NCPA - National Center for Policy Analysis

Keeping Employees Healthy

August 5, 2011

Health premiums in America have more than doubled in the past decade.  The proportion of adults who are not merely chubby but clinically obese has more than doubled since 1980, to a third.  Small wonder more firms are offering wellness programs.  This year 73 percent of employers surveyed by PricewaterhouseCoopers said they offered some type of wellness initiative; of those with more than 5,000 workers, 88 percent did, says the Economist.

Such programs used to involve little more than a few leaflets urging staff to exercise, eat less and quit smoking.  Now they are pushier.

  • Many firms ban smoking on the premises.
  • Many also offer incentives for living healthily -- this can mean cash, or something more complicated.
  • This month Humana, a health insurer, launched a program to reward healthy behavior with points that can be used toward hotels and electronic gadgets.

The trendiest human resources departments subscribe to the theory, peddled by behavioral economists, that people are not rational actors -- given the choice between good health later and a doughnut now, the doughnut will usually win.  But people can be manipulated to act more wisely.  Large firms are often the most ambitious.

  • At IBM, employees receive a $150 bonus for exercising, eating nutritious meals and so on. One such bonus is designed not just for an employee but for his entire family.
  • According to IBM's own data, caring for a diabetic child is six times costlier than caring for a healthy one.
  • One study of the exercise bonus scheme showed that participants' annual health costs grew 19 percent more slowly than those of non-participants.

Companies may be nudging now, but in future they may shove, says the Economist.

Source: "Keeping Employees Healthy:  Trim Staff, Fat Profits?" The Economist, July 30, 2011.

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