome-based approach, some organizations charge employees different amounts for health insurance depending on whether or not they participate in a wellness program. Medtronic, a Fridley-based medical equipment manufacturer, saw its participation rate nearly double when it began offering employees $50 in exchange for taking an annual health risk assessment—and increasing the insurance rates by $50 for those not taking the assessment.

“Our participation rate went from 40 percent or 45 percent to 90 percent in six months,” notes Gen Barron, manager of U.S. health and wellness for Medtronic.

The new insurance-focused incentive program lets employees earn up to $100 a year toward a health reimbursement account for participating in coaching programs, for exercising regularly, and for other healthy behaviors. “There are hundreds of different activities and ways people can get points,” Barron explains.

About 8,000 of Medtronic’s 23,000 eligible employees are now working with a health coach, and 55 percent of those have improved or eliminated at least one health risk, Barron says. “We had one individual who was diabetic who lost 130 pounds and is not considered diabetic any more.”

Despite such successes, however, sources say wellness incentive programs typically do not have an immediate financial payoff for the employer. Because a health risk assessment may identify previously undiagnosed conditions, “often for the first year or two we see an increase in health care plan costs,” Eskedahl says. By around the third year, however, a company should begin to see financial gain, says Sharon Stein, a vice president for JourneyWell.

“That’s based on medical care cost savings,” Pronk adds. “That doesn’t include the productivity savings, which tends to be three to four times as large.” Productivity savings may include a reduction in absenteeism, as well as a more nebulous phenomenon known as “presenteeism,” which gauges the extent to which employees are present at work, but not working as productively as they could be. Productivity may suffer because an employee is not feeling well, often due to ongoing health concerns such as those targeted by wellness programs. The impact of presenteeism is typically measured through anonymous surveys of employees, which tend to show that productivity improves for employees who make progress in a wellness program.