Plenty of companies these days offer their employees monetary incentives to exercise, lose weight or quit smoking. Join the program, take a physical, track your steps, your pounds, or your other vital stats, and usually, your employer will trim a healthy chunk out of your annual premiums — which, considering how much most workers are contributing to their health insurance coverage, ought to be a strong motivator.
So why aren’t more of us getting healthier?
Mitesh Patel, a professor of medicine at the University of Pennsylvania’s Perelman School of Medicine and a professor of health care management at Wharton, has been researching some fundamental questions about these programs. He joined the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111 to talk about when they work, when they don’t, and what incentives and structures are most likely to get us to adopt healthier habits.
You can listen to the interview using the player above. An edited transcript of the conversation appears below.
Knowledge at Wharton: Let’s start specifically with the studies you did about weight loss and companies’ exercise incentive plans. Can you go into the background about how this all came about?
Mitesh Patel: Many people are interested in using financial incentives to help motivate employees to lose weight. About 80% of large employers in the United States use some form of financial incentive for health promotion, but there hasn’t been a lot of evidence about how to use these incentives, how they can best be designed, or whether or not they actually work. We conducted a yearlong clinical trial to test whether or not financial incentives delivered through premium adjustments — which is the standard way employers do this — work. They either lower your health insurance premium payments if you meet certain goals or they raise them if you don’t. It’s a common mechanism that companies use, and there are a variety of reasons why we think it may not be the best way. So we conducted a yearlong clinical trial to test whether or not they could be used effectively to help people lose weight.
Knowledge at Wharton: This was one of a couple of different projects that you’ve worked on looking in this same area, correct?
Patel: Yes, we’ve been looking at a series of different things. This one was first to test the standard approach of using the premium adjustment. We’ve done some other work looking at increasing physical activity in the workplace by using cash incentives, framed either as a gain or a loss, as a lottery, and then also done some work looking at whether we should pair people individually or on a team.
“The control group essentially lost no weight, and all of the intervention arms essentially lost no weight.”
Knowledge at Wharton: So going back to the original study: Why didn’t giving people money for their insurance premium really work?
Patel: There are a couple of reasons. In the study, we offered people $550 if they could lose 5% of their weight over the course of the year. They would get that as a premium adjustment, dispersed across 26 payments. In one arm, they got that starting the next year, which is the standard approach.
It means “lose weight now and we’ll reward you next year.” In the other arm, they got it immediately. Then we also had a lottery arm, which was cash incentives, but was designed a little bit differently from our past studies, in that we couldn’t use a function called “regret feedback” that we often use, and we compared that to a control group. We found out at the end of the year that the control group essentially lost no weight, and all of the intervention arms essentially lost no weight. And the main reason is that these incentives delivered through premiums are often hidden, in a way.
They go into your direct deposit. They’re bundled in with larger sums of money from how much you make, and it turns out that a change in your direct deposit from $3,000 to $3,020 is not really noticeable, whereas, if you got a $20 check in the mail, you might have noticed that. And these payments are often delayed into the future. People tend to prefer immediate gratification; they want rewards now. It’s really had to get someone to lose weight and do something that’s hard to do now for a reward that’s next year.
Knowledge at Wharton: Would a plan where the benefit was applied to your health insurance premiums monthly have a better chance of working than postponing it for a year? Or just giving it as a cash incentive immediately?
Patel: There are a couple of insights from behavioral economics that can really help us think about how to better design these incentives. One is offering them immediately, as someone changes their behavior, giving them an incentive to support that along the way, as opposed to a lump sum at the end of the year. The second is making them more noticeable or salient — for example, providing a check in the mail. When someone gets a check or they get cash, they think about what they could use that for, as opposed to a direct deposit that goes in the bank unnoticed. Then, being able to use those incentives to build in daily feedback loops can really help people to change habits in a way that the current premium adjustments are not designed to.
Knowledge at Wharton: I would think the companies are very interested in this kind of information because concern over health care costs is so pervasive right now.
Patel: Yes, there are a lot of stakeholders involved in this process, all who have ways to benefit. The employer can reduce the cost of their employee health plans. The employees themselves want to be healthy. A lot of people want to lose weight, quit smoking, be more physically active, but they have a hard time doing so. These programs are one avenue that they can use to try to help them toward those goals. Then, in terms of the question, “How do we create a culture of health?” — being able to create a system where we’re using these incentives more effectively can really help drive that forward.
Knowledge at Wharton: You mentioned smoking, and you’ve done work looking at that, as well. Is there any major difference between the types of programs designed to help people break the habit of smoking and those intended to help them lose weight, in terms of the financial incentives or how you go about providing those incentives?
