Wellness Programs

1. WellnessPrograms Eric Samaniego VP Wellness Strategy Keys to Success

2. Agenda • Wellness Programs • - Keys to Success - • Justifying the Cost of Wellness • Comprehensive Program Strategy • Incentive Research • Alere Incentive Strategy • Alere Incentive Data Analysis • Questions Wellness Programs

3. Wellness Programs • JUSTIFYING THE COST • OF Wellness

4. Justifying the Cost of Wellness:The Full Cost of Employee Illness Personal Health Costs Medical Care Pharmacy Medical & Pharmacy Costs $3,376 PEPY 25% Productivity Costs Overtime Health-Related Productivity Costs $10,128 PEPY Turnover Turnover 75% Absenteeism Temporary Staffing Administrative Costs Replacement Training Off-Site Travel for Care Total PEPY = $13,504 Presenteeism Customer Dissatisfaction Variable Product Quality Sources: Edington DW, Burton WN. Health and Productivity. In McCunney RJ, Editor. A Practical Approach to Occupational and Environmental Medicine. 3rd edition. Philadelphia, PA. Lippincott, Williams and Wilkens; 2003: 40-152. Loeppke, et.al., JOEM, 2003; 45:349-359 and Brady, et.al., JOEM, 1997; 39:224-231

5. Justifying the Cost of Incentives:Incremental Cost for Every Risk Factor $11,917 $10,524 $9,086 $7,741 $6,324 $5,097 $3,932 $2,807 Source: Dee Edington, PhD, Health Management Research Center, University of Michigan

6. Justifying the Cost of Wellness:Physiology of Behaviors Research shows a positive correlation between consistent exercise and proper nutrition with improving many illnesses. Significance: Change your behaviors, and improve your health. Wellness Programs

7. Comprehensive Program Strategy Outcomes C O R P O R A T E C U L T U R E

8. Corporate Culture

9. Program Design Wellness Programs

10. Program DesignInfluencing Behavior Change Wellness Programs

11. Program Design Variety of Activities Wellness Programs

12. Marketing & Communication Wellness Programs

13. Marketing & Communication Presentation name_081408

14. Incentives • INCENTIVE RESEARCH

15. Integrated Benefits Institute StudyEmployer Incentives for Workforce Health and Productivity • Published 2008 • Survey of more than 500 employers • Approximately 5 million employees • Employers using Incentives & Disincentives • Incentives 73% • Disincentives 19%

16. IBI Study – Employer Demographics

17. IBI Study Number of Incentives Offered

18. IBI Study – Types of Incentives

19. IBI Study – Subjective Effectiveness

20. IBI Study – Types of Disincentives

21. IBI Study – Program Goals

22. IBI Study – Value of Incentive HOW MUCH INVESTMENT/PENALTY? Per participant per year

23. IBI Study – Key Findings • IBI Finding #1: Employers appear to use a shotgun approach in developing incentives programs. • IBI Finding #2: Employers target participation as their most frequent incentives goal, outcomes much less so. • IBI Finding #3: Corporate culture is critical to a successful incentives program. • IBI Finding #4: Employers often don’t view the incentives and the disincentives they offer as the most effective. • IBI Finding #5: Employers invest substantial sums in incentives and disincentives programs.

24. Incent One SurveyEmployee Health & Productivity Management Programs: The Use of Incentives • Survey conducted April-May 2008 to member employers of National Association of Manufacturers and the ERISA industry Council • Representing 225 employers with 7.6 million employees • From 2007 to 2008 there was an increase from 62% percent to 71% of employers offering incentives • Average incentive was $192 PPPY • Most common incentives: • gift cards • premium reduction • cash • Rewards for participation; completion (38%); outcomes (16%)

25. Book: InfluencerThe Power To Change Anything • Chapter 8: • Design Rewards and Demand Accountability • Structural Motivation • Choose Extrinsic Rewards Third • Connect behaviors to intrinsic satisfaction • Provide social support • Choose extrinsic rewards

26. Book: InfluencerThe Power To Change Anything • Use Incentives Wisely • Don’t use incentives to compensate for failure to engage personal and social motivation. • Take care to ensure that rewards: • Come soon after the desired behavior • Are gratifying • Are clearly tied to vital behaviors

27. Book: InfluencerThe Power To Change Anything • Principles of Extrinsic Rewards • If you’re doing it right, less is more. • Symbolic significance and social forces carry a lot of weight • Reward vital behaviors, not just results. • Reward small improvements in behavior along the way • Reward right results and right behaviors. • Set clear goals and ensure appropriate behaviors • Reward vital behaviors alone. • Reward behaviors that support valued processes • Watch for divisive incentives. • Align your message with your rewards

28. Incentives • ALERE INCENTIVE STRATEGY

29. Meaningful Incentives • Focus on an incentive that best meets the company goals, culture, and resources. • Merchandise(tax consequences; fulfillment) • Cash / Cash equivalent(tax consequences) • Benefits related (premiums, deductibles, coinsurance) • Health Savings Accounts(FSA, HSA, HRA) • Awarded to everyone who reaches the program goal. • Reward participation – Not changes in biometric values • A meaningful incentive has a perceived value that is significant enough to initiate and maintain behavior change over time.

