As wellness and health management programs have become increasingly common, many employers who’ve seen the positive results of reward-based incentives wither have begun using financial penalties to encourage enrollment in these plans.
Although this can be an effective approach in boosting plan participation among at-risk workers, misusing it can lead to negative reactions from employees.
The logic behind penalty incentives is rooted in behavioral economics, particularly the theory of loss aversion, which holds that a person is more easily compelled to prevent the loss of something than to pursue a reward. The most common penalties for opting out of wellness plans are monthly or annual increases in employees’ health care premiums, copayments, and deductibles.
Some businesses prefer a carrot-and-stick approach, offering workers “gated benefit plans,” which limit employees who don’t take part in wellness programs to limited-coverage, high-deductible plans, while rewarding those who do participate with access to plans that provide better coverage and/or lower premiums and deductibles.
Despite the potential effectiveness of using penalties, this approach can easily upset or anger employees if they don’t understand the broader goals of your wellness program.
To minimize this risk, focus on the program’s overall goal of improving workers’ health, together with as a theme of shared responsibility for the long-term success of the company’s Group Health plan.
“You might need a year of lead time to begin the process of educating employees on why the company is sharing responsibility for their health care coverage,” advises one industry expert. “Only after you get through that incremental education process are you ready to implement the change, especially if it’s a penalty.”
To learn more, feel free to get in touch with the Employee Benefits specialists at our agency.