Companies that want to reduce their health care costs see two ways of doing so: shift more costs to employees and reduce utilization by helping workers adopt healthier lifestyles. We've covered the potential of measuring the return on investment in wellness before. However, a separate question is whether it makes sense to go beyond simply offering wellness programs to offering some type of financial incentive for participating in wellness programs and for achieving positive results.

For many employers, incentives are the right thing to do. A survey of 147 large and mid-sized companies conducted by Fidelity Investments and the National Business Group on Health found that the use and amount of wellness incentives is increasing. The study found that companies offered incentives that averaged $430 per employee in 2010, a significant increase from the $260 per employee offered in 2009. Wellness programs can include smoking cessation, weight loss, and exercise programs. Incentives can be in the form of lower healthcare premiums, cash, gift cards, or contributions to health savings accounts. Starting in 2014, the Patient Protection and Affordable Care Act will permit employers to reduce the cost of health care coverage by 30% as a reward for employees who participate in a wellness program and meet certain health-related standards.

But is spending money on wellness incentives an effective way to maximize that companies' return on that investment? Although incentives can motivate short-term changes, there are questions whether those incentives motivate people toward long-term healthier lifestyles. For example, a review of 17 studies conducted by an Oxford University research team found no difference in success rates among individuals receiving financial incentives to participate in smoking cessation programs. However, the study did find that financial incentives can help improve participation rates in smoking cessation programs. Assuming a consistent success rate, simply getting more people into the program is likely to lead to greater numbers of former smokers. However, it is unclear whether that level of success is enough to make the investment in incentives worthwhile or lead to long-term success at smoking cessation.

Other research tells a more positive story. A study of 878 employees of a large U.S. employer conducted by The Center for Health Equity Research and Promotion found that employees who received information about smoking cessation programs and a financial incentive to participate had much higher success rates than employees who just received information about the program and no incentive. The program awarded each participant $100 for completing a smoking-cessation program, $250 for smoking cessation within six months, and $400 for continued smoking cessation for another six months. Compliance was confirmed through biochemical testing.

Here are the success rates for the two groups—employees who were eligible for an incentive and employees who were not eligible for an incentive—at various milestones:

  • Smoking cessation enrollment: 15.4% incentive, 5.4% no incentive
  • Program completion: 10.8% incentive, 2.5% no incentive
  • Smoking cessation within the first 6 months: 20.9% incentive, 11.8% no incentive
  • Smoking cessation after 9 or 12 months: 14.7% incentive, 5.0% no incentive
  • Smoking cessation after 15 or 18 months: 9.4% incentive, 3.6% no incentive

If companies continue to invest in these types of incentives, they need to track ongoing research into their effectiveness.