According to the ShapeUp Employer Wellness Survey, the average per employee per year incentive is $375.
I’ll take a pass, for now, on discussing the role of incentives in motivating behavior change. That topic is being well covered in all corners of the wellness world.
Let’s take a look at this number, $375. While ShapeUp wrote in its blog, and its webinar debate, that this is the average per employee per year (PEPY) incentive, I suspect that they were being more precise when they stated in their survey results that $375 was “the average incentive amount.” The difference is that, for many of us, PEPY would refer to the total amount of the incentive expense distributed across the entire employee population, regardless of the number of participants, whereas the average incentive amount would simply refer to the amount paid to each incentive recipient. The difference between these numbers would be millions of dollars for those survey respondents with low participation rates. But this is a minor issue of terminology, if indeed, the number refers to the average incentive payout. If it truly refers to PEPY, the $375 figure would raise numerous questions, as a typical wellness expense for large employers has been unofficially reported to be only $100-$150 PEPY.
A bigger question for me is, “How was this figure calculated?” ShapeUp presented a bar graph (check out the graph in their blog) depicting the distribution of responses regarding incentive amount. The graph seems to indicate that more than 50% of respondents offered payouts of $200 or less. One or two respondents had an incentive of $1,000 or more. It’s likely, therefore, that the $375 average was a mean average that could have been heavily influenced by one or two high-paying outliers. A more typical incentive, based on the graph, appears to be around $200 or less.
The number of respondents for the survey, and for the incentive question in particular, is relevant, but I’ll address this in a future blog. ShapeUp didn’t present this data as a scientific study. It was an opportunity to get the pulse of large employers’ wellness strategists and to spark discussion. But we should keep the survey limitations in mind if we are tempted to use these data as benchmarks.
In future surveys of employers’ incentive practices, whether by ShapeUp or others, it would be interesting to get a more complete understanding of how employers are funding their incentives. Are incentives being paid out of operating funds, or out of their self-funded health plan funds? If the incentives are paid out of plan funds — as I believe they often are — employees may actually be subsidizing the incentives through their premiums, limiting the employers’ risk. If this is correct, the incentive is more of an earned rebate. Such a scheme may be perfectly appropriate, though I wonder if perhaps employees are entitled to know, say, via a disclosure statement, that their incentive is actually their own money they are earning back.
For this particular post, I’ve made some inferences based on limited available information. I welcome insights from readers who have reviewed the data or who have experience with self-funded medical plans and wellness incentives. When it comes to our nascent employee wellness profession, we all are surfing the learning curve together.
(This post is sixth in a series. For the full series, click here).
#1 by Carol Harnett on March 15, 2012 - 3:58 am
Great post as always, Bob. All of us need to be crystal clear regarding how we are measuring and reporting data.
#2 by Shawn LaVana on March 22, 2012 - 4:08 pm
Hi Bob — We’re really enjoying your analysis of our report and appreciate the feedback on it. We’ll take this into account in our 2012 report and see if we can provide some more detailed data. I will note, though, that in terms of the average incentive amount, the National Business Group on Health and Fideility Investments recently published an even greater amount of $430 per employee in 2010. http://www.wbgh.org/pressrelease.cfm?ID=170
Shawn LaVana
ShapeUp
#3 by Bob M. on March 22, 2012 - 7:28 pm
Thanks so much for commenting, Shawn. ShapeUp has received my blog posts with graciousness — again demonstrating your commitment to discourse and inquiry — and I appreciate it.
I didn’t have a quibble with the value of the “average” incentive ShapeUp cited. I was trying to better understand your finding and, I hope, help others better understand it, too.
NBGH released their 2011 survey results earlier this month. Full results are here (pdf). Note that they make a distinction between the median incentive ($400) and the (presumably mean) average, which was $460. (But, to complicate matters for people like me, the median for companies with 5,000 to 20,000 employees was $300). I’m no statistician, but I think the difference between the mean and the median is important, especially in ShapeUp’s survey, in which the difference may have been wider than it was in NBGH’s.
While I’m complicating matters, Shawn
I’ll ask our readers to consider this hypothetical:
You survey four employers about their wellness incentives…
- Employer A offers a $500 cash incentive to employees who complete a health risk assessment, biometric screening, and 16-week physical activity and nutrition challenge.
- Employer B offers a $100 cash incentive to employees who complete a health risk assessment, and everyone who participates in a biometric screening is eligible in a drawing for a Caribbean cruise.
- Employer C jacks us its premiums by an extra 10% so that they can give a 10% premium discount to employees who earn 100 “wellness points” by doing various activities throughout the year.
- Employer D adopts a plan with a $1,000 deductible, but if employees maintain a BMI less than 25, or decrease their high BMI, they can reduce their deductible by $500.
This variety of incentive schemes is typical of what you might find in a larger survey. In this scenario, what’s the average incentive? And what can we learn from calculating the average?
#4 by Rajiv Kumar, M.D. on March 23, 2012 - 9:34 am
Bob, what I find interesting about looking at the “average” of the incentive amounts used by employers is that it gives us a sense of just how much money is at play here. Yes, the various schemes are structured differently, with some using rewards and others essentially using penalties, but I think the point of examining the amounts is that it gives us some insight into how important of an issue employee health management is to America’s corporations. Employers are willing to either spend $400 out of their own pocket or charge their employees $400 more just to get them to take basic actions to assess and improve their health (e.g. take a health assessment, complete a biometric screening, participate in a 12-week exercise program). The overall takeaway for me is that our population as a whole is unhealthy, health care costs are rising to unsustainable levels, human behavior is hard to change, traditional programs don’t seem to engage enough employees, and employers are increasingly desperate to change the status quo. The $375 incentive amount we quote in our survey simply means that there’s a huge problem here, but also a huge opportunity for innovation.
#5 by Bob M. on March 24, 2012 - 9:28 pm
Your “overall takeaways” have definitely given me a lot to think about, Dr. Kumar.
These are keen insights. I’d be interested someday to hear your opinion on whether employers commonly view themselves as desperate to change the status quo. One might infer — based on internet-based dialogues, conferences, other surveys, and media coverage — that employers believe they have solved health and wellness. We hear so much about successes…improved biometrics, positive ROI, high participation rates, etc. Yet, indeed, the fact that we keep raising the stakes — specifically by offering more incentives and by requiring more to earn them — and continuously experimenting with incentive design, does seem to suggest desperation in light of unsustainable health care costs.
That said, I also appreciate your optimistic conclusion about having a huge opportunity for innovation. Your survey revealed some anxiety amongst employers that, in my opinion, has not shown itself in the results of other surveys (NBGH, Principal Well-Being Index, etc.). We should be anxious. And I hope that anxiety will help create an environment that advances innovation. If benefits and wellness directors are swayed by our own propaganda about the efficacy of our strategies, than I’m afraid we — just like many of the employees we have yet to reach — won’t be very motivated to jumpstart change.