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Towers Watson: Use of Rewards and Penalties to Drive Employee Health Jumps During 2012

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Posted on 27 Oct 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.

According to the 2011/2012 Staying@Work survey, 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. ? ?“Employers today view health and productivity programs as integral to their overall health benefit strategy and efforts to control health care cost inflation,” said Shelly Wolff, senior health care consultant at Towers Watson. “As companies strive to maximize employee participation in these programs, they are opting for both rewards and penalties. And many are finding these approaches are producing significant results.”

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.

Costs Continue to Play a Major Role

Continuing investment in health and productivity programs is also fueled by concerns about the rising cost of employee illness and time away from work. In fact, health and productivity costs as a percent of payroll totaled nearly 27% in the U.S., a 22% increase from 2005 U.S. levels. What’s more, overtime costs as a percent of payroll increased by nearly 70% from 2009 to 2011.

“The old adage of doing more with less is still a dominant theme,” said Wolff. “But there’s also a new twist. While employers continue to offer and promote programs to address health improvement, the accountability model has shifted over the last two years from one where managers and employees share responsibility to one in which employees are expected to bear the primary burden.”

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%.

Effective Health Management Drives Better Business Results

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

• 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 evidence overwhelmingly shows that effective health and productivity programs can make a real difference to a company’s bottom line,” said Helen Darling, CEO of the National Business Group on Health. “There are unrelenting pressures on employers and employees today, but improving employee health is an opportunity for a true win-win.”??*The Staying@Work survey findings reported in this press release are based on the responses of 248 companies based in the United States. Findings based on the responses of Canadian companies will be issued in November 2011.

About the Survey

The 2011 Towers Watson/National Business Group on Health Staying@Work survey is the second biannual North American survey of companies’ health and productivity programs. The survey identifies the strategies and tactics taken by companies with the most effective health and productivity programs and showcases the significant financial advantage of their efforts. The survey was completed by 335 human resources and/or health benefit managers in the United States (248) or Canada (87) with at least 1,000 employees. The responding organizations employ 7.8 million workers and operate in all major industry sectors.

 

*The Staying@Work survey findings reported in this press release are based on the responses of 248 companies based in the United States. Findings based on the responses of Canadian companies will be issued in November 2011.


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