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Healthy Payoffs

Companies are starting to see the power of incentives and rewards as tools for effecting healthier lifestyles and behaviors in employees.

Saturday, April 1, 2006
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Few would argue with the premise that healthier employees make for healthier businesses and bottom lines. Or that employees with fewer medical problems provide employers with better prospects of containing spiraling health-care costs. At this point in the cost crisis, such notions might be considered old-school.

Newer to the game are the companies that have figured out concrete ways to promote such health. Only recently, for instance, have businesses started taking seriously the power of incentives as tools to promote healthy behavior and employee follow-through with corporate health initiatives.

"If used appropriately, incentives can make a big difference," says Michael Thompson, principal with PricewaterhouseCoopers in New York. "If no incentives are provided, participation in a personal health-risk assessment may be less than 10 percent of the population. Employers that have offered significant incentives have seen participation as high as 90 percent."

Even in organizations which have not yet begun offering incentives, their potential seems to be gaining currency. In a recent survey reported by PwC, nearly half of the respondents felt incentives should be provided to employees who make a reasonable effort to manage chronic health conditions. In the same survey, providing financial incentives was cited as the most promising option for reducing corporate health-care cost increases.

"In a time of rising health, dental and pharmacy costs, the primary benefit of a wellness-incentive program for an employer is cost-containment," says Rod Lacey, vice president of human resources for Melaleuca, a health-products company based in Idaho Falls, Idaho. "Directing and offering incentives for employees to effectively and proactively manage their health is perhaps the most underdeveloped resource in health-cost management."

Indeed, organizations of all types are finding employees respond to a variety of wellness incentives. At Melaleuca, the most popular is a deduction in monthly health-insurance premiums.

"Monthly premiums immediately impact the employee's paycheck," says Lacey. "The reality of this deduction has literally driven many employees to change lifestyles and modify bad habits they have had for years."

Premium differences range from $78 for an employee with single coverage to $178 for an entire family, he says, equating to an annual difference of more than $2,000 for some workers.

Melaleuca runs a monthly wellness contest in which employees are encouraged to track exercise hours. Winning teams receive fruit or vegetable trays or bread baskets, and individual employees participate in monthly drawings for prizes.

"Exercise is defined in our program very liberally, as employees are simply encouraged to be more active than they have been in the past," Lacey says. "Exercise may include the standard cardio workouts or weight-lifting exercises, but may also include yard work, shopping or even walking the dog."

Employees undergo wellness exams, have weight-loss contests, set fitness goals and track individual and group successes.

"This program has actually worked for me personally," Lacey says. "I reduced my total cholesterol 40 points in just one year."

According to him, other employees are reporting successes in stopping tobacco use, losing weight or reducing cholesterol, and that increasing numbers of employees are qualifying for the premium category reserved for the healthiest employees.

"On-site wellness exams have identified many individuals who were in the early phases of a medical condition such as being pre-diabetics or having potential heart problems," Lacey says. "We have been able to help employees to better manage these conditions in a preventive manner, rather than after the condition became a full-fledged medical condition."

For the company, the bottom-line effect has been impressive.

"Our experience has resulted in no increase in reinsurance rates for the past several years and the net plan cost per employee actually decreasing on an annual basis," Lacey says. He reports that the company's net plan cost per employee, calculated on a monthly basis, has reduced by 22 percent since January 2001, explaining that the net plan cost per employee is calculated by subtracting an employee's monthly premiums from the health plan's monthly net expenses.

"It's important to clarify that there has been no increase in Melaleuca's employee monthly premiums during this time period that would have factored into this net improvement," he adds.

Tangible Rewards

Worthington Industries, a metal-processing company based in Columbus, Ohio, also offers monetary incentives to employees. Anyone participating in a "Healthy Choices" wellness program earns a $25 monthly credit, which is doubled if a spouse is also enrolled in the program, according to Harry Goussetis, vice president of human resources.

