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Should you pay employees to change unhealthy behaviors?

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in Employee Benefits Program,Human Resources,Office Management,Payroll Management

Cash is king when it comes to wellness incentives. Studies show that the almighty dollar is the best motivator for employee participation in wellness activities, followed closely by reductions in health insurance premiums.

On average, it costs employers $8,748 to cover each employee’s health insurance—up 62 percent from five years ago, according to Towers Perrin. A quarter of those costs result from preventable unhealthy and unsafe behaviors.

As a result, more employers are paying workers to change their ways (see box below). One Hewitt Associates study says 30 percent of employers offer incentives to encourage employee participation in wellness programs, up from 21 percent in 2004.

States are also getting into the act. California Gov. Arnold Schwarzenegger recently proposed that individuals receive health care discounts if they submit to assessments that can determine potential health risks.

Wellness incentives: 11 guidelines

If your organization plans to provide financial incentives for employees to improve their health, stop unhealthy habits or participate in a wellness program, follow these guidelines:

  1. Ask employees to sign a statement saying they will truthfully report their participation in programs. When employees are directly asked to tell the truth, most do.
  2. Require participants to submit a journal that details their physical activities, or a form that lists the criteria they met during the incentive period. Inform them that their participation will be verified, and that those submitting incorrect reports will have to return any prize money.
  3. Verify what you can, including attendance at nutrition seminars and on-site exercise programs. Don’t try to verify everything.
  4. If possible, give employees a choice of activities to qualify for incentives. Some prefer individual goals and prizes, while others would rather work with a team.
  5. Offer substantial incentives. Payouts that are too low won’t attract as many participants. A prize of $500, for example, might make it worth shedding some excess pounds.
  6. Determine your ROI and trumpet your results to the top brass. Track the difference in health care premiums versus the cost of the incentives.
  7. Limit the reward to 20 percent of the total premium for employee-only coverage under your plan. (Read this newly finalized Labor Department rule at www.dol.gov/ebsa/regs/fedreg/final/2006009557.htm.)
  8. Ask your health plan vendor if it can help administer the incentive programs or if it has any incentives of its own for your employees.
  9. Adopt incentives for behavior, not health status. An employee can quit smoking—a behavior you can reward. But heredity might make it impossible for someone to lower blood pressure.
  10. Make the program voluntary.
  11. Get a legal opinion before offering stop-smoking incentives if your employees work in a state with “smokers’ rights” laws that prohibit employers from discriminating against smokers in compensation or benefits. 

9 common wellness incentives

  1. Discounted health plan premiums.
  2. Raffles, drawings and prizes.
  3. Paid time off.
  4. Use of paid company time to participate in weight-loss or smoking-cessation programs.
  5. Workplace recognition of teams or individuals.
  6. Special reserved-parking spaces.
  7. Discounts on healthy cafeteria meals.
  8. Reimbursement of gym memberships.
  9. Free athletic equipment, like running shoes.   

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