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Incentives Provide an Rx for the Healthcare Industry

As health and wellness become key corporate priorities, the role of incentives expands

The healthcare industry is waking up to what Corporate America realized decades ago: Incentives help promote desired behaviors, foster engagement, instill loyalty, achieve business goals and reduce costs.

Until now, incentives have been a mainstay in pharmaceutical and medical equipment sales. But this is now changing as incentives are proving to be a valuable strategy across the entire healthcare spectrum. A recent PriceWaterhouseCoopers study revealed that 80% of CEOs at large companies believe incentives are the most promising tool to reduce healthcare costs. And they’re stepping up to the plate to prove it. The 2007/2008 Staying@Work survey of 355 large employers by Watson Wyatt and the National Business Group on Health found that 46% of employers currently offer incentives to encourage workers to monitor and improve their health or plan to in 2008. By 2009, that number is expected to surpass 70%.

A handful of companies, including IncentOne, Incentive Logic and Maritz, are making inroads educating employers about the far reaching benefits of incentives to promote healthy behaviors, engage consumers to actively participate in the administration of health benefits programs, encourage financing of their healthcare and utilize personal health assessment programs.

Wellness Initiatives

While there are numerous healthcare-related behaviors that can be influenced using incentives (see below), wellness initiatives top the list in the current market. “Looking ahead a few years, incentives will play a huge role in the way consumers manage their healthcare funds, including enrollment and investment in Health Savings Accounts to help pay for current incremental healthcare expenses and to prepare for healthcare funding in retirement,” says Roger Hackett, President of Scottsdale, AZ-based Incentive Logic. “But right now companies are most interested in how wellness incentives can improve the health of their employees and help lower costs across the board.”

Hackett referred to recent research by the Milken Institute showing that the seven most common chronic diseases – including diabetes, heart disease and high blood pressure – are costing employers $1.1 trillion in lost productivity. “It’s almost impossible to wrap your head around a number like this,” says Hackett. “And what’s most distressing – or most encouraging, depending on your perspective – is that these costs can be avoided because these are conditions that can be avoided or diminished in many cases, or at least controlled.”

One Company’s Story

The Kellogg Company, one of the earliest adopters of health and wellness initiatives, has received numerous kudos for its successes, including a platinum Best Employers for Healthy Lifestyles award in 2007 from the National Business Group on Health. In its current incarnation, Kellogg’s Feeling Gr-r-reat program, launched in the early 1980s, provides an array of proactive, interactive tools and opportunities to help employees make effective decisions about their own health.

“Kellogg has a long tradition of promoting health to society in general, and a commitment to improving the safety and health of employees plays a critical role in our business strategy,” says Cydney Kilduff, the company’s Associate Director of Work Life Benefits. “Not only do employees personally benefit, but we’ve seen a direct increase in productivity and reduction in costs.”

Kellogg sponsors annual weight loss and fitness challenges, health screenings to help employees assess their physical health and identify health risks, flu shot clinics for employees and retirees and other initiatives such as health coaching and nutritional counseling. A primary goal is to move employees off of the high risk list onto the low risk list – and keep them there. The financial benefits to the company (not to mention employees) of doing so are clear: People with fewer than three health risks cost the company 33% less than those with three or more health risks. The number of low risk employees has been steadily rising, with approximately two-thirds of employees currently deemed low risk.

Incentive industry expertise is helping drive participation in (and success of) the Feeling Gr-r-reat program. Kellogg has been working with New Jersey-based IncentOne since 2006 to bring its incentive wellness programs online. In addition to merchandise incentives, Kellogg now offers reductions in insurance premium payments to employees who take part in health screenings, health risk assessments and commit to stopping risky behavior, like smoking.

A Two-Pronged Strategy

Incentive companies with specific healthcare industry expertise are filling a growing need. Incentive Logic provides the rewards-fulfillment component for health promotion programs designed by San Diego-based WellVentures, architect of a turnkey incentive wellness program called “InTune,” currently in use by Fortune 100 companies, as well as a number of more modest-sized firms. Travis Haws, WellVenture’s Managing Partner, explains: “The Health Risk Assessment is the front door. Once you walk through it, you’re rewarded with cash [that is] loaded immediately on an InTune Visa debit card.”

Once a member’s health risk factors are identified, he or she is directed and incentivized towards telephone coaching, smoking-cessation programs, exercise programs, or other lifestyle programs. Haws believes a two-pronged incentive/rewards strategy works best. The impact and immediate gratification of the cash debit card propels people to take the first big step towards engagement, while contests, sweepstakes and prizes sustains participation for extended periods of time.

“To keep momentum going and the experience dynamic, we’ll even design essay contests or online games, in addition to rewarding participants for specific health-related goals,” says Haws. “There’s nothing like the chance to win big ticket prizes or a vacation to entice participants to keep working towards their health goals.” Haws also confirms that incentives for wellness are changing with employers demanding more sophisticated strategies. “The key to success for the employer is to deploy incentives designed to help employees maintain involvement and make wellness a permanent part of their lives,” he explains. “That’s when the payoff occurs. Improved lifestyle means improved performance and lower costs. Thus, it pays to be well.”

A Critical Juncture

The health of U.S. workers and their families – and the health of the entire healthcare – is at a critical juncture. The stakes are high, as companies strive to reduce costs, increase worker productivity and promote wellness. Incentives alone obviously can’t repair a damaged system. But they can play a key role in moving behaviors in the right direction. If the tradition-bound healthcare system can embrace incentives as a respected, results-driven business strategy, the question is then “Where else can incentives take us?”

10 Healthcare-Related Behaviors That Get a Boost from the Use of Incentives
  • Online enrollment in Consumer Directed Health Plans (CDHPs)
  • Participation in Health Risk Assessments (HRAs)
  • Health optimization: weight-loss and weight-control, smoking cessation, nutrition, etc.
  • Wellness website registration
  • Regular screenings: eye exams, mammograms, colonoscopies, skin checks, etc.
  • Regular use of offsite and onsite fitness centers and trainers
  • Utilization of nurse counseling
  • Utilization of Employee Assistance Programs (EAPs)
  • Ongoing two-way communication regarding health conditions, healthcare and benefits
  • Use of generic drugs

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