Use of Incentives to Manage Employee Health on the Rise

October 25, 2011 ( - To engage employees in health management programs, the number of companies using financial incentives and penalties for participation and measurable improvement to health is rapidly on the rise, according to a survey by Towers Watson.

The 2011/2012 Staying@Work survey finds the use of financial rewards in health management programs increased by 50% between 2009 and 2011. By 2012, four in five companies plan to offer some type of financial reward to individuals who participate in their health management programs.   

In addition, the use of penalties more than doubled from 2009 to 2011, rising from 8% to 19%, and is expected to double again by 2012 when over a third (38%) of respondents plan to have penalties in place. While just 12% of U.S. respondents report that they currently reward (or penalize) based on outcomes (such as target BMI or cholesterol levels), an additional 16% are planning this achievement-based approach for 2012.   

A press release said that among employers that offer financial incentives for health risk appraisals, employee participation rates are 46%, compared with 19% for those that do not offer incentives. Participation in biometric screenings is 45% at companies with incentives and 25% at those without. By contrast, participation rates in disease management programs for chronic conditions were low among all respondents at just 14% and show little responsiveness to incentives, increasing to just 16% where incentives were present.  

The 2011 Towers Watson/National Business Group on Health Staying@Work survey revealed that continuing investment in health and productivity programs is also fueled by concerns about the rising cost of employee illness and time away from work. Health and productivity costs as a percent of payroll totaled nearly 27% in the U.S., a 22% increase from 2005 U.S. levels, according to the press release. What's more, overtime costs as a percent of payroll increased by nearly 70% from 2009 to 2011.   

The proportion of respondents that believe employees should be accountable for maintaining and improving workforce health and productivity rose from 78% in 2009 to 83% this year. However, the percentage of employers that believe managers should be accountable dropped from 64% to 42% over the same period. Despite a five-fold increase, the percentage of employers that believe their employees are held accountable is still only 10%.   

While 89% of employers cite health and productivity programs as core to their organizational health strategy, companies with effective health and productivity programs achieve significantly better business outcomes. According to the survey, employers with effective health and productivity programs are doing much more to link senior leaders to program performance, engage employees in the management of their health with incentives, measure program outcomes, target preventable causes of employee absence and personalize communications for specific employee populations.   

In particular, top performers achieved:  

  • Industry-adjusted average revenues per employee that were 40% higher than low-effectiveness companies, a difference of $132,000 per employee; and 
  • Fewer lost days due to unplanned absences and disability – which, when combined with savings on health care costs, creates a $27 million annual cost advantage for a U.S. company with 20,000 employees and an average pay level of $50,000. 

The 2011 Towers Watson/National Business Group on Health Staying@Work survey findings are based on the responses of 248 companies based in the U.S.