Employer Spend on Health Incentives Hits All-time High

By Michael Dermer

Incentives continue to gain steam as an effective way for employers to engage employees in their health – reducing healthcare costs, increasing productivity and loyalty. Reaching an all time high, employers plan to spend an average of $693 per employee on incentive-based health and wellness programs in 2015, according to a new industry survey. This is up an impressive 16.7%, from $594 in 2014 and $430 just five years ago.

The annual survey from Fidelity Investments and the National Business Group on Health is the most watched survey on incentive spending and has been conducted since 2009 to analyze the growth and design of corporate health improvement programs.

While 79% of employers are offering health improvement programs, the biggest growth is among large employers (20,000 employees or more). These organizations are projecting to increase incentives by $161 on average, spending up to $878 per employee in 2015 compared to $717 in 2014.

According to the survey, these are the most popular incentive-based programs that employers plan to offer:

  • Biometric screenings – 72%
  • Health risk assessments – 70%
  • Physical activity programs – 54%

Employers are continuing to evolve the design of their programs, focusing more on “carrots”, or outcome-based incentives – as opposed to “sticks”, or disincentives for non-participation. In fact the number of employers using disincentives for health risk assessments dropped from 11% to 6% in 2014. For biometrics the use of disincentives decreased from 12% to 5%. Penalties for smoking cessation programs held steady however with 17% of employers planning to attach penalties for employees who choose not to participate. 

“It’s extremely encouraging to see an ever-increasing number of companies embrace corporate wellness programs as a way to promote a healthy workforce,” said Brian Marcotte, president and CEO, National Business Group on Health.

The survey noted another positive trend in the usage of incentives - 47% of employees earned their full incentive amount in 2014 and 26% earned a partial amount. The progress is promising but there is still work to be done in designing effective incentive-based programs that will encourage individuals to get more engaged in their health.

Robert Kennedy, Health & Welfare practice leader with Fidelity’s Benefits Consulting business said, “The next challenge for companies is to continue to find ways to increase participation in these programs and encourage employees to earn the full incentive amount available to them, which will contribute to their financial well-being as well as their physical health.”

If you’re thinking about how to make your incentives program more impactful, check out Welltok’s Guide to Incentive Optimization, which includes:

  • The 5 factors to incentive optimization
  • How to map effort level to incentive value
  • Consumers’ perspective on rewards