Scott MacStravic, PhD
To get the most out of employee health management (EHM) programs, whether HCOs buy them or sell them, or both, requires obtaining the highest successful participation rates possible. Voluntary participation (i.e. with no extrinsic incentives) is often no better than 5-10% among those eligible for a particular EHM program. On the other hand, participation can get as high as 60-80% if the right incentives are offered to those eligible and paid to those who participate. [A. vanDusen “Slimming Down the Workforce” Forbes.com Sep 4, 2007]
Both positive (rewards) and negative (penalties) incentives have been suggested as ways to promote EHM program participation. Gordian Health Solutions, according to the above article, recommended that a $30 per month boost in health insurance premiums for those who fail to participate in wellness programs. Positive incentives are more common, though I know of no scientific study that has compared the two to see which works best, overall.
To compare the two, and determine the optimal incentive amount, whether penalty or reward, would require not just measuring the effect of incentives on participation rates, however. It would also have to look at success rates, the percent of participants who actually achieve the necessary behavior or health status changes that yield the desired economic benefits, and thereby justify the EHM investment. One difficulty in the use of incentives is that they might promote merely opportunistic participation, i.e. just enough to qualify for the reward or avoid the penalty, but nowhere near enough to deliver any economic benefit to the employer.
The economic benefits involved can be significant, combining: 1) reductions in health, disability and WC insurance costs; 2) reductions in absenteeism, presenteeism, and turnover costs: and 3) improvements in performance relative to quality, customer satisfaction, new business and other positive revenue, not just cost impacts. Therefore the amounts offered and paid in incentives can be significant as well, while still generating significant positive economic impact for HCOs or their clients.
Participation vs. Success Incentives?
While participation is essential to achieving success, it is not enough, by itself. Participation may involve little more than taking a Health Risk Assessment and being sent frequent customized e-mails coaching participants toward behavior and health status change. Even those who participate by interacting with health coaches by phone, or visiting their physicians appropriately may not succeed in making any significant changes in either behavior or status – effort does not mean success. Moreover, participation incentives always add to the costs of success, whether or not they add to the degree and benefits thereof.
Costs per participant will already include whatever program costs are incurred, and enrollment expenses invested in efforts to gain participation among those eligible for any given EHM program. To these must be added participation incentives, offered to all eligibles in most cases, but paid only to those who actually participate. And these costs are automatically multiplied when compared to the benefits of EHM success, depending on the efficacy or success rate for each EHM program.
For example, if the program and enrollment costs generated per participant amount to $100 each, and a $200 participation incentive is offered, this will amount to a total of $300 costs per EHM participant. The success rate for a weight management program, for example, might be 10%, reflecting those who lose a recommended number of pounds or percent of body weight, and maintained this loss for a prescribed period. That for a smoking cessation program, i.e. those who quit smoking and remained abstinent for a year, might be 20%.
With such program success rates, the effective cost per successful participant is multiplied by how many participants it takes to yield one successful one. This is the same as the “number necessary to treat” analysis used in judging the cost efficacy of clinical care. Since at a 10% success rate, ten participants are needed to achieve one successful weight loser, and at a 20% rate, five participants are needed to achieve one smoking quitter, the effective costs per success for these would be $3000 for each weight loser and $1500 per smoking quitter.
These amounts will be a major burden for the HCO, whether in its own EHM program, or in achieving an admirable ROI for its clients. To achieve even a breakeven result in such programs, an economic benefit amount per success of $3000 for weight management or $1500 for smoking cessation would be required. To achieve even a $2.00:1 ROI ratio, benefits of $6000 or $3000 would be required. And of these necessary benefits, 2/3 of these amounts are needed to cover the participation incentive alone!
Another option would be to offer not a participation incentive, but a success incentive. A success incentive is only paid to those who succeed; it only imposes an ROI requirement related to its amount, with no multiplier based on incentive costs of participation. Any program or enrollment costs per participant will be subject to this multiplier, but none of the success incentive.
For example, in the same two kinds of EHM program, where there were $100 per participant program and enrollment costs, with no participation incentive costs, the effective costs per success based on this $100 cost per participant would be $1000 for weight management, and $500 for smoking cessation. If a $500 success incentive were offered for each, the total costs per success would be $1500 for weight management and $1000 for smoking, dramatically less than when an only $100 incentive was paid per participant. The $2.00:1 ROI ratio benefit would be achieved with benefits per participant of only $3000 and $2000, compared to $6000 and $3000 in the participation incentive example.
Moreover, it could easily be that a success incentive would increase the success rate significantly, without harming the participation rate. After all, instead of the prospect of getting $100 in the participation incentive case, eligibles who choose to participate have the prospect of getting $500 for achieving outcomes they control, themselves. This success incentive could easily be offered to teams of participants, who could supply both peer pressure and support to each other in pursuit of success rewards, and increase the success rate that way. In addition to the greater motivational effect of this higher incentive, by conditioning it on success alone, this approach would tend to create positive “self-selection bias,” i.e. attract more people who are motivated toward and confident in succeeding.
