When a 2014 portion of the Affordable Care Act comes into effect, employers will be able to use financial rewards and penalties to encourage healthier behaviors. Last week the Obama administration released its final rules regarding these employer-based wellness programs.
Still, critics are concerned that an annual premium adjustment isn't likely to change behavior, and will just end up penalizing those with poorer health.
The difference between the Bronze and Gold tiers can make a difference of as much as $2,400 per year for a family of four.
According to Dr. Kevin Volpp, director of the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania, it isn't as simple as just paying someone for doing the right thing. People tend to respond to immediate, short-term rewards (e.g. the satisfaction of eating one more piece of pizza) more readily than to delayed consequences (weight gain). The science of "behavioral economics" has found that when people are offered immediate incentives and penalties to do the healthy thing, they are more likely to make the right decision, sort of like having a swear jar for healthy living.
But not all incentives are created equal, and some behaviors are harder to change (e.g. quitting smoking) than others (taking your kid for a routine check up). The impact of an incentive depends a lot on how it is framed, and the context in which it's offered.
People also respond differently to rewards and penalties. Volpp studies how different types, sizes, and frequencies of incentives impact people's behavior.
In one study, Volpp and colleagues teamed up with General Electric to develop financial incentives to get employees to quit smoking. All smokers received information about smoking-cessation programs, but half were chosen at random to also receive financial incentives. In the financial incentive group, smokers were given $100 for completing a smoking-cessation informational program, $250 for quitting smoking within six months of joining the study, and $400 if they were still not smoking six months after they quit.
The smokers in the incentive group were three times more likely to join a smoking-cessation program, and three times more likely to quit smoking than those who were not offered financial rewards. But when GE rolled these financial incentives to quit smoking to the rest of their workforce, employees complained about rewarding smokers to do something they should be doing anyway. From their perspective, GE turned the program into a penalty rather than reward program.
"If you make it all about rewarding smokers, you'll predictably get the reaction, 'No, we shouldn't be rewarding smokers, we should penalize them,'" Volpp said. But we already are paying for the health consequences of other people smoking, eating poorly or not exercising. According to him, the response to the financial incentive might have been different if GE had done a better job of explaining to its workforce that getting employees to quit smoking would also save money for everyone else.
Volpp also cautioned that you have to be careful about overusing penalties if you are trying to help people improve their health. Penalties can create distrust and drive unhealthy behaviors underground, making them that much harder to tackle.
King County, Washington, was one of the first local governments to use rewards and penalties to encourage healthier behaviors. A decade ago, the county panicked as health care costs were growing at a pace of 15 percent every year. Then-executive Ron Sims convened a task force that included physicians, health care policy and legal experts, economists and labor and business leaders to develop a strategy to address health care costs from the perspective of both patients and the employers paying for their coverage.
Sims told the Seattle Times at the time, "I refuse to sit back and allow the county and its employees to be victims of these seemingly uncontrollable cost increases. Further, I refuse to accept there are only two choices: reducing benefits to our employees and their families, or paying crippling annual increases. Tweaking the edges of the problem will no longer work."
Out of the task force's recommendations was borne Healthy Incentives -- a voluntary wellness program for its employees and their families. While everyone receives the same medical benefits coverage, their out-of-pocket costs (deductibles and co-pays) vary according to their level of participation in the Healthy Incentives program. Those who choose not to participate receive a Bronze status, with the highest out-of-pocket costs. To attain a Gold status, with the lowest out-of-pocket costs, you need to complete a health risk assessment and complete a personal wellness plan. The individual action plans might include texting in a log of healthy activities, joining Weight Watchers at Work, attending YMCA classes to learn how to prevent diabetes through nutrition and exercise, or working with a Quit for Life coach on the phone to quit smoking. The difference between the Bronze and Gold tiers can make a difference of as much as $2,400 per year for a family of four.
When she started working for King County three years ago, Lynn Argento was automatically enrolled in the Gold tier after completing her health risk assessment. Failing to complete her personal wellness plan, Argento got bumped down to the Silver level the following year. "It was an eye opener in terms of the differences that I was paying for my deductible and co-pays," she said. "It was a big reminder that my wellness activities had a significant financial connection to what I was paying out-of-pocket." But Argento wasn't upset with King County. She was disappointed in herself. "It was pretty clearly laid out to me. I knew what I needed to do, and I didn't follow through on it," she said.