Patel: Yes. For each behavior, we have to think carefully about the way that we can design the incentives to work. With weight, we have the benefit of letting people weigh in daily, so we can get frequent feedback, give them frequent incentives.
Smoking is a little bit more challenging because you either quit or you don’t. There is obviously a pathway to decreasing how much you smoke. But some work led by my colleagues, Kevin Volpp and Scott Halpern, has tested ways to use financial incentives for smoking cessation — one large study with General Electric, another with CVS Health — and found that financial incentives in the range of $700 to $800 over the course of a year can triple smoking cessation rates.
“It’s really had to get someone to lose weight and do something that’s hard to do now for a reward that [comes] next year.”
Knowledge at Wharton: Is it easy now for companies to monitor these types of programs and see whom they work for and whom they don’t?
Patel: Certainly. You know, many people are excited about the potential of using wearable devices, wireless weight scales and these other types of technologies to help us get a glimpse into these everyday behaviors, things that we couldn’t track before. Many people are really excited about that potential. But often, there’s this kind of delusion that we can just give someone a Fitbit or wearable device and they’re going to change their behaviors.
We really need to combine it with an effective incentive strategy. That’s what people really need to think about. Now, one thing that’s important is that a lot of people already have some of this technology. For example, 70% of adults in the United States have a smartphone, carry it with them everywhere they go. So there is some infrastructure built in that employers or large insurance organizations can use without having to make that up-front capital investment. If we can find ways to make these programs effective, then it may actually make the case for investing in these types of technologies.
Knowledge at Wharton: So really, it would be just the syncing of a person’s Fitbit or other device through their phone to a source to provide that data for them.
Patel: Right.
Knowledge at Wharton: So that the company’s investment is fairly minimal.
Patel: Yes. The key thing there is: How do we use these programs effectively? If we can get people to lose weight, to be more physically active, then it makes an easy case for being able to invest in these types of technologies.
Knowledge at Wharton: You mentioned that about 80% of large corporations have some sort of a program. They obviously would like to see their employees lose weight and get into better shape, but realistically, how invested are they in these programs? Is the monitoring of these programs such that you get the feedback that you want? Or is it still a process that’s developing?
Patel: The programs have existed for a while. You know, there are wellness programs through all kinds of different avenues and opportunities. I think a lot of that is starting to change now. You know, the Affordable Care Act has increased the proportion of health insurance premiums that we can use as incentives from 20% to 30%, and if you target smoking or tobacco cessation, as much as half of your insurance payment can go as an incentive. That’s really driving insurance companies and employers to think about ways they can use these incentives smarter. Health care costs continue to rise, so there’s more of an imperative to figure out how to do that. And these technologies now allow us to do things that we couldn’t do five years ago.
I think what we are trying to add is the evidence base here. Employers have used premium adjustments for years and years, because it’s a mechanism that exists and because there was no evidence to suggest they shouldn’t. We’re hoping that our work can really shed some light on what types of incentive designs work and what types don’t, so that we can think smarter about how we design these in the future.
Knowledge at Wharton: You mentioned one of the studies that you did looked at individuals, but another involved teaming people up. How did that study differ?
Patel: Yes, we did a second study in which we recruited employees and asked them to form teams of four. Then, we varied the incentive based on either your individual performance, the performance of the whole team, or a combination. Essentially, everyone was asked to achieve at least 7,000 steps a day, which is kind of the minimum amount of physical activity you need to start getting health benefits.
These were folks that had a baseline step count in the 3,000 to 4,000 range, so fairly sedentary to begin with. So this was a significant increase for them. They were in a drawing every other day where they could win $50. If you were in the individual arm, you could get that $50 if you met the 7,000-step goal.
In the team arm, you were only eligible if all four of your team members did, so it really placed the pressure on you to be accountable to your team members.
And then, the combination arm was you could get $20 if you met the goal and a $10 bonus for each of your teammates that did.
We compared that to a control group over three months. And what we found was that compared to the control group, the individual arm and the team arm were no different. They were slightly higher, but essentially, it was as if we were not paying them at all.
Knowledge at Wharton: Right.
Patel: But the combination arm was significantly higher. It actually doubled the proportion of time that people met their physical activity goals by allocating the reward in some degree to the individual, but also, as a bonus to their teammates. You know, a lot of employers are interested in making their interventions — whether it’s weight loss or physical activity — more social.
Knowledge at Wharton: Yes.
