Business of Well-being

Dangling the Carrot' - Using Incentives to Achieve Corporate Health and Wellness Goals

In recent years, human resource offices across North America have made it a priority to elevate their levels of corporate health and wellness. Companies are clearly recognizing that employee wellness programs benefit everyone, especially as healthcare costs continue to rise.

In the past few years, corporate wellness programs are in 44 percent of U.S. organizations, a number that will likely continue to increase. In order to continue improving and growing corporate health and wellness programs, both employers and employees need to participate. Understanding wellness incentives and how new Affordable Care Act provisions impact program offerings can help drive growth and participation in your programs.

Wellness Matters and The Case for Incentives

The growth in wellness incentives has corresponded to the growth in wellness programs. More than 66 percent of companies believe wellness programs have a direct and positive impact on profitability.[1] Companies that use properly designed wellness programs are also seeing medical costs fall by roughly $3.27 for every dollar spent on wellness programs and absenteeism costs fall by about $2.73 for every dollar spent.[2]

Employees find wellness programs are appealing as well. In fact, 61 percent of employees indicate that they are more likely to be extremely or very satisfied with their job if their organization has a wellness program.[3] Employees recognize that if their employer supports, subsidizes and sponsors a wellness program, they not only care about their physical health and well-being but also are willing to invest in it.

However, there is the catch. While studies have shown that 6 out of 10 employees believe wellness programs are a good idea, only 3 out of those 10 are actually participating. This means something has to drive more engagement. That is where incentives come in. Wellness incentives typically fall into a "carrots" or "sticks" approach.

Employers can use either positive incentives ("carrots") or negative incentives ("sticks") to reinforce their wellness goals. It is important to note, however, that a carrot for someone may actually be a stick for someone else. To drive behavior change it is important to pay attention to the attitudes and values of your specific audience.

In developing your wellness program, it is helpful to consider where incentives will fit right from the beginning. Generally, organizations set aside about a third of their overall wellness program budget for incentives. An employee survey from the National Business Group on Health and Fidelity Investment found that employers plan to spend an average of $521 per employee annually on wellness-based incentives.

Affordable Care Act Compliance Considerations for Wellness Programs

Effective January 2014, the Affordable Care Act (ACA) dramatically expanded companies' ability to reward or penalize employees as part of their wellness initiatives. Incentives can now be 30 percent (formally 20 percent) of the total cost of employee-only coverage. For health contingent smoking cessation programs, the incentives can be even higher - 50 percent of the total cost of employee-only coverage.

Health contingent means rewards are offered as a result of achieving a specific health behavior, such as quitting smoking. To maintain compliance with ACA regulations, employees need to be offered the opportunity to qualify for the program at least once a year, rewards need to be available to all similarly situated individuals, a clear disclosure of the incentives must be provided, and the program must be designed to promote health or prevent disease.

Increasing Participation and Improving Engagement

Creating a successful wellness program and ensuring that your incentives are effective starts with the company's culture. You can offer up all of the health coaching tools, carrots, sticks and other wellness tips you can think of; but without a culture of wellness, it will be hard to achieve success. Below are some questions to consider as you look to build a culture of wellness at your organization:

  • What level of executive and manager support do you have? If leaders do not buy into the program, employees are not going to buy into it either. It is important for employees to see leaders "walking the talk."
  • What is your population's experience with wellness programs? Learn about your employees' experiences with wellness programs so you can tailor your program specific to their needs and interests.
  • How do your wellness program goals align with your broader organizational goals? Aligning goals can have a "two birds with one stone" effect and really help boost participation and create employee buzz surrounding program goals.

In addition to creating a culture of wellness, you can take other steps to boost participation and engagement in your program. For example, hold a kickoff event that is visible to the entire organization to encourage employees to get sign up. Alternatively, host a picnic with free food and competitive games and team challenges.

Hosting any kind of activities that grabs peoples' attention, holds their interest and gets them passionate about wellness will help increase program participation. Finally, do not forget to communicate everything about your company's wellness incentives early and often.

Celebrate successes, and no matter what the carrot might be - perhaps a raffle ticket, a gift card, or just cold, hard cash - remind people what they stand to gain from improving their wellness outlook.

About the Author

Sue Blankenhagen is a Wellness Program Specialist at Ceridian LifeWorks. She has worked in the health and wellness industry for more than 20 years and has experience with worksite wellness, community health education and health promotion. She is a Certified Wellness Coach with a bachelor's degree in General Dietetics from Madonna University in Michigan.


[1] Data from 2013 Aflac Workforces Report conducted by Research Now in January 2013. Participants included 1,884 benefits decisions makers and 5,299 employees in the U.S.

[2] Harvard University Study "Workplace Wellness Programs Can Generate Savings"

[3] Data from 2013 Aflac Workforces Report conducted by Research Now in January 2013. Participants included 1,884 benefits decisions makers and 5,299 employees in the U.S.

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