Employers have a vested interest in encouraging their workers to do things like eat right, exercise and not smoke: Healthy employees generally are more productive and have lower medical costs than their less-healthy colleagues.  To that end, a growing number of companies are implementing workplace wellness programs, many of which include incentives that reward workers for doing things like getting a physical or hitting the gym. More employers are even tying wellness-program requirements to health-insurance premiums, offering discounts to those who achieve health goals or successfully complete company wellness programs.  That has some advocates concerned. They say if premiums go down for some they will go up for others, and the last thing a wellness program should do is make health care more expensive for the people who need it most.  Proponents say insurance discounts can be good motivational tools when combined with other things. They also say they're fair, noting that people with zero lifestyle-related health risks spend a lot less on medical care on average than those with many risks.  I fully support employers implementing "wellness incentive" programs in which employers offer lower health plan premiums to employees who achieve health goals (like not smoking, having normal biometrics, and normal weight), or participate in programs to make progress toward those goals.  I think about this from three perspectives: What drives healthy behavior? What is equitable? What is financially sustainable?  • Behavior: Financial incentives are very effective in getting people to do simple, short-term things, like participate in a health screening. Studies have shown that program participation rates can be pushed from 40% without an incentive to more than 70% with a $200 incentive and to 90% when incentives are built into health-plan premiums or deductibles. There is also good evidence showing that incentives are effective in motivating people to continue performing the behaviors they are already performing, like exercising, eating nutritious foods, etc. There is limited research showing that incentives such as gift cards, cash prizes and extra time off increase participation rates, but these types of incentives are challenging to administer because of handling and tax issues and aren't as effective as incentives built into the health plan.  One major caveat: If an employer's goal is to improve employee health, a wellness incentive must be integrated into a comprehensive program that includes additional strategies to motivate people, training in the skills required to change and maintain positive health practices, and, most important, an abundance of opportunities to practice a healthy lifestyle.  • Equity: Research has shown that people with zero lifestyle-related health risks (like tobacco use, inactivity, poor nutrition, high blood pressure, etc.) have annual medical costs averaging about $3,000 compared to $10,000 for people with many health risks. Employers pay an average of 70% of these costs, and employees pay the remaining 30%. The employee's share would be $900 if everyone had zero risks, and $3,000 if everyone had many risks. In a typical company, the distribution of risks produces average costs of $6,500 a year, so the employees' 30% share is $1,950. This means the employee with zero risks, the employee who is doing everything to eat right, be active, not smoke, etc., is paying an annual subsidy of about $1,050 ($1,950 minus $900) to cover the cost of other people's poor lifestyle choices. Offering these employees lower premiums corrects much of this inequity.  Some argue that premium incentives aren't fair because they punish employees for having poor genetics or challenging life circumstances that prevent them from exercising or cause them to gain weight or smoke. Life circumstances do influence behavior, and wellness programs should address them. But lifestyle—not genetics—is the primary cause of seven of the top 10 causes of death, and the secondary cause for two others.  Others oppose higher premiums for employees who have health risks because they believe these employees might delay or forgo treatment to save money, and end up getting sicker. Not only is there is no evidence linking higher premiums to avoiding necessary care, consumer behavior research predicts the opposite: People who pay more are likely to seek more medical care because they want to get what they paid for.  • Financial sustainability: To survive, an employee wellness program, including the incentives, must pay for itself. A well-designed program can usually pay for itself several times over by reducing medical costs and enhancing productivity, but this usually takes two to three years. Building the cost of the program, including the incentives, into the health benefit plan, and sharing these costs with employees through their share of the premium, provides a way to pay for the program in the first year.  Dr. O'Donnell is clinical professor in the School of Kinesiology and the director of the Health Management Research Center at the University of Michigan. He is also editor in chief of the American Journal of Health Promotion. He can be reached at reports@wsj.com.  Employers have an important stake in finding ways to help their employees improve their health: Better health means lower health-care costs, higher productivity and a better quality of life for workers. Workplace-wellness programs can be a powerful tool to achieve these aims, but only if they are designed well.  There are numerous ways to structure wellness programs, and many of them have been shown to help improve people's health. Offering fitness and nutrition classes on site and stocking office vending machines and cafeterias with healthy foods are just two examples of how employers can effectively promote healthy behavior. Employers also can use small immediate incentives, like cash prizes or gift cards or the potential to earn extra vacation time, to motivate people to participate in wellness activities.  However, linking wellness-program requirements to what employees pay for health coverage isn't an approach that is backed by evidence.  Insurance premiums are set so that, in the aggregate, they will cover expected health-care claims. That means if some employees earn premium discounts as a reward for meeting health measures or participating in wellness programs, others will have to pay more to make up the difference.  There is no scholarly evidence showing that charging some workers higher premiums will lead to employees making meaningful healthy behavior changes. Behavioral economics even suggests that small, frequent and immediate cash incentives may be more effective motivators. . Increasing premiums for some simply creates barriers to workers getting needed care—and ultimately, to being healthy.  Employees work out at a tech company in Silicon Valley.  One of the biggest problems with higher premiums is that they often end up penalizing the people who are least able to afford insurance or meet wellness-program requirements. Lower- and middle-income families operate on tight budgets. A workplace wellness program in Wisconsin increased overweight employees' premiums by more than $100 a month if they didn't meet goals such as losing weight, which evidence shows can be very challenging. That kind of increase creates a real cost barrier for many families. The last thing a wellness program should do is make health coverage less affordable for those with greater health risk factors and whose health could most benefit from certain health services. Studies have found that being uninsured or underinsured leads people to delay or forgo needed care, making them sicker—and their health care costs higher—down the line.  Proponents of insurance incentives claim they are fair because people with no lifestyle-related health risks typically use less medical care than those who have many. It's important to remember that a person's health status is affected by more than just personal behaviors. Genetics, socioeconomic factors, environmental factors and accidents all affect an individual's health outcomes and medical costs. Premiums should be distributed equally, based on the understanding that some people who seem healthy today could experience unforeseen health problems in the future. Cost barriers to purchasing insurance only hinder people's ability to work with a doctor to improve their own health—the supposed aim of wellness programs.  Some say that building the cost of a wellness program, including the incentives, into the company's health plan gives employers a way to pay for the program in the very first year. But employers can build financially sustainable wellness program without charging some of their workers discriminatory premiums. A well-designed wellness program will pay for itself over time by slowing down increases in health care costs, reducing absenteeism, and boosting productivity.  Offering employees activities and supports proved to induce healthy behavior changes is the strategy most likely to improve workers' overall health. Charging people more for insurance isn't. If employers want their wellness programs to work, they should stick to the evidence.  Ms. Mitts is a health policy analyst at Families USA. She can be reached at reports@wsj.com.  A version of this article appeared February 19, 2013, on page R5 in the U.S. edition of The Wall Street Journal, with the headline: Should Employees Get Insurance Discounts for Completing Wellness Programs?.
Proponents of the idea say it's a fairer way to distribute costs. Others say it might backfire and lead to higher costs for all.