Overview. Agenda. Reasons to reward healthy behavior. Market trends. Strategy design best practices. Customer experience

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1 Carrots, Sticks and Spades: Incentive Strategies to Motivate and Sustain Healthy Behavior in Employees Janet Bruno, M.D., M.A Medical Director, OptumHealth Care Solutions 12/03/09

2 Overview Agenda Reasons to reward healthy behavior Market trends Strategy design best practices Customer experience Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 2

3 Why is Behavior Change So Important? Fifty percent of a person s health status is a result of behavior* Decisions, Decisions Should I quit smoking? I don t need a mammogram yet. I didn t know my benefits included a Healthy Weight program. Genetics Environment Behavior 50% Access My cholesterol is high, but I don t know what to do about it. If we can change behavior, we can drastically impact a consumer s health status * IFTF, Center for Disease Control and Prevention Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 3

0¹ Nearly half of employees don t know about work-based wellness programs or don t see them as relevant ² Only 9% of US Consumers have reported participating in a disease management or health

4 What Impact Do Wellness Programs Have on Behavior Change? Wellness programs have been proven to impact health-limiting behavior, but low program participation minimizes the potential impact Wellness programs have demonstrated ROIs from 1:1.5 to 1:3.0¹ Nearly half of employees don t know about work-based wellness programs or don t see them as relevant ² Only 9% of US Consumers have reported participating in a disease management or health improvement program² It doesn t matter how great your wellness program is, if you can t engage the consumer, you can t drive behavior change 1. Serxner S, Baker K, Gold D. Guidelines for Analysis of Economic Return from Health Management Programs. The Art of Health Promotion, Forrester. Boehm E. Incentives Entice Employees Toward Wellness, June Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 4

5 Meaningful Incentives Motivate Employees to Participate in Wellness Programs Regardless of whether your employer offers it, please indicate whether each of the following would encourage or discourage your participation in a health improvement program at work. Financial incentive for reaching certain health milestones (e.g., goal weight, cholesterol level) 10% 32% 58% One-time financial incentive for completing a health risk assessment 9% 35% 56% One-time financial incentive for participation in health counseling 11% 36% 53% Reduced insurance premium for participation in health counseling 11% 35% 53% Doctors or nurses available at your work site at no charge 14% 38% 48% Health status or improvements tied to your work bonus 22% 35% 43% 72% of respondents report that at least one of these incentives would encourage program participation Discourage (1,2) Neutral (3) Encourage (4,5) Source: Forrester. Boehm, E. Incentives Entice Employees Toward Wellness, June Forrester s North American Technographics Healthcare and Travel Online Survey, Q Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 5

The Power of Rewards Even employees who resist wellness programs say that incentives would encourage their participation About 65 percent of employees with neutral or negative attitudes toward

6 The Power of Rewards Even employees who resist wellness programs say that incentives would encourage their participation About 65 percent of employees with neutral or negative attitudes toward work-based wellness, reported that at least one of the incentives they were asked about would encourage their participation* Nearly half of the employees with negative attitudes said a cash reward would encourage them to complete a health assessment* More than half of the employees with negative attitudes report they would be encouraged by a financial incentive for reaching a health milestone* * Forrester. Boehm, E. Incentives Entice Employees Toward Wellness, June 2008 Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 6

7 Market Trends 12/03/09

Key Factors Influencing Market Penetration of Incentives Public sentiment is shifting toward acceptance of higher insurance rates for people with unhealthy lifestyles¹ Regulations surrounding

8 Key Factors Influencing Market Penetration of Incentives Public sentiment is shifting toward acceptance of higher insurance rates for people with unhealthy lifestyles¹ Regulations surrounding incentives for health-related behaviors are becoming less stringent (e.g., Bona Fide Wellness Programs)² There is movement away from employer-sponsored plans and a shift toward self-managed work lives Plan designs with clear financial incentives are popular among employers There is an increased trend for use of punitive measures among employers, carriers Trends show increased cost-shifting from employers to employees Employers are more willing to offer incentives to soften the impact of the buy-down for some employees 1. Wall Street Journal/Harris Poll 2. Proposed by Departments of Treasury, Labor, Health and Human Services in January 2001; 3 SRG: Membership Attrition Rates Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 8