30. How much do incentives cost? • First consider Cost vs. Perceived Value • Cost Neutral  Perceived Value High • company may increase the deductible amount from $250 to $500, and then offer an incentive of $250 reduction in deductible • Cost = Value • $250 contribution in FSA; becomes an expense when employee withdraws from FSA • Cost > Value • $250 Cash • the real cost becomes almost $270 (with FICA and Medicare), and the employee receives around $185 if in a 20% tax bracket. • $250 in merchandise, add the fulfillment fee to the company’s $270 expense, and it is taxable income to the employee.

31. Alere Incentive Structure • Competitive Model Level Credits Incentive Bronze 15 $200 Silver20 $250 Gold25 $300 Significant increase in reward for achieving more. Provide a variety of activities and assign “weighted” credits Establish credit requirements for the Program Cycle Track credits earned through completion of activities Award incentives to those who met the goal

32. Incentive Structure Options • Inverted Model Level Credits Incentive Bronze15 $250 Silver20 $250 + certificate Gold25 $250 + certificate + gift Key incentive paid at lowest level, “recognition” rewards for achieving more. • Single Level Model (one credit criteria  one incentive value) Level Credits Incentive Met criteria 20 $250

33. Incentive Structure Options • Activity Model • Incentive is earned as each selected activity is completed • Activity CompletedIncentive Earned • Wellness Assessment $50 • Biometric Screening $50 • Health Coaching $50 • Disease Management $50 • Healthy Living Program $50 • Challenge $50

34. Incentive Structure • Considerations in Selecting an Incentive Structure • Corporate culture • Perceived difficulty of obtaining the “highest” award • Simplicity of communication • Ease/cost of fulfillment • Value of incentive • Short-term vs. long-term incentive strategy

35. How long should it take to earn an incentive? • Annual Program Completion • Participate in a variety of activities over a long-enough period of time that a behavior change is likely to take place • Single Activity Completion • Provided immediately after activity – low cost items to drive participation in selected activities Which one to use? What are your Goals & Objectives?

36. Recommended IncentivesResearch & Alere Experience • Program Incentive (full 12-month program cycle) • Earn the required wellness credits by (month 12) to receive program incentive. • Optimal value = $300 range • Activity Incentive (i.e. Wellness Assessment) • Complete the assessment by (month 2) to receive the incentive. • Optimal value = $50 range • Combine activity and program incentive strategy

37. Incentives • ALERE INCENTIVE DATA ANALYSIS

38. Alere Incentive Data Analysis • Number of Clients = 62 • Eligible Population N = 524,862 • Client Population Size Range N = 325 – 63,000 • Types of Incentives • Benefits related incentives = 26 • Cash / cash equivalent = 28 • Merchandise = 2 • No Incentive = 6 • Other program variables: culture; communication; program design; # required engagements; program year

39. Alere Incentive Data Analysis • Top 10 clients in percent participation • N Eligible = 42,433 • N Participation = 37,990 (89.5%) • N Participation Range: 76.2% - 99.6% • Program Incentive Value • $301 - $350 = 1 • $201 - $250 = 4 • $151 - $200 = 2 • $101 - $150 = 2 • $ 51 - $100 = 1 • Incentive Type • Benefits Related = 6 • Cash = 4

40. Alere Incentive Data Analysis • Top 10 clients for percent program completion • N Eligible = 92,058 • N Met Goal= 56,833 (61.7%) • N Met Goal Range: 45.6% - 93.7% • Program Incentive Value • $301 - $350 = 3 • $201 - $250 = 2 • $151 - $200 = 2 • $101 - $150 = 3 • Incentive Type • Benefits Related = 8 • Cash = 2 • Average Number of “Touches”: 3.7

41. Outcomes – key metrics Wellness Programs

42. Wellness ProgramsKeys to Success • QUESTIONS • If you have questions after the presentation, please contact your local UBA Member Firm for assistance. • Thanks!

43. References • References • 2008 Integrated Benefits Institute. Employer Incentives for Workforce Health and Productivity. (Survey of over 500 employers representing approx. 5 million employees.) • Edington DW, Burton WN. Health and Productivity. In McCunney RJ, Editor. A Practical Approach to Occupational and Environmental Medicine. 3rd edition. Philadelphia, PA. Lippincott, Williams and Wilkens; 2003: 40-152. Loeppke, et.al., JOEM, 2003; 45:349-359 and Brady, et.al., JOEM, 1997; 39:224-231 • Dee Edington, PhD, Health Management Research Center, University of Michigan • Patterson K, Grenny J, Maxfield D, McMillan R, Switzler A. Influencer – The Power To Change Anything. VitalSmarts, LLC. McGraw-Hill 2008. • IncentOne. Employee Health and Productivity Management Programs: The Use of Incentives. June 2008.