Patel: And they’re thinking about pairing people up into teams, but nobody’s really looked at what’s the best way to allocate incentives across the team. This study really sheds some light on the fact that the way we designed them, these incentives can really dramatically impact the outcome.
Knowledge at Wharton: Working within teams, and grouping people together to get them to lose weight, I would think that would have great potential for building team morale within the company — especially if it’s successful.
Patel: Yeah, certainly. When you have teams competing with each other in a workplace, and they all work together, they know that they’re going to strive to get their 7,000-step goal or weigh in.
Knowledge at Wharton: More importantly, get their $50, too.
Patel: Yeah, get the $50 incentive. I think what this brings in is that there’s a way that we can marry financial incentives with social incentives, being accountable to your team, using that competitive drive that people have, to really improve the effectiveness of these programs.
Knowledge at Wharton: I guess the ideal would be to have these types of habits followed without having to have a financial incentive. The companies would certainly like that a little bit better. But let’s be honest, cash or a check in the mail does motivate people.
Patel: Yes, we know that if we design a financial incentive in the right way, we can motivate outcomes. That doesn’t mean that financial incentives are the answer for every scenario. There are certain scenarios where financial incentives may make more sense and others where social incentives may make more sense. On top of that, these programs are often designed as one-size-fits-all. Here’s a program, regardless of who you are as the individual. But we know that people are driven by different things.
Some people may be very focused on the money, other people may be very focused on the competition. We’re looking at ways that we can start teasing that out in making these more patient-centered.
“Often, there’s this kind of delusion that we can just give someone a Fitbit or wearable device and they’re going to change their behaviors.”
Knowledge at Wharton: How do you do that, though?
Patel: One of the ways we can do that is by looking across these studies to see if there are certain characteristics or certain types of people that respond more to one incentive or the other. We’ve done some preliminary work looking at some of our prior studies and haven’t found a large relationship between certain demographic characteristics. What we think might be interesting is that people probably have some type of behavior phenotype. So this is the way they respond; they may be more or less socially connected to others. We’re currently doing studies that are focused on social incentives for weight loss and physical activity, where we’re measuring how connected you are. We’re pairing you up with either someone who you don’t know, or a family member.
Then, we’re testing the differences in outcomes when we change that social connection, and can actually evaluate how your social network changes from the beginning to the end of the study.
Knowledge at Wharton: How difficult is that as a factor in this type of study, when you may study a thousand people at a specific company, and chances are, their mindsets will be different on working out or not working out, or being incentivized or not being incentivized? You’re working with different personalities. I would think it would be hard to get a really good gauge of what works and what doesn’t work.
Patel: Yes, it’s hard to gauge people who are at different stages of their motivation. So one aspect that we can do to improve upon that is to design these studies so that they encourage everyone within the workplace. A lot of workplaces that are looking to increase physical activity will say, “Let’s get a leader board, strive for 10,000 steps, we’ll post who does the most.”
That really motivates the people at the top of the leader board, but doesn’t motivate the other 99% of people who need motivation the most.
Knowledge at Wharton: Yes.
Patel: In our studies, instead of setting a design that helps the power walkers or the runners walk more, we ask them to achieve a floor. We want to get everybody above 7,000 steps. What that does is increases morale, because everybody has a common goal, and it really focuses on the people who are less engaged, more sedentary, obese or overweight to start with, because those are the people who could benefit the most from these programs. I think a lot of programs are not well designed to focus in on those people. And we find that at the end of our studies, the physical activity studies, 96% of people stayed in the study, even three months after we took the incentive away. That’s much higher than you’ll see in an employer program.
Knowledge at Wharton: That’s an interesting point I wanted to touch on. Thinking back where I used to work, at The Wall Street Journal, I remember in our newsroom, you could see out into the parking lot and you would see around lunchtime groups of walkers or groups of runners. These were not people that were linked into any study or linked into a program. This came out of just meeting people within the workplace, and basically, something almost like clubs developed organically.
Patel: Yes, it’s almost like a natural social network that develops because of where you work. You know, a lot of people think that one reason to target workplace programs is because that’s how we can deliver insurance. That’s true, but the workplace also is a natural social environment where you spend eight hours a day, a third of your day, a majority of the time. That’s a time we need to take better advantage of.
Knowledge at Wharton: I am guessing that the ultimate goal of this is to find a benefit for the companies in terms of the health insurance costs that they’re paying out. But the overall effectiveness of the employees will be increased, as well — and that ends up being another bottom line benefit to the company.
Patel: Definitely. I think if we can focus on finding ways to design these programs so they improve the employees’ health, that will lead to all of these other things, including financial savings.
