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Incentives: Experts weigh the expense against the effect of improved participation

In increasing numbers, employers and health plans are experimenting with the use of incentives to boost participation rates in DM and wellness programming. Although there is no question that incentives in the form of cash, reduced healthcare premiums, gift cards, and other items of value can indeed boost engagement in such programs, less clear is whether payers can expect any lasting clinical effect from the approach, or even whether incentives can ultimately pay for themselves in reduced medical utilization.

Plenty of policy experts and consultants are firm believers in the approach. In fact, many believe that incentives are absolutely essential to any well-intentioned effort toward population-based management. However, with much of the financial data around incentives open to interpretation, there are also skeptics, noting that payers interested in using the approach for the purpose of controlling healthcare costs are right to consider incentives with a critical eye.  To take a closer look at incentives, DMA connected with healthcare professionals on both sides of the issue. 

Simple incentives are not enough

“We live our entire lives based on incentives,” says Michael Parkinson, MD, MPH, president of the American College of Preventive Medicine and former executive vice president and chief health and medical officer of Alexandria, VA–based Lumenos, a subsidiary of WellPoint. “They may not be financial incentives, but there are certainly social incentives, cultural incentives, and educational incentives.”

Consequently, Parkinson doesn’t understand why the notion of incentivizing behaviors to align with desired outcomes is so controversial in the realm of healthcare. In fact, he believes that all of the incentives built into the third-party payment system are totally misaligned with what most people traditionally want from healthcare: good health and reduced expenses.

Intent on coming up with an alternative approach, Parkinson became one of the chief architects of the consumer-driven model offered by Lumenos—a model that relies heavily on incentives to get members to fill out health risk assessments (HRA), engage in appropriate DM programming, and utilize cost-efficient care. 

He explains that in the Lumenos plan, preventive care is covered 100%. For additional healthcare services, funds are set aside by the employer in health savings accounts (HSA). That, in and of itself, is an incentive to spend more wisely, he says, because people see that money as their own. If there is money left over in the account at the end of the year, that money is rolled over into the funds set aside for the following year’s healthcare spending. 

“It really gets someone’s attention when they see that Lipitor is $120 per month along with a $20 copay, and lovastatin is $17 per month,” he says. Similarly, he points out that people stop using the ER for primary care when they see the fees being deducted from their accounts, and they become more discriminating on the basis of quality in selecting their providers. 

In addition to the HSAs, Lumenos members receive $50–$100 each year to fill out an online HRA that, upon completion, immediately connects them with a health coach to discuss their risks. Parkinson explains that the financial incentives boost participation rates in the HRA process by 35%–75%. In addition, members who need to work on tobacco cessation or weight-management or members who are chronically ill receive additional incentives to participate in appropriate interventions for those issues.  

Why all the incentives? Parkinson explains that a simple, one-time incentive is not enough to produce sustained behavior change. “The industry likes to look at one incentive in isolation, and then calculate the ROI, but that doesn’t make sense clinically,” he says, noting that behavior change requires a more comprehensive strategy. 

Parkinson acknowledges that he does not have data to show that the Lumenos approach produced specific outcomes or risk changes within a specific employer group. However, he points out that employers using the Lumenos health plan, with incentives, for their entire work force have seen their total healthcare costs remain flat, or close to baseline, for two consecutive years.

Nonincentive factors matter

Ramsay Farah, MD, MPH, the chief medical director of medical management at Hunt Valley, MD–based Health and Medical Solutions, a division of Nationwide Better Health, agrees that incentives can make a big difference in participation rates, but from a study he conducted of his company’s entire book of business, he concludes that the way they are implemented is critically important. 

“For people to participate, you can’t just wait until they finish [the program], and then give them money. You have to give them something up front to get them motivated,” says Farah. In addition, he indicates that there are certain thresholds you have to meet to make a significant effect. “We found . . . that if the incentive is less than $66, it is much less likely that you will get [much of an] effect on participation.”

By their medical nature, some programs require a different approach than others, he adds. For example, although most healthcare organizations identify people for intervention through claims, that strategy does not work well with maternity management programs. “With maternity, by the time you find out [through claims] that someone is pregnant, you have already missed a golden opportunity of getting them in the first trimester,” says Farah. 

