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Employer Use of Financial Incentives to Reward Healthy Behavior Expected To Surge

Companies Tailor Programs to Target Specific Actions, According to Watson


WASHINGTON, May 29 /PRNewswire-FirstCall/ -- The number of employers offering workers financial incentives to better manage their health is expected to jump sharply next year, according to a survey by Watson Wyatt Worldwide, a leading global consulting firm, and the National Business Group on Health, a national nonprofit association of large employers.

The survey of 453 large employers found that half currently use incentives to encourage their workers to participate in health improvement activities, such as smoking cessation or weight management programs. By 2009, however, that number is expected to leap to 74 percent.

"Some employees need a little extra inspiration to address their own health and develop healthy habits," said Ted Nussbaum, Watson Wyatt's director of group and health care consulting in North America. "Financial incentives can be a valuable investment that provides that essential push. And the payoff from improved workforce health and productivity cannot be overstated."

According to the survey, employers are using a wide range of financial incentives to promote healthier lifestyles -- from completing health risk appraisals to participating in health improvement and disease management programs. While the vast majority of employers are rewarding healthy lifestyles, 6 percent are penalizing employees for poorly managing their health conditions.

Companies use financial incentives to encourage a healthier lifestyle

Employers offering financial

Employee action/behavior incentive (%)

Full coverage of preventive services 53%

Completion of health risk appraisal 53%

Participation in health improvement or

disease management program 42%

Participation in smoking cessation program 40%

Participation in weight management program 31%

Management of cholesterol level, blood pressure 21%

Completion of consumer education module 12%

Maintaining a personal health record 7%

Employers use cash or an equivalent reward most frequently as an incentive for participating in health engagement activities. However, some employers now tailor their programs, matching desired rewards with a specific behavior or activity. For example, premium or deductible credits are more effective than cash at boosting health risk appraisal (HRA) participation. Seventy-three percent of companies that offer premium credits and 67 percent that offer deductible credits have at least half of their workforce enrolled in an HRA compared with 17 percent that offer cash and 12 percent that offer no incentive.

"Companies are targeting specific results with incentives that align with their business goals and matter most to their workers," said Bruce Kelley, senior group and health care consultant at Watson Wyatt. "For these types of rewards to be effective, it's a matter of tailoring the incentive to the desired behavior and ensuring that employees are more involved in the process."

Employers with a consumer-directed health plan (CDHP) are more likely to offer incentives. Twenty-six percent of companies with a CDHP offer financial incentives for managing health risk levels (e.g., weight, blood pressure) compared with 17 percent of companies without a CDHP. Similarly, 50 percent of CDHP companies offer incentives for participation in health improvement or disease management programs versus 35 percent of non-CDHP companies.

"A second generation of incentive programs that rewards a new range of health care choices such as selecting high-quality doctors and providers is around the corner," said Nussbaum. "Employers view this as a big picture. They realize the broad power of targeted incentives in building a healthier and more productive workforce."

To view the 13th annual National Business Group on Health/Watson Wyatt Report, visit

About Watson Wyatt Worldwide

Watson Wyatt (NYSE, Nasdaq: WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm's global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,000 associates in 32 countries and is located on the Web at

About the National Business Group on Health

The National Business Group on Health is the nation's only nonprofit organization devoted exclusively to representing large employers' perspective on national health policy issues and providing practical solutions to its members' most important health care and benefits related issues. Business Group members, primarily FORTUNE 500 companies and large public sector employers, include the nation's most innovative health care purchasers who provide health coverage for more than 55 million U.S. workers, retirees and their families. The Business Group fosters the development of a safe, high- quality health care delivery system, works to achieve transparency and make scientific evidence of effectiveness the standard for care, and shares best practices in health benefits, health and productivity, related paid time off and work balance issues. For more information about the NBGH, visit

SOURCE Watson Wyatt Worldwide
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