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CCH® BENEFITS — 11/04/11

Employers Offering Incentives To Employees To Improve Health And Productivity

U.S. employers seeking to contain rising health benefit costs in 2012 will continue their commitment to programs that improve their workers’ health and productivity, according to Towers Watson and the National Business Group on Health (NBGH). The 2011/2012 Staying@Work survey found that the number of companies using financial incentives for employee participation has increased by 50% between 2009 and 2011. By 2012, four in five companies plan to offer some type of financial reward to individuals who participate in their health management programs.

In addition, the use of penalties more than doubled from 2009 to 2011, rising from 8% to 19%, and is expected to double again by 2012, when 38% of respondents plan to implement penalties. While just 12% of survey respondents reported that they currently reward (or penalize) based on outcomes (such as target body mass index (BMI) or cholesterol levels), an additional 16% are planning to implement this strategy for 2012.

“Employers today view health and productivity programs as integral to their overall health benefit strategy and efforts to control health care cost inflation,” said 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 employee completion of health risk appraisals, employee participation rates are 46%, compared with 19% for those that do not offer incentives. Participation in biometric screenings is 45% at companies with incentives and 25% at those without. By contrast, participation rates in disease management programs for chronic conditions were low among all respondents at just 14% and incentives appear to have little effect, boosting participation to just 16%.

Costs Drive Efforts

Continuing investment in health and productivity programs is driven by concerns about the rising cost of employee illness and time away from work. In 2011, costs as a percent of payroll totaled nearly 27% (a 22% increase from 2005) for health and productivity, and they rose by nearly 70% from 2009 for overtime.

“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,” Ms. Wolf added.

The proportion of respondents that believe employees should be accountable for maintaining and improving workforce health and productivity rose from 78% in 2009 to 83% in 2011. However, the percentage of employers that believe managers should be accountable dropped from 64% to 42% over the same period. Despite the increase, the percentage of employers that believe their employees are held accountable is still only 10%, the Towers Watson/NBGH survey revealed.

Improved Business Results

While 89% 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, Towers Watson/NBGH asserted.

According to the survey, effective health and productivity programs focus on linking senior leaders to program performance, incentivizing employees to engage them in the management of their health, measuring program outcomes, targeting preventable causes of employee absence, and personalizing communications for specific employee populations.

Top performing employers attained the following results:

• Industry-adjusted average revenues per employee that were 40% higher than for low-effectiveness companies, a difference of $132,000 per employee; and
• Fewer lost days due to unplanned absences and disability—which, when combined with savings on health care costs, created a $27 million annual cost advantage for a company with 20,000 employees and an average pay level of $50,000.

“The evidence overwhelmingly shows that effective health and productivity programs can make a real difference to a company’s bottom line,” said Helen Darling, CEO of the NBGH. “There are unrelenting pressures on employers and employees today, but improving employee health is an opportunity for a true win-win.”

The 2011 Towers Watson/National Business Group on Health Staying@Work survey was completed by 248 U.S. human resources and/or health benefit managers with at least 1,000 employees. For more information, visit http://www.towerswatson.com.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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