Reading Between the Lines: Incentive Spending Up, But Not Optimized

By Michael Dermer

Employers are spending more money than ever on incentive-based health programs – up nearly 17% over 2014 – according to a survey by National Business Group on Health and Fidelity Benefits.

Yes, companies are allocating more for incentives as summarized in my survey recap, but what does the data really tell us? Here are my two cents on it:

  • Culture and the EEOC are impacting the use of penalties. Many employers are seeking new ways to hold employees more accountable for their health, yet concerns about the negative effect of penalties on corporate culture are evident. It’s creating a contradiction with the overall objective of creating a positive environment for changing employees’ healthcare behavior. The exception to this seems to be smoking cessation, which held steady from 2014 to 2015 with 17% of employers planning to attach penalties for non-participation. This reflects the views of the general public that applying surcharges to smokers is socially acceptable.
  • Biometrics Passes Health Risk Assessments: It is noteworthy that for the first time, the use of incentives tied to biometric screenings surpassed the use of incentives tied to health risk assessments. This is likely due to two factors: 1. Many programs tied incentives to HRAs in the first year, but not consecutive years. 2. The popularity of biometric screenings is rising because more programs are being tied to outcomes.
  • Spending on More Diverse Behaviors - Including Some Immediate ROI: Employers that are spending close to $700 per employee (and in the case of large employers almost $900 per employee) are no longer spending those incentives on just the basics of HRAs and biometric screenings. While there is certainly a continued trend toward outcomes-based programs, I would also suggest that employers are starting to align incentives to a wider variety of behaviors and services such as telehealth and cost transparency initiatives. An opportunity also exists for employers to align incentive dollars to behaviors that have an immediate return on investment such as using a lower cost MRI facility or visiting an urgent care center instead of the emergency room. We expect that as the incentive dollars continue to grow, a portion will be allocated to these other behaviors that can produce more near-term ROI.
  • Easy to Earn Some, Hard to Earn All: While 47% is a significant portion of employees to earn the full incentive amount, there are still 26% that only earned some and 29% did not participate at all. This indicates that some behaviors aren’t aligned with the correct level of incentive to drive action or the programs are not factoring in both intrinsic and extrinsic motivators.  

This survey does a great job of capturing the current state of incentives and what is being done today. I believe we can learn from these insights, but ultimately need to be driving towards incentive optimization. As the spend grows - are we allocating the incentives wisely? And are we achieving both short and long-term ROI?

Read more about incentive optimization here and find out how both you and your consumers can be well rewarded.