Employer Adoption of Incentives is Growing Incentive usage among employers increased by 9 percentage points in 2008 Percent of employers using incentives 72% 70% 68% 66% 64% 71% 9% increase 62% 60%

9 Employer Adoption of Incentives is Growing Incentive usage among employers increased by 9 percentage points in 2008 Percent of employers using incentives 72% 70% 68% 66% 64% 71% 9% increase 62% 60% 62% 58% 56% Source: IncentOne. Capps K; Harkey, J. Employee Health & Productivity Management Programs: The use of incentives, June 2008 Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 9

Employers Use a Variety of Incentives Change in type of incentives offered for health and wellness programs 2007 over 2008 45% 40% 35% 30% 25% 20% 15% 10% 0% 17% 28% 5% Most Popular Gift Cards 41%

10 Employers Use a Variety of Incentives Change in type of incentives offered for health and wellness programs 2007 over % 40% 35% 30% 25% 20% 15% 10% 0% 17% 28% 5% Most Popular Gift Cards 41% 26% Greatest Decline 25% 24% 18% 19% 15% 14% Premium Reductions Cash Bonus Merchandise Health Account Contributions Spring 2007 Spring 2008 Source: IncentOne. Capps K; Harkey, J. Employee Health & Productivity Management Programs: The use of incentives, June and 2008 Spring Surveys of NAM and ERIC membership Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 10

Employers Target a Variety of Activities Source: proprietary research Employee Action/Behavior Employers Offering Financial Incentive (%) Full coverage of preventive services 53% Completion of health

11 Employers Target a Variety of Activities Source: proprietary research Employee Action/Behavior Employers Offering Financial Incentive (%) Full coverage of preventive services 53% Completion of health risk appraisal 53% Participation in health improvement or disease management program 42% Participation in smoking cessation program 40% Participation in weight management program 31% Management of cholesterol level, blood pressure 21% Completion of consumer education module 12% Maintaining a personal health record 7% Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 11

Use of incentives is more prevalent than disincentives Prevalence of Incentives & Disincentives 73% of employers

8 while the average for disincentives was only 1.

programs are used by about two-thirds of employers using disincentives Copay increases are used by more than 40%

12 Use of incentives is more prevalent than disincentives Prevalence of Incentives & Disincentives 73% of employers used incentives while only 19% used disincentives The average number of incentives used was 4.8 while the average for disincentives was only 1.7 Type of Disincentive Used Premium increases for employees who don t participate in health and productivity programs are used by about two-thirds of employers using disincentives Copay increases are used by more than 40% Source: Integrated Benefits Institute, Employer Incentives for Workforce Health and Productivity, 2008 Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 12

Types of Disincentives by Goals 70% 60% 50% 40% 30% 20% 10 % 0% Support of Disincentives Based on Personal Health & Wellness Factors 63% 62% 52% Smoking Seat Belts Drink Heavily 30% Overweight 26% No

13 Types of Disincentives by Goals 70% 60% 50% 40% 30% 20% 10 % 0% Support of Disincentives Based on Personal Health & Wellness Factors 63% 62% 52% Smoking Seat Belts Drink Heavily 30% Overweight 26% No Exercise Goals for Disincentives Employers are often concerned about the potential impact to employee goodwill with the use of disincentives A poll from the WSJ and Harris Interactive shows lower public support for the use of disincentives for individuals with health problems especially for weight and lack of exercise However, more employees are comfortable with disincentives for smoking and heavy alcohol use perhaps because of their potential affect to others Source: 2005 Wall Street Journal and Harris Interactive Poll of 2,007 adults Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 13

14 Best Practices 12/03/09

Best Practices Incentives Maximize the power of incentives and minimize their limitations Understand HIPAA implications Understand taxation implications Align your strategy with the entire health

15 Best Practices Incentives Maximize the power of incentives and minimize their limitations Understand HIPAA implications Understand taxation implications Align your strategy with the entire health continuum Take a gradual, multi-year approach to incentives used a staged approach Choose the right incentive type and value Create universal appeal Communicate, communicate, communicate... Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 15

Maximize the Power of Incentives and Minimize Their Limitations Incentives are: Capabilities designed to support Wellness, Care Management and Disease Management product solutions Catalysts to