"Participants complete an annual health assessment and screening, and those with identified health risks complete an individualized action plan," he says. The plan outlines six-month and 12-month goals, and the employee is required to stay in touch with a coach from the third-party administrator who documents progress. For those in disease-management programs that necessitate regular follow-up with a doctor, documentation is required from the health-care provider showing that the follow-up has been completed. The health coaches track the participants' results.

The credits are distributed monthly through paychecks. They may be used to offset the cost of health-care, dental and/or vision premiums, rolled over to 401(k)s, or paid as taxable cash.

"The program is headed into its third year, and we're currently at a 65 percent participation rate among eligible employees," Goussetis says. He reports that for every dollar the company spends on the program, it anticipates recovery of $1.55 in health-care-cost savings.

Denise Johnson, HR director of employee benefits, safety and wellness for Portland, Ore,-based health-insurance carrier the Regence Group, says reward programs that promote healthy lifestyles "need to get people truly engaged as consumers. Cash is a great vehicle, and one that everyone can resonate with."

Johnson's company provides a variety of incentives for wellness, including gift certificates and cash prizes based on a point system. Employees accumulate points for everything from reading articles about health and fitness to joining a fitness program. Special initiatives focus on giving up smoking, logging 150 minutes of exercise each week, walking, avoiding weight gain over the holidays and managing stress.

Employees receive e-mails about health-and-wellness topics, and are also encouraged to consult a recently launched "Building a Healthy Future" Web site that offers one-stop shopping for benefits-and-wellness information.

"We have tried various incentive approaches including cash drawings to encourage participation in health campaigns and the completion of a health-risk appraisal," Johnson says. According to her, quarterly $250 drawings for participating in a voluntary health-risk assessment resulted in a 48 percent participation rate last year.

"We are only in our second year, but looking across all of our programs, participation has increased an average of 40 percent," she says.

Employee reaction to the initiatives has been positive, according to Johnson. "I have noticed a significant increase in the conversations about wellness at water coolers and discussions in meetings," she says. "This is the energy that fuels fundamental change in a culture."

Choice Hotels, which has corporate offices in Silver Spring, Md., and three other locations, also offers a variety of incentives for joining wellness programs.

"We've run programs in which teams of employees work together to help each other either lose weight or maintain their weight during the holidays," he says. "We've offered a number of different incentives for the successful teams, from cash to a variety of other prizes."

Employees who undergo health screenings are eligible to win raffle prizes including heart-rate monitors, fitness accessories, rounds at a local golf course and other prizes. Subsidies for gym or YMCA memberships are also provided.

At HSBC, a financial services firm in Prospect Heights, Ill., employees earn $100 toward flexible-spending accounts by participating in an annual health screening. In addition, the company offers free, on-site mammograms.

"Our benefits and incentive programs support the goal of creating a shared, high-performance culture," says Jennifer Macadlo, senior human resource manager. She says all employees are offered a Total Rewards package that includes training opportunities, employee discounts, philanthropic programs, and competitive pay and incentive plans.

The initiative has been highly successful, Macadlo says, with a steady increase in program participation over the past few years.

Columbus, Ga.-based insurance provider Aflac offers a number of simple yet popular wellness incentives. Employees who participate in wellness programs earn points that are redeemable for shirts, ties, notebooks, umbrellas, movie tickets and other items. Their names are also placed in monthly drawings, with winners receiving prizes such as water bottles, towels or step-o-meters.

Group wellness incentives are used as well, according to Sharon Douglas, Aflac's human resources vice president.

"This past year, employees throughout the company joined together in teams of four each to see who would lose the most combined weight," she says. "The 'biggest losers' received cash prizes."

The company also operates an on-site gym that makes personal trainers, state-of-the-art exercise equipment and aerobics classes available to all employees.

"In addition to financial and personal goals, health goals have been added to the list," Douglas says. "Aflac's wellness point program has worked well in supporting a healthier lifestyle for our employees and their families."

Penny Stoker, vice president of human resources at AstraZeneca Pharmaceuticals, says escalating health-care expenses have made fitness a higher priority for both employees and her company.

