Why Some Workplace Health Care Incentive Programs Don’t Work – And Some Do by [email protected]

Mitesh Patel oon Incentivizing Healthy Habits

Plenty of companies these days offer their employees monetary incentives to exercise, lose weight or quit smoking. Join the program, take a physical, track your steps, your pounds, or your other vital stats, and usually, your employer will trim a healthy chunk out of your annual premiums — which, considering how much most workers are contributing to their health insurance coverage, ought to be a strong motivator.

So why aren’t more of us getting healthier?

Mitesh Patel, a professor of medicine at the University of Pennsylvania’s Perelman School of Medicine and a professor of health care management at Wharton, has been researching some fundamental questions about these programs. He joined the [email protected] show on Wharton Business Radio on SiriusXM channel 111 to talk about when they work, when they don’t, and what incentives and structures are most likely to get us to adopt healthier habits.

You can listen to the interview using the player above. An edited transcript of the conversation appears below.

[email protected]: Let’s start specifically with the studies you did about weight loss and companies’ exercise incentive plans. Can you go into the background about how this all came about?

Mitesh Patel: Many people are interested in using financial incentives to help motivate employees to lose weight. About 80% of large employers in the United States use some form of financial incentive for health promotion, but there hasn’t been a lot of evidence about how to use these incentives, how they can best be designed, or whether or not they actually work. We conducted a yearlong clinical trial to test whether or not financial incentives delivered through premium adjustments — which is the standard way employers do this — work. They either lower your health insurance premium payments if you meet certain goals or they raise them if you don’t. It’s a common mechanism that companies use, and there are a variety of reasons why we think it may not be the best way. So we conducted a yearlong clinical trial to test whether or not they could be used effectively to help people lose weight.

[email protected]: This was one of a couple of different projects that you’ve worked on looking in this same area, correct?

Patel: Yes, we’ve been looking at a series of different things. This one was first to test the standard approach of using the premium adjustment. We’ve done some other work looking at increasing physical activity in the workplace by using cash incentives, framed either as a gain or a loss, as a lottery, and then also done some work looking at whether we should pair people individually or on a team.

“The control group essentially lost no weight, and all of the intervention arms essentially lost no weight.”

[email protected]: So going back to the original study: Why didn’t giving people money for their insurance premium really work?

Patel: There are a couple of reasons. In the study, we offered people $550 if they could lose 5% of their weight over the course of the year. They would get that as a premium adjustment, dispersed across 26 payments. In one arm, they got that starting the next year, which is the standard approach.

It means “lose weight now and we’ll reward you next year.” In the other arm, they got it immediately. Then we also had a lottery arm, which was cash incentives, but was designed a little bit differently from our past studies, in that we couldn’t use a function called “regret feedback” that we often use, and we compared that to a control group. We found out at the end of the year that the control group essentially lost no weight, and all of the intervention arms essentially lost no weight. And the main reason is that these incentives delivered through premiums are often hidden, in a way.

They go into your direct deposit. They’re bundled in with larger sums of money from how much you make, and it turns out that a change in your direct deposit from $3,000 to $3,020 is not really noticeable, whereas, if you got a $20 check in the mail, you might have noticed that. And these payments are often delayed into the future. People tend to prefer immediate gratification; they want rewards now. It’s really had to get someone to lose weight and do something that’s hard to do now for a reward that’s next year.

[email protected]: Would a plan where the benefit was applied to your health insurance premiums monthly have a better chance of working than postponing it for a year? Or just giving it as a cash incentive immediately?

Patel: There are a couple of insights from behavioral economics that can really help us think about how to better design these incentives. One is offering them immediately, as someone changes their behavior, giving them an incentive to support that along the way, as opposed to a lump sum at the end of the year. The second is making them more noticeable or salient — for example, providing a check in the mail. When someone gets a check or they get cash, they think about what they could use that for, as opposed to a direct deposit that goes in the bank unnoticed. Then, being able to use those incentives to build in daily feedback loops can really help people to change habits in a way that the current premium adjustments are not designed to.

[email protected]: I would think the companies are very interested in this kind of information because concern over health care costs is so pervasive right now.

Patel: Yes, there are a lot of stakeholders involved in this process, all who have ways to benefit. The employer can reduce the cost of their employee health plans. The employees themselves want to be healthy. A lot of people want to lose weight, quit smoking, be more physically active, but they have a hard time doing so. These programs are one avenue that they can use to try to help them toward those goals. Then, in terms of the question, “How do we create a culture of health?” — being able to create a system where we’re using these incentives more effectively can really help drive that forward.

[email protected]: You mentioned smoking, and you’ve done work looking at that, as well. Is there any major difference between the types of programs designed to help people break the habit of smoking and those intended to help them lose weight, in terms of the financial incentives or how you go about providing those incentives?

Patel: Yes. For each behavior, we have to think carefully about the way that we can design the incentives to work. With weight, we have the benefit of letting people weigh in daily, so we can get frequent feedback, give them frequent incentives.

Smoking is a little bit more challenging because you either quit or you don’t. There is obviously a pathway to decreasing how much you smoke. But some work led by my colleagues, Kevin Volpp and Scott Halpern, has tested ways to use financial incentives for smoking cessation — one large study with General Electric, another with CVS Health — and found that financial incentives in the range of $700 to $800 over the course

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