16 Maximize the Power of Incentives and Minimize Their Limitations Incentives are: Capabilities designed to support Wellness, Care Management and Disease Management product solutions Catalysts to encourage adoption of healthy behaviors that result in quality of life (short term and long term) Motivators designed to manage health care costs over time Incentives are NOT: Only relevant to Wellness/standalone product solutions Replacement for effective program promotion and communication A solution that resolves all health issues or applies to all populations Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 16

Understand HIPAA Implications Wellness and incentive programs that are likely to cause the fewest issues are programs that require participation or completion and are: Open to a wide variety of

17 Understand HIPAA Implications Wellness and incentive programs that are likely to cause the fewest issues are programs that require participation or completion and are: Open to a wide variety of individuals Completely voluntary Based on program participation not on health status achievement Focused on rewarding a healthy behavior instead of punishing an unhealthy behavior Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 17

18 Understand HIPAA Implications Is the reward based on participation only? no Reward contingent on satisfying a health status factor? yes no HIPAA does not require that additional standards be met HIPAA does not require that additional standards be met yes HIPAA requirements for rewards that require the satisfaction of of a a standard related to to a a health factor apply: a Reward amount 20% of employee-only coverage or less Designed to promote good health or prevent disease and is not overly burdensome Offered at least once a year Alternative standard available Availability of alternative standard disclosed in plan materials regarding the wellness program no yes Violates HIPAA HIPAA Compliant Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 18

19 Understand Taxation Implications Are wellness incentives taxable? It depends Health benefit incentives are not taxable Reduced health coverage premiums Employer contributions to health FSAs, HSAs or HRAs Cash incentives issued on behalf of the employer may be taxable Cash or cash equivalents (gift cards or gift certificates) may be subject to federal income and employment taxes Taxation of incentives is the responsibility of the employer When in doubt, check with the legal department Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 19

Align Your Strategy With the Entire Health Continuum Stay

onsite behavior modification programs for: Nutrition,

Screenings Immunizations Flu Health Fair Biometrics (i.e. Blood pressure, Glucose, and BMI, etc.

utilization Get onsite behavior modification programs for:

Health Condition Health Assessment Online, telephonic, mail

management Diabetes Asthma COPD Heart Failure Coronary

Cards Premium Reduction Financial Account Credits Payroll

Do not distribute or reproduce without express permission

20 Align Your Strategy With the Entire Health Continuum Stay Healthy Health Assessment Online, telephonic, mail and onsite behavior modification programs for: Nutrition, Physical activity Stress management Pregnancy Preventive Screenings Immunizations Flu Health Fair Biometrics (i.e. Blood pressure, Glucose, and BMI, etc. Other online activities Personal Health Record, Tracker utilization Get Healthy Health Assessment Online, telephonic, mail and onsite behavior modification programs for: tobacco cessation, back health, weight loss Live with a Health Condition Health Assessment Online, telephonic, mail and onsite behavior modification programs for disease management Diabetes Asthma COPD Heart Failure Coronary Artery Disease Cancer Depression Coronary Heart Disease Gift Cards Premium Reduction Financial Account Credits Payroll Credits Merchandise Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 20

Take a Gradual, Multi-Year Approach to Incentives Keep your strategy simple at first, but strive for an approach that incorporates health outcome achievement 16% of employers offer incentives for

21 Take a Gradual, Multi-Year Approach to Incentives Keep your strategy simple at first, but strive for an approach that incorporates health outcome achievement 16% of employers offer incentives for achievement of an outcome goal Health outcome -based Incentives Years 4-5: Complex 38% of employers offer incentives for completion Completion-based incentives Years 2-3: Moderate 48% of employers offer incentives for participation Participation-based incentives Year 1: Simple Source: IncentOne. Capps K; Harkey, J. Employee Health & Productivity Management Programs: The use of incentives, June Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 21

Work Toward a Staged Incentive Strategy Over Time Focus on one time, event-based activities at first, but implement a staged incentive strategy over time Incorporate incentive-eligible activities