Knowledge at Wharton: What are the next steps in this research to build off what you’ve already done?
“[A leader board] really motivates the people at the top of the leader board, but doesn’t motivate the other 99% of people who need motivation the most.”
Patel: I think there are a couple of next steps. Some of the studies that we’ve done for physical activity and other things have been examining “How do we achieve maximum effect in the short term: three to six months?” We’re now looking at longer periods of time, because we want to think about sustainability of these interventions. We want to think about better ways to bring in social incentives. Are there ways that we can bring people in on the team, use some type of gamification element that has insights from behavioral economics to make people more accountable and tied in toward a goal? How do we focus on really driving towards these clinical outcomes? Losing weight; increasing physical activity; if you’re diabetic, improving your hemoglobin A1C.
We have a study looking at physical activity for patients after they have a heart attack, the time when they really should change their health behaviors the most. If we can take these elements and put them into these clinical scenarios, they can drive greater benefits broadly.
Knowledge at Wharton: Technology would be a factor in terms of this, right? When you’re talking about something like gamification, it’s easier to achieve the benefits from that, because you can put the app involved right on people’s smartphones, which they always have with them.
Patel: Right. I mean, I could leave home without my wallet and I probably wouldn’t go back to get it, but if I left home without my smartphone, I would turn around and go get that. People can’t function without it, and that’s very powerful. The fact that we can leverage technology — it can be game-changing, if we can figure out how to do it right.
Knowledge at Wharton: In terms of our knowledge about how companies can help employees improve their health, we’re just seeing the tip of the iceberg. There is still a long way to go — not only in terms of putting these plans in place, but being able to reach people effectively, because you are talking about so many different types of personalities. And some things work with some people, and some things don’t.
Patel: Right. You know, these programs have been in place for a while, and they haven’t changed or adapted as the technology has changed, as the types of people who are in these different scenarios have changed. The evidence and the research have really come along in the last five years. We know what works well and what doesn’t, and we need to start translating that better into the real world, and then continuing to iterate on that.
Knowledge at Wharton: Do you expect to see these plans having fairly significant changes in the next few years?
Patel: That would be our hope. You know, my colleagues, Kevin Volpp and Scott Halpern did this smoking cessation study with CVS, and CVS implemented it nationally for all of their employees. They are one of the largest employers in the United States, and they created a program called 700 Good Reasons to Quit, where people could put down $50 to enter in the program and have a chance to win $700 if they quit smoking. That was one of the fastest translations from research and creating evidence to actual implementation. We’d like to see more of that as this new evidence continues to come out.
Knowledge at Wharton: You mentioned GE was another company that you worked with. What are some of the things they have learned, and that they have tried to implement?
Patel: Yeah, that was based off a study that my colleague, Kevin Volpp did, one of the first smoking cessation studies looking at financial incentives. They found a tripling in smoking cessation rates. Now, I think one of the things that they found was when you have that kind of finding, how do you then implement that in the real world? There are some folks who think that it’s unfair to give an incentive to people who aren’t healthy and not to people who are.
Knowledge at Wharton: Right.
Patel: The people who don’t smoke are not eligible for these types of incentives, so, we need to think carefully about how we design that program, how these incentives are framed, whether you frame them as a gain or you frame them as a loss, and whether there are ways that you can do that effectively.
I think we have started to make progress on that, but that’s still something we need to work on.
Knowledge at Wharton: But realistically, people who are healthy, who are in good shape, are gaining a benefit anyway, because chances are, they are going to be paying a lower premium to begin with.
Patel: Sure, and I think that’s how those companies have tried to mediate that — by making it clear that people who are less healthy have higher premiums to start with, but they can earn back some of that penalty if they become healthy.
Knowledge at Wharton: But as the companies themselves take steps to go forward with these types of programs, there are things that they could promote — doing a company 5K or a company walk, for example. There are so many more pieces to this that companies probably haven’t invested in yet that will benefit their employees down the road.
Patel: Definitely. I think there is a wide range of opportunities. And I think what’s important is to figure out — for your set of employees, what are the one or two things that you can do? How can you use some of the evidence to guide those designs? Because it’s hard to do five or six things at once, and a lot of times, people need to focus. I do think that while companies are a way to deploy these programs at a larger scale, individuals can take a lot of this insight. There are apps and programs that they can use to put money down or put skin in the game, or just pair up with a buddy who holds them accountable for going to the gym or keeping up with their diet or whatever it might be. There are ways that we can translate this research to make it applicable to individuals who want to start these types of behavior-change programs.
