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Wellness incentives: Offer some carrots with those sticks

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in Compensation and Benefits,Human Resources

For plan years beginning on Jan. 1, 2014, new federal regulations allow employers to provide financial disincentives (or penalties) of up to 30% on employees who fail to meet certain wellness goals. Plus, you’ll be able to charge smokers up to 50% more for health insurance (see box below).  

Already more than three-fourths of large employers are moving to penalties and/or rewards to help improve employee health, says a recent Midwest Business Group on Health survey.

Some companies will offer penalties but no incentives. That could be a mistake. Experts say that incentives alone or combined with penalties work best.

Finding the right mix: the company

Here are guidelines on creating the most cost-effective mix of carrots and sticks to boost wellness program participation and create healthier employees:  

Tie incentives and penalties to specific goals. Give rewards for reaching individual benchmarks in areas such as blood pressure, cholesterol, smoking cessation and weight loss. Also require a surcharge or higher premium for unsuccessful employees.  

Create different reward tiers. Example: Award the highest premium reduction to employees who complete age-appropriate health checkups and join a smoking cessation, weight loss, exercise or diabetes care program. Then, give the next highest reduction to workers who complete a biometric screening. And so on.

Cash works. Even smaller cash rewards of $25 to $100 can help motivate your employees to complete singular wellness activities, such as attending a health fair or joining a smoking cessation program. Reserve the largest amount of cash perks for the most beneficial and complex health actions, such as losing significant weight.

Spread out incentives for tough cases. Offering multiple small rewards over several months is more effective than just one lump-sum reward. 

Use “soft incentives.” These include company and peer recognition incentives.

Example: Award a “health champion” trophy or plaque to employees who complete wellness activities or goals. Provide recognition via company publications and websites. Also, hand out such rewards by department.

Final tip: Don’t complicate things for employees. Your wellness incentive programs should be easy for your staff to understand and simple for HR to track and measure employees’ results.

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