Consequently, he recommends instituting a tiered incentive program whereby women who self-refer into the program in the first trimester will receive a much larger incentive than those who contact the program in the second trimester. “Then, if the woman comes into the program in her third trimester, she would not receive any incentive to start, but she would be eligible—along with all the other participants—to receive an additional incentive when she completes the program,” he says.

Whereas Farah found incentives to be powerful, he also found that a number of other factors are critically important to insuring the success of an incentive program. “You need a commitment and a culture from senior management that is expressed to the employees that this [health initiative] is something of a priority to the organization,” he says. 

Further, he emphasizes that the employees must trust that information that they share with any DM or wellness program will be confidential. Otherwise, he says, employees will be afraid that their information, or even their participation in a DM program, will adversely affect their employment.

Farah agrees with Parkinson that a simple, one-time incentive will not have much effect in producing behavior change. However, Farah concludes from his study that a well thought out, longer-term strategy will ultimately save money. 

Long-term effect is an open question

Not everyone is convinced that implementing incentives is a good idea. Although acknowledging that incentives can boost participation in DM and wellness programming, Ian Duncan, FSA, MAAA, president of Solucia Consulting, Inc., an actuarial firm based in Hartford, CT, says he is skeptical that they can deliver an ROI. 

“You are dealing with [DM] programs that are not able to save large amounts of money to start with. And if you then incentivize large numbers of people to participate in the programs—especially if you give them large incentives—you destroy the economics,” he says.

In fact, one trend that mystifies Duncan is the move by many employers away from DM approaches that have demonstrated small, but real, savings toward wellness programming where they are instituting all kinds of incentives to boost participation. “I don’t think there is any chance of demonstrating a financial return [with these programs] for at least the first few years,” says Duncan. “Clearly, you want your employees to reduce their risks, be more compliant, and take control of their health . . . so it is a good thing to do,” says Duncan. “But whether it is a good thing to give every employee $500 to do it, though, I think is a question we should ask ourselves more.”

A better approach, at least from an economic standpoint, according to Duncan, is to consider implementing disincentives, such as higher premiums or higher deductibles, for employees or health plan members who do not participate. 

“It is more valid economically because you don’t have all this extra cost that the employer has to pay out of pocket to get a lot of people to participate in the program. It can be cost-neutral if you structure it correctly,” he says. “These sorts of designs seem to be getting more prevalent. There is a lot of interest in them at the moment.” 

 Duncan acknowledges that it is possible that incentives, implemented in year one, may produce positive financial returns a few years down the road. “If an employer is going to invest in health today, we look at what happens in the next year or so—whether there is a payback. And the answer is generally not enough to pay for the incentives,” says Duncan. “However . . . even though there isn’t a payback today, there may be in five years’ time.” n

Incentives: They’re not just about participation anymore

How do you determine whether to integrate incentives in your health management strategy? The answer is in your data, according to Sue Lewis, senior vice president of health and productivity solutions at Lyndhurst, NJ–based IncentOne. “If you can’t get your population engaged in a program above 30%, that is generally an indicator that you might want to consider an incentive,” she says.

Once they decide to offer an incentive, Lewis advises companies or health plans to get input from the population, perhaps through focus groups or surveys, about what type of incentive would be well received. In addition, she points out that the incentive should be a good fit with the priorities and culture of the organization. “Generally, what we come down to at the end of the day is a very limited design of options which includes cash or gift certificates, which are very prevalent,” she says. “And, of course, medical premium discounts aligned with overall medical management cost models.”

Lewis says incentives of $50–$100 are generally effective in driving individuals to do simple activities associated with their health, such as filling out a health risk assessment. A bigger commitment, such as that required for participation in a DM program, will probably require a larger incentive. “You have to have enough of an incentive to motivate individuals over an extended period of time in engagement,” she says. “And $250 per year is generally pretty sufficient for most groups, and $500 would be very sufficient and motivational for almost any group you are putting an incentive out there for.”

One new trend involves aligning incentives with value-based purchasing, says Lewis. For example, employees are being rewarded for using premium networks, decision-support programs, and other resources that show they are making informed decisions regarding their health. “We are continuing to reinforce healthy behaviors . . . with incentives, but we are also now being asked by employers to design programs that drive people to tools and resources that foster strong consumerism skills, and get them more engaged in their healthcare purchasing,” she says.