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"A growing body of research confirms that health-care claims and absences from illness decrease when employees participate in fitness programs," she says.

To encourage healthy eating, all 104 vending machines at the company's U.S. headquarters in Wilmington, Del., feature healthy choices such as nuts and cereal bars. Cafeterias offer heart-healthy, low-fat, low-carbohydrate, low-calorie and vegetarian selections, and employees may opt for on-site counseling with a nutritionist at reduced cost to help them lose weight.

Physical activity is also promoted through in-house fitness centers and discount arrangements with private fitness operations. To foster early detection of disease, employees are offered on-site screening programs for breast, prostate and skin cancer, as well as blood pressure and cholesterol measurement. The company has even purchased its own mammography equipment. In the 15 years it has been in existence, the breast-cancer screening program has picked up more than 30 cancers in employees, says Stoker.

AstraZeneca also offers an intensive annual health-risk-assessment program in which all employees are encouraged to take a survey assessing their health habits such as smoking, nutrition and physical activity. Participants then receive a written appraisal and recommendations prepared by the Mayo Clinic. Employees identified as "high-risk" are offered one-on-one telephone lifestyle-coaching sessions with counselors from Mayo.

To promote participation in the program, corporate leaders send voice mails and e-mail messages to employees. Those who do not participate in the HRA pay an additional $50 per month for their health-care plans.

"We believe employees are the most valuable assets in our business," Stoker says. "We also believe that healthy employees are vital to business success."

Odds for Success

Although incentive programs seem to make plenty of sense, their success is not guaranteed. This is especially true for employees who just aren't interested in participating.

"We have learned that some individuals are extremely content with their lifestyle and health status and simply have no interest in changing," Lacey says. "Some employees are perfectly willing to pay a higher monthly premium because they have no interest or no desire to make the necessary changes to live healthier. They generally feel that encouraging annual wellness assessments is outside the scope of where an employer should venture."

At the same time, the employees most willing to embrace incentives may be those who need them the least.

"Healthy employees are more likely to take advantage of incentives," says Adele Langevin, associate vice president and chief human resource officer at Babson College in Babson Park, Mass. "This is not necessarily the case for the less healthy, and therefore most needy, population."

Other considerations include fear of revealing medical problems and feelings that incentives are not offered on an equitable basis.

"Employees may raise concerns that administration of the incentive will let the employer know who has risk factors or health conditions," says Bruce Kelley, a senior consultant in the Minneapolis office of Watson Wyatt Worldwide. "If the incentive does not apply to all participants or is less for completing minor activities, low-risk participants may complain that it is not fair to them."

Barry Hall, principal of Buck Consultants in Boston, says some incentives may inadvertently reward unhealthy behaviors.

"A per-pound weight-loss incentive with no limits may encourage unhealthy or hazardous weight-loss practices," he says.

Hall also says incentives may create a dependency such that, when the reward is removed, the desired behavior ceases.

"A key consideration in incentive design is maintaining desirable behaviors without unwanted challenges to the program," he says.

Programs that are developed too hastily can be vulnerable to problems.

"When incentives are not designed properly, they do not yield the appropriate results for employees or employers," says Teri Weber, a consultant with Spring Consulting Group in Boston. "Great care must be taken in assessing the risks and rewards, and in identifying the goals and objectives." She recommends employers with little experience in this area seek help from consultants or other employers who have had success with incentives.

Despite some negatives, many employers are finding that incentive programs offer the potential to bring meaningful results to a significant portion of their workforce, especially if carried out over a period of years.

"A focus on health is one of the key strategies to reduce health-care costs over time," says Thompson. "A culture of health and well-being can reduce the trend in health-care costs over time."

Certainly, incentives that bring more focus on employee health offer solid potential for virtually any organization. Potentially, that means cost savings.

"Encouraging wellness should improve the general health of the insured population and, thus, help reduce insurance cost increases," says Langevin. "Promoting wellness is also an attractive, while inexpensive, benefit to provide employees."

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