There are significant benefits of having healthier employees, both in savings in medical costs and related insurance premium reductions, and in productivity though better well-being and fewer sick days and time off.

Wellness Incentives Encourage Participation and Engagement

Every wellness program should be designed and measured to produce a return on investment.

The Affordable Care Act (ACA) has made it even more compelling for companies to initiate wellness programs for their employees. In November 2012, the Department of Health and Human Services issued guidance on important parts of the ACA about employment-based wellness programs, which followed the final wellness program regulations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) published in 2006.

Barbara Flitch, vice president of Leverage Health Solutions, a health care consulting company, reports that, according to the 2014 Towers Watson/National Business Group on Health (NBGH) Employer Survey on Purchasing Value in Heath Care, the vast majority of companies surveyed (almost 95 percent) offer subsidized health care benefits for employees, but this is expected to be reduced in 2015 and beyond as health care costs continue to escalate and private exchanges become more feasible for employees to buy their own health insurance. While 75 percent of companies have updated their health care strategy or are in the process of doing so, only 25 percent of the respondents expressed confidence that they will offer employee health coverage in 10 years.

Phil Dell, vice president of health strategies at Razr Marketing, explains that there are two types of wellness programs: participatory and health contingent. A participatory wellness program does not make the reward based on an individual’s satisfying a health requirement; examples are gym and smoking cessation program memberships. A health-contingent wellness program conditions the reward on an "individual satisfying a standard that is related to a health factor." For health-contingent programs, the 2006 regulations state that the total reward must be limited to no more than 20 percent of the total cost of employee coverage, but the proposed rules allow for 30 percent--and even as much as 50 percent for tobacco prevention programs.

Using the Right Incentives
There are many definitions of wellness programs, from simple to comprehensive, but most have weak participation and engagement. This is due to a number of factors that include poor program design, unattainable objectives, and poor communications, but a big factor is that the proper incentives are not being used.

In the best circumstances, program sponsors hope that "intrinsic motivation" will drive employees to participate and engage in the program. Intrinsic motivation is doing something because we enjoy the process and tasks, in and of themselves. We want to do it. We are inspired to do it. We are driven to do it! But in the real world, most people need "extrinsic motivation" to get started and keep going until intrinsic motivation can take hold and substantially take over. Extrinsic motivation includes inspirational leadership, compelling communications, relevant training and processes that help set goals, manager and peer coaching, team support, and tangible incentives. Much has been written about training, coaching, and communications, so the focus of this article is about the effective use of tangible incentives.

According to Flitch, there has been a proliferation of incentive management companies during the past few years that run the gamut from cash to merchandise, and the decisions often are based on tax consequences. Like most wellness experts, she believes using cash as an incentive is not as effective as tangible awards, because when people get electronic paychecks they don't even look at them, so value of the reward is lost and there is a "take away." Premium reductions are not as effective as gift cards or merchandise. Items under $25 often are used because of the non-taxability of nominal value items, but the use of award point systems is very popular and effective because they allow participants to accumulate their points for more valuable items over time.

Melissa Van Dyke, executive director of the Incentive Research Foundation (IRF) explains there is not enough money available to be meaningful as incentives, no ability to encourage social reinforcement in which people can discuss which award they are working toward, individually and/or in teams, people rarely remember from where they got extra cash, and it has no long lasting effect after it has been issued. In other words, when people redeem a merchandise item in an incentive program, they will use it for years and remember the reason they earned it. Jon Jeffreys, Ph.D., wrote a research paper about the psychological processes by which tangible awards work more effectively than cash, and it is available for download at

Tangible incentives include merchandise items, gift cards and cash, branded and non-branded, and used for different purposes at different times and varying amounts. The word "incentives" as a broad term includes cash, free premiums, recognition items, and achievement awards. There are many types of incentive programs, and each should have incentive items selected for the program objectives, theme, appropriateness for the company culture, demographics of the participant audience, amount/value of the awards budget, number of participants, timing and duration of the program, what incentives have been used before, and many other factors.

A Cornucopia of Wellness Choices
For wellness programs, in general it makes sense to select items that relate to health and encouraging healthy behaviors on an ongoing basis. So, for example, a wellness program should have plenty of fitness and workout-related items, such MP3 players and ear buds, sports attire, sneakers, bikes, and other gear.

