The Affordable Care Act will pay for smaller companies to set up their wellness programs, and it also increases the amount of their health care costs that employers can devote to incentives.

Wellness Winning the Day

As the calendar turns to 2013, the outlook for wellness and safety incentives is bright, says Melissa Van Dyke, president of the Incentive Research Foundation.

There's no sign of a slowdown in the appeal of wellness incentives for American businesses. The simple explanation is that employee wellness became an imperative for companies of all sizes as health care costs climbed, and incentives make wellness programs work.

The 17th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, published in March 2012, showed how rapidly U.S. companies have embraced financial incentives to encourage employees' engagement in wellness programs: While 36 percent of surveyed companies offered such rewards in 2009, 61 percent offered them as of early 2012, and an additional 21 percent said they planned to begin doing so in 2013. Companies also realize employees’ spouses are key influencers in the overall family health environment, so increasingly they are offering incentives to spouses, as well, according to this annual survey. (www.towerswatson.com/assets/pdf/6556/Towers-Watson-NBGH-2012.pdf).

Melissa Van Dyke, president of the Incentive Research Foundation, echoed those results during a Nov. 9 interview. "What we're finding is a broad push by companies to use wellness incentives, rather than a one-off program," she said. "There's a three to one return on investment for these types of programs. I would challenge business executives to find any other type of program that has more than a 300 percent rate of return."

The foundation (www.theirf.org) is a not-for-profit in St. Louis, Mo., that conducts research studies about incentive and motivational programs, including corporate wellness programs that utilize incentives. The foundation's "Energizing Workplace Wellness Programs: The Role of Incentives, Rewards & Recognition" report in August 2011 reiterated that incentives are critical for promoting employees' participation in these programs, so it's no surprise that wellness incentives are widely used. "Based on the research, there are a number of strong arguments for their use in sales, productivity, engagement, and safety -– all issues for the common American business. Wellness, however, tends to be the greatest area of growth and new application that we are seeing," Van Dyke said.

The Affordable Care Act will pay for smaller companies to set up their wellness programs, and it also increases the amount of their health care costs that employers can devote to incentives, she said. "By 2020, about 25 percent of GDP will be tied up in health care. You've got all of this spend going toward health care, but it's primarily going toward care for preventable diseases," and this fact has focused employers on prevention, Van Dyke said.

Along the same lines, the safety profession well understands the notion that prevention is far less costly than repair (of product damage, injury, illness, etc.). This concept is the foundation of occupational and public safety and of the hierarchy of controls. Van Dyke agreed, saying, "There's so much that the wellness community can learn from the safety community."

'Just in Time' Incentives
In the foundation's 2012 Fall Pulse Survey, conducted in August and September 2012, the respondents -- incentive providers and buyers –- said they believe the U.S. economy will have a positive effect on their ability to implement merchandise incentive programs in the year ahead, but their confidence seemed to have weakened since the March 2012 survey.

"We have found this to be a relatively good gauge of incentive providers' results," said Van Dyke. "As you may see in some of the other statistics, volatility is, and has been, a common theme in all of the indicators since 2008. It is not uncommon for many of the results to become a bit more pessimistic in the fall. One reason is that is the time that many program owners are going through the planning and budgeting phases for the following year -- a notably arduous task met often with skepticism and criticism from executives or budget planning committees."

In the September 2012 survey, 29 percent of the respondents said they planned to add merchandise (including electronics, golf items, or luggage), 31 percent planned to add debit/prepaid gift cards, and 32 percent planned to include individual travel as an option.

"There's not necessarily a magic mix," she explained. "The key theme that we saw in this data regarding merchandise programs was that more program owners were planning to add various elements versus decrease them. This has not always been true, and in fact the opposite was generally true for the travel [incentives] portion."

The foundation's research also indicates those who use gift cards say they do so primarily because of the ease of administration and flexibility, and Van Dyke said the success of these programs is tied to a strong understanding of the recipients (what do they personally find rewarding?), a good handle on administrative capacity within the organization (how much time is available to support the program internally?), and consideration of the underlying business performance requirement (top performer sales or spot-recognition?).

For almost a decade, larger companies have been consolidating their many programs -– such as safety, wellness, and sales incentives -– into a single program, both for easier administration and for reduced costs, she said. But a more recent trend is exemplified by the concept of "fast HR" -– the idea that human resources must be more agile for organizations whose planning cycles are much shorter now, months rather than a year or longer, and whose compensation structures are much more agile. Van Dyke said this trend suggests "just in time" rewards will appeal to "just in time" workforces. "For the younger workers, that's how they want to work," she added. "It does fit the younger workforce very well."

More respondents in the September 2012 survey said their companies are using a points-based system for their merchandise non-cash incentive programs. However, 26 percent of the respondents said they don't yet use a points-based system in their programs. "A points-based system adds several different dimensions to a program, including the opportunity to 'bank' points and store them for larger awards," Van Dyke said. "It is not a detriment that 26 percent don't use a points-based system, but an interesting benchmark that most of program owners who responded are using them."

Both the foundation and the National Business Group on Health are hosting events in early 2013 with an eye on wellness incentives. Van Dyke said the foundation will present an educational program titled "Building Better Business Results through Incentives and Recognition" April 28-30, 2013, in New Orleans. The foundation also will publish at least one trend paper, which she described as a "deeper dive" on rewards and recognition's role in recruiting, the hiring process, and retention, later this year.

The National Business Group on Health's 2013 Employers' Summit on Health Care Cost and Solutions: Aligning Health Benefits Strategies for a New Era conference will take place Jan. 30-31, 2013, in Washington, D.C. Its agenda includes a breakout session discussing the ROI on incentives and the future of incentives as part of employer-sponsored health plans, as well as how to increase spouses’ engagement in healthy lifestyles and health care decision-making. Visit www.businessgrouphealth.org/ for information.

This article originally appeared in the January 2013 issue of Occupational Health & Safety.

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