Top 7 hazards of outcomes-based wellness incentives

We’ve seen some clients rush from “0 to 60” by implementing outcomes-only incentive models (AKA contingency-based rewards) within their employee-wellness programs. And while their ambition and enthusiasm are right up our alley (and we know their intentions are good), we also know that they’re heading down a precarious path. Due to recent EEOC regulations, combined with cautionary tales we’ve learned over the years, this type of wellness-incentive model waves a couple of big red flags for today’s employer.

Yes, our wellness platform can handle outcomes-based rewards systems – they’re rather straightforward from a technical standpoint. But just because we (and other wellness vendors) can do it, doesn’t mean that you should. And we’ll urge you to think twice before you do, because here are seven reasons why you should be cautious about outcomes-based incentives in your employee wellness program:

1. Incentives are a poor substitute for imagination and a great wellbeing program. Why start with rewards first? Why spend unnecessarily when you’ve already invested in a wellbeing vendor that promises engagement? Incentives should come last (if at all).

2. Contingency-based rewards only incent the consequences of health, not the determinants of health. No matter how rich the reward, incenting people to somehow achieve a healthy BMI within 12 months doesn’t unravel a lifetime of unhealthy habits.

3. Zero percent (0%) of our clients reward solely based on outcomes because we vigorously consult against it. We only administer systems based mainly on effort, improvement, and sustained engagement in activities that directly improve health. A health assessment, visiting a physician, or claiming to be tobacco-free are all one-time events that reflect the past, not the future.

4. Outcomes-only incentives usually cause associates to grumble (or even despair). For most companies, the majority of employees don’t qualify for the maximum incentive on the basis of being within healthy ranges for biometric values. The common reaction by employees? “I am somehow broken and my employer wants to ‘fix’ me by forcing me to magically lose 30 pounds, and they are going to monitor whether or not I succeed.”

5. The majority of rewards will go to the “already healthy.” Given national trends that more than 2/3 of Americans won’t qualify for healthy BMI, rewarding on the basis of healthy ranges means the majority of the rewards go to the “already healthy” – those who don’t need rewards to keep doing what they’re doing.

6. If you don’t build multiple pathways to earning the maximum reward, you’ll have an unnecessarily high number of requests for reasonable accommodations.  Several activity pathways should exist, so that associates can succeed by building confidence and capability in a variety of participation-based activities that demonstrably improve health over time. Outcomes can be one component, but preferably a small one, and certainly not the totality of the system.

7. Incentives should reward effort and improvement rather than outcomes. The only way to improve health without adding cost is to address health habits, which means rewarding the leading indicators of health rather than the lagging indicators (i.e., biometrics).

Given the most recent EEOC updates, employers face ever-increasing liability. And when huge financial incentives are on the line, a wellness program’s “voluntary” status becomes evermore difficult to justify. Given the many other options available to employers, it’s simply not worth the risk.

EEOC rulings are constantly being written and revised, and each update typically provides additional clarity around what is/isn’t allowed, but you don’t need to wait for an official ruling to think twice about implementing an outcomes-only incentive model. For clients who insist on including outcomes-based rewards, we counter-insist that they do so within the following parameters:

• Include multiple incentive pathways to the maximum reward value, with participation-based activities making up the majority of options
• Add at least one pathway tied to long-term physical-activity (preferably validated by a device)
• Tie some incentive activities to improvement (e.g., either have BMI in a healthy range OR improve by 5%)
• Discuss incentives LAST, after all other options have been exhausted in order to drive organic engagement without the necessity for unnecessarily rich remuneration

If you have questions, we’ve been consulting on employee wellness best-practices (particularly around incentives) for 10+ years, and would love to chat with you!