Employers want their employees to be responsible for their health—and they want it so badly that the number of companies using financial incentives and penalties for participation in health programs is rapidly on the rise, according to a survey of companies by Towers Watson.
The use of financial rewards in health management programs increased by 50 percent between 2009 and 2011. And by 2012, four in five companies plan to offer some type of financial reward to individuals who participate in their health management programs.
Additionally, the use of penalties more than doubled from 2009 to 2011, rising to 19 percent from 8 percent, and is expected to double again by 2012 when more than a third (38 percent) of respondents plan to have penalties in place. While just 12 percent of U.S. respondents report they currently reward (or penalize) based on outcomes (such as target BMI or cholesterol levels), an additional 16 percent are planning this achievement-based approach for 2012.
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"Employers today view health and productivity programs as integral to their overall health benefit strategy and efforts to control health care cost inflation," says Shelly Wolff, senior health care consultant at Towers Watson. "As companies strive to maximize employee participation in these programs, they are opting for both rewards and penalties. And many are finding these approaches are producing significant results."
Among employers that offer financial incentives for health risk appraisals, employee participation rates are 46 percent, compared with 19 percent for those that don't offer incentives. Participation in biometric screenings is 45 percent at companies with incentives and 25 percent at those without. By contrast, participation rates in disease management programs for chronic conditions were low among all respondents at just 14 percent and show little responsiveness to incentives, increasing to just 16 percent where incentives were present.
Costs play a role
Continuing investment in health and productivity programs is also fueled by concerns about the rising cost of employee illness and time away from work. In fact, health and productivity costs as a percent of payroll totaled nearly 27 percent in the United States, a 22 percent increase from 2005 U.S. levels. What's more, overtime costs as a percent of payroll increased by nearly 70 percent from 2009 to 2011.
"The old adage of doing more with less is still a dominant theme," Wolff says. "But there's also a new twist. While employers continue to offer and promote programs to address health improvement, the accountability model has shifted over the last two years from one where managers and employees share responsibility to one in which employees are expected to bear the primary burden."
Respondents who believe employees should be accountable for maintaining and improving work force health and productivity rose from 78 percent in 2009 to 83 percent this year. However, the percentage of employers that believe managers should be accountable dropped from 64 percent to 42 percent over the same period. Despite a five-fold increase, the percentage of employers that believe their employees are held accountable is still only 10 percent.
Driving better results
While 89 percent of employers cite health and productivity programs as core to their organizational health strategy, companies with effective health and productivity programs achieve significantly better business outcomes.
According to the survey, employers with effective health and productivity programs are doing much more to link senior leaders to program performance, engage employees in the management of their health with incentives, measure program outcomes, target preventable causes of employee absence and personalize communications for specific employee populations.
In fact, those employers achieved fewer lost days due to unplanned absences and disability—which, when combined with savings on health care costs—creates a $27 million annual cost advantage for a U.S. company with 20,000 employees and an average pay level of $50,000.
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