NCPA - National Center for Policy Analysis

More Employers Offer Financial Rewards to Stay Healthy

November 18, 2011

As U.S. employers seek to address rising health-related costs, their commitment to programs that improve the health and productivity of their workers is holding firm.  However, 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 of 335 midsize to large companies by Towers Watson, a global professional services company, and the National Business Group on Health.

  • The use of financial rewards in health management programs increased by 50 percent 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 percent to 19 percent, and is expected to double again by 2012 when over a third (38 percent) of respondents plan to have penalties in place

While many of these activities and programs can prove costly, both in their financial outlays and in the opportunity cost of time lost, employers continue these directives because of the return on their investment.

  • Health and productivity costs as a percent of payroll totaled nearly 27 percent in the United States, a 22 percent increase from 2005 U.S. levels.
  • Those companies that implemented the most effective programs achieved industry-adjusted average revenues per employee that were 40 percent higher than low-effectiveness companies.
  • They also had success in reducing 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.

Source: "Use of Rewards and Penalties to Drive Employee Health Jumps during 2012," Towers Watson, October 25, 2011.

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