Be Afraid: Behavioral Economics and Outcomes-Based Wellness

In their disjointed but best-selling book, Nudge, Richard Thaler and Cass Sunstein promulgate a trendy school of thought known as behavioral economics. The gist of their position is that bureaucrats are smarter than the rest of the “mindless Humans” (to use their term) and therefore obligated to manipulate our decisions to save us from our hopelessly irrational selves.

The manipulation is called a nudge — “shove” doesn’t sell books. The bureaucrats, those creating the nudge, are “choice architects.” Of course, truth be known, choice architecture has been around as long as Phillip Morris — longer even.

Thaler and Sunstein spin a web to persuade us that a hodgepodge of existing or proposed social initiatives have a common behavioral economics thread. Men’s-room hygiene, substance abuse, fast driving, organ donation, popcorn consumption, and 401(k) enrollment get lumped together as the playthings of choice architects who, for some reason that’s never made entirely clear, possess greater powers of reason than the rest of us.

The absence of any obvious connection between the various behaviors the authors choose to tackle makes the whole mess difficult to dispute. Inevitably, some of their tactics will serve us well. But does “nudging” men to aim for the center of a urinal qualify as behavioral economics? Is it really comparable to the complex problem of obesity? Is it anything at all?

Biometric Intrusions

Meanwhile, corporate-benefits-managers-gone-wild have taken the popularity of behavioral economics — and its zeal for financial incentives — as license to do whatever they want, brandishing their copies of Nudge like the torches of an angry mob. In employee wellness, this is most readily visible in schemes that offer financial rewards (often in the form of cheaper health insurance) to employees who reduce their body mass index — by whatever means possible (starvation, dehydration, and fad diets are known to work well) — lower their cholesterol and blood pressure, quit smoking, or excel in the employer’s or insurer’s notoriously flawed disease management programs. Employees’ failure or success is carefully monitored with blood draws, swab tests, and other biometric intrusions.

With a hubris that would make even Thaler and Sunstein blush, the human resources and benefits elite have dubbed their programs “outcomes-based wellness,” pressing home their point that true wellness does not manifest from behaviors like physical activity, healthy eating, and stress management, but by snatching some of your blood and shipping it off to the lab. (In fairness, it’s not all their fault. Employee benefits leaders have been worked into a frenzy by being assigned to control something — health care expenses — beyond their control. Desperation does not foster rational choice architecture.)

In fact, paying employees, or risk-rating their health insurance, for achieving pre-determined medical test results, is not an outcomes-based wellness program any more than paying a high schooler to increase his SAT score makes him a genius. No, these are not wellness programs at all. They are medical surveillance initiatives.

Scant Evidence

Employers are quick to point out that, in the insurance world, premiums have long been tied to levels of measurable risk. You pay more for homeowner’s insurance if you live in a flood plain, more for auto insurance if you’re a young male, and even more for life insurance if you smoke cigarettes or have out-of-range biometrics. But, then again, when your life insurer samples your blood, they don’t call it a wellness program. It’s risk-rated insurance — plain and simple. Wellness professionals should vehemently resist the euphemism “outcomes-based wellness,” as it undermines years of hard work genuinely promoting healthy lifestyles and achieving positive outcomes in an environment that respects employees.

Don’t be fooled. There is scant evidence that paying employees to achieve healthy outcomes, or penalizing them for unhealthy outcomes (Nudge’s preferred approach), is an effective strategy for improving health or controlling health care costs. Certainly there is not enough evidence to overshadow the research that suggests that incentives do not work either to motivate sustainable behavioral change or to improve health outcomes. Incentives may even reduce motivation.

In the words of The American Cancer Society, The American Diabetes Association, and the American Heart Association, published in their joint issue brief, Financial Incentives to Encourage Healthy Behaviors:

Based on evidence to date, … offering health promotion services such as smoking cessation programs, fitness centers, weight loss programs and exercise classes on-site, and offering healthy vending and food choices throughout the workplace environment will be more effective in improving employee health – and reducing employer health care costs – than applying financial incentives through their employer sponsored insurance plan.