Ruth Owens, vice president of sales for Harco Incentive Solutions, a major national premium incentive distributor, recommends merchandise that promotes healthy lifestyles, such popcorn makers that use air instead of oil, George Foreman grills that drain grease away from meats, vegetable steamers, powerful juicers, and other items that are healthier versions of appliances people often use at home. Joe Hafenscher, vice president of Fuji Special Markets, recommends water-resistant cameras that can be used while hiking and touring, especially underwater models that can be used while swimming and skin diving.

Most major sporting goods retailers sell gift cards, such as Nike, Sports Authority, etc.

Bill Termini, vice president of business development at Certif-a-Gift, recommends adding eCodes for eBooks that relate to health so people can become more educated. He pointed out that eBooks and virtual media are available for low cost, and because they are delivered over the Internet, they have no shipping and handling costs, thus saving a substantial amount. Stephen Humphreys, president of Choose Digital, recommends adding downloadable music, which can tie in to the wellness program theme and set the pace as a theme song to inspire people. The Choose Digital platform also can integrate with wellness technology platforms to allow individuals to select their own motivational song as part of the engagement and daily encouragement process. Digital media incentives also are delivered instantly, with no need to wait for the mail.

Merchandise affinity malls are gaining steam because they allow employers to reduce the cost of the awards, since retail affiliate commissions are rebated and individualized experiential travel is becoming more prevalent and can relate to wellness, with individualized programs that relate to specific diseases and treatments. Mobile is proliferating with location-based services using RFID technology such as Foursquare and devices that track activity such as Fitbits, and social recognition can help to keep people going because it allows peers to recognize one another. But "there is a fine line between social recognition and public shaming," Flitch cautions.

To be effective, a wellness program must include carefully selected incentives that are designed to be used to specific activities throughout the life of the program. Still, incentives are just one part of a comprehensive wellness system, which must include:

  • Wellness methodology. There are many expert methods from major insurance companies such as United Health Group/Optum and health care systems such as the Mayo Clinic. The proper method must be selected to fit the company's specific needs and insurance plan.
  • Wellness training. This instructs people about how to accomplish improved health.
  • Communications--an interactive and engaging campaign an ongoing basis.
  • Tracking technology platform to manage the entire campaign.
  • Incentives, properly selected for the audience and each activity and phase.
  • Recognition. This is the process by which people are recognized for participating and for their achievements along the way. It's not just enough to give people awards, but how and when: One on one? In front of a team? At an all-company meeting? On stage in a formal way? A curriculum and best practices for recognition are available from the Recognition Professionals International Association at and from Certified Recognition Professionals (CRPs) who follow the process.
  • Analysis. Every wellness program should be designed and measured to produce a return on investment. There are significant benefits of having healthier employees, both in savings in medical costs and related insurance premium reductions, and in productivity though better well-being and fewer sick days and time off.

When to Use Incentives

There are many types of incentives:

  • Name-brand merchandise (specific items or participant choice selections from a catalog)
  • Logo items (shirts, water bottles, and other things with the company and/or program logo)
  • Retailer gift cards (physical cards or eCodes)
  • Digital items (eBooks, music, movie and game downloads, all delivered via eCodes)
  • Cash (delivered in the paycheck, separate check, or stored-value card)
  • Recognition awards (pins, framed art, trophy items)
  • Meals, movies, and other activities
  • Recognition events (kickoff, rally, recognition ceremonies of achievement)

Delivery methods include:

  • Mail to employees as part of "teaser" campaigns
  • Hand-out at meetings or in person, one on one
  • Award points system so participants can accumulate points for more valuable items
  • Instant digital downloads

When to use incentives:

  • Reading the materials
  • Enrolling in the program
  • Reading the training materials and taking quizzes
  • Taking the specified actions, such as a health risk assessment (HRA)
  • For accomplishments, such as losing a specific amount of weight
  • As recognition awards

The use of properly selected incentives as part of a well-designed wellness program can significantly improve the motivation and engagement of people to participate and to accomplish the goals of improved health and the related benefits of reduced medical and health insurance costs. This trend will proliferate over time as health care and insurance costs keep rising and employees become more accountable for their own health and wellness behaviors and expenses.

This article originally appeared in the September 2014 issue of Occupational Health & Safety.

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