Recycle your copy of Nudge — it will better serve society reincarnated as an eco-friendly fast-food container — and read the brighter and more evidence-based Drive (by Daniel Pink), or even Punished by Rewards, by Alfie Kohn, for the other side of the story.

Don’t Nudge. Drive.

Behavioral economics, formerly the darling of the Obama administration and, more recently, the Cameron administration in the UK, is gradually being nudged out of government. Only time will tell if this leads to the long overdue recognition of behavioral economics as the “Emperor’s New Clothes.” There’s nothing there at all.

Compare Nudge to Drive. Then you can make an informed decision about which approach (if you feel compelled to choose one) is truly most likely to evoke sustainable health behavior change. And, while you’re at it, consider which underpinnings — Nudges’s “libertarian paternalism” versus Drive’s “autonomy, mastery, and purpose” — are most likely to support other important business goals, such as employee engagement, trust, retention, and, ultimately, productivity.

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10 thoughts on “Be Afraid: Behavioral Economics and Outcomes-Based Wellness

  1. Intereseting take on Nudge. I have read both Nudge and Drive, as well as Switch, Sway, Predictably Irrational and am currently reading Punished by Rewards.
    Your post leads me back to re-read both Nudge and Drive to see if I understand your perspective. I do believe there is more to take-away from Nudge such as product placement (example early in the book about where to place healthy foods in a cafeteria). I do believe there are useful aspects of Nudge, such as the “default” concept requiring people to actively opt-out.

    Thanks for challenging my perspective though!

  2. I tend to agree with you on incentivizing wellness by adjusting premiums based on biometric results. I’ve actually worried that type of “incentive” would be perceived as a penalty and erode any trust and good will built up with a wellness program.

    I’ve read Nudge and there are some concepts that I like. For example, forcing people to make a conscious decision during open enrollment and not just assuming that someone wants to opt out if they don’t turn in a form. I didn’t find much that would help me with our wellness program though.

    I just downloaded Drive on Audible and I’ll start it on my way home. I look forward to comparing the approaches. Thanks!

  3. Great post. Good controversy…
    As a big fan of economics and a bigger fan of the intrinsic motivation covered in Drive, I felt I would share a wellness provider’s view. We hear employers talk about some of the following key variables re: outcomes-based wellness:
    1. Rational pricing for health insurance. Employers want an approach that provides the “good driver discounts” with a little more meat than participation-based programs. It’s not pure capitalism — but there is a little financial accountability CFOs and CEOs like
    2. Do not alienate my people — make the program positive, social, engaging and fun — and make the execution seamless
    3. Drive real change — make all programs as self-authored and intrinsically motivated as possible. Incentives will never drive lasting behavior change
    4. Make it a culture-builder. Find ways to reinforce the strategy of the business — not the strategy of insurance!

  4. Great comments, Rex, Janet, and Henry. I’m humbled by how open and insightful all your feedback is. I have to admit that I was a bit concerned that I overstated my case and that the quality of the discussion might devolve, as it so often does on the internet. But more reasonable minds than mine prevailed! :)

    Of course, you are right. There is at least some value in both behavioral economics and even in Nudge. Overall, though, I am pleased that some readers are open to taking a new, more critical look at Nudge, behavioral economics, and the role they should or shouldn’t have in benefits and wellness program design.

  5. Thanks for the link, Duncan. Actually, long before we posted this blog, there was quite a bit of discussion about Pink’s TED Talk in the tEWN Forum. Doug Hensch had embedded the video on the Forum, so anyone interested can also find it at:

    And, I agree… he is witty! :)

  6. Pingback: Choice Architecture | In tEWN

  7. Pingback: Behavioral Economists Question Outcomes-Based Wellness Incentives « In tEWn

  8. Great post. Consider incentives in light of the article in the NYT magazine on junk food marketing science in March. The junk food companies are spending billions to manipulate brain signals to cause us to eat more, and the wellness industry’s response to that is to pay people even more money to sure an addiction they don’t even know they have.

  9. Pingback: Prologue: Fact-Checking Reuters’ Case Against Employee Wellness | In tEWn

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