22 Work Toward a Staged Incentive Strategy Over Time Focus on one time, event-based activities at first, but implement a staged incentive strategy over time Incorporate incentive-eligible activities throughout the year Make incentives available on an ongoing basis with consistent communications Consider allowing consumers to bank their rewards for a bigger payout in the end Use incentives for more than just one event Example: First complete a health assessment then complete a next step activity like an online health coach program Benefits Keeps consumers engaged yearlong Provides engagement opportunities for those who weren t ready to change earlier Reinforces behavior over time which increases the likelihood of habit formation Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 22

23 Choose the Right Incentive Type: Consider the Pros and Cons Reward Type Gift Cards Cash or Debit Card Merchandise Sweepstakes HRA Deposits HSA Deposits Pros High consumer demand Consumer s ease of use Minimal expiration policies, if any Free of spending purpose limitations Consumer s ease of use Promotes multiple-event campaign Removes the general spend promotes guilt-free self-rewarding Fixed budget cost control at employer level Big-ticket items up for grabs allow for excitement and buzz High adoption rates among consumers Actively engages the employee health care cost management Tax advantage to employer and employee allows for greater value Actively engages the employee in the management of health care costs Tax advantage to employer and employee allows for greater value Cons Taxable to employee in most cases Taxable to employee in most cases and may have expiration time frame Cash does not carry brand recognition and may discourage guilt-free spending Restrictive redemption Taxable to employee (not typically full value) in most cases Requires online audience Typically more expensive due to setup/management Additional legal considerations to account for Limited reinforcement in rewarding a consumer with a chance to win Potentially not as appealing to employees as cash or gift cards more appealing to employer group Costs more than gift cards unless rewards are greater than $ annually Risk of over-contributions (tax event) Real dollars (not employer-owned) Potentially not as appealing to employees as cash or gift cards Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 23

Assign the Right Incentive Value There should be a correlation between the value of the incentive and the level of effort needed to meet a requirement Based on a 2008 Survey: Program incentives

24 Assign the Right Incentive Value There should be a correlation between the value of the incentive and the level of effort needed to meet a requirement Based on a 2008 Survey: Program incentives averaging $192 per person per year are part of an overall employer investment that is expected to yield a return. (IncentOne, 2008)* Incentive value is generally between $100 and $300 per person per year* * IncentOne. Capps K; Harkey, J. Employee Health & Productivity Management Programs: The use of incentives, June Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 24

Create Universal Appeal Design incentive programs to be consistent across all consumer segments Reward all demographics and all levels of health Consider activities that are gender neutral or provide

25 Create Universal Appeal Design incentive programs to be consistent across all consumer segments Reward all demographics and all levels of health Consider activities that are gender neutral or provide options for each gender (prostate exam or mammogram) Accelerate participation and generate excitement for everyone Raffles/sweepstakes can encourage participation at minimal expense Think beyond your benefits-eligible population Invite all employees and spouses to participate Cultivate a culture of wellness Establish support networks at home and at work Ensure you have a consistent and robust communication plan Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 25

26 Customer Experience 12/03/09

27 Customer Case Study Industry: health care Total employees: approximately 22,000 Incentive-eligible population: all benefit-eligible employees Total number of incentive-eligible individuals: approximately 16,300 Multiple carriers: yes Incentive strategy Phase 1: Completion of a Health Assessment to qualify for a $100 gift card Existing employees had 15 days to complete the health assessment in order to qualify for the gift card Phase 2: Employees have the opportunity to earn additional gift cards for completion of incentive-eligible activities/programs Employees can complete either a telephonic or online health coach program to earn a gift card Employees can also complete a variety of online/offline programs to earn additional gift cards including: Biometric screenings at a health fair, telephonic stress assessment, etc. Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 27

Gift Card Rewards Drive Participation Health Assessment Results: 86% completion rate Percent Complete 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $100 Gift Card 86% Without

28 Gift Card Rewards Drive Participation Health Assessment Results: 86% completion rate Percent Complete 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $100 Gift Card 86% Without Incentive 10% Health Assessment Completion Rate Customer Book of Business Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 28

Best Practices Check List Case Study Check List Strategy required program completion or health outcome achievement Strategy was implemented in stages over time Results demonstrated that the right

29 Best Practices Check List Case Study Check List Strategy required program completion or health outcome achievement Strategy was implemented in stages over time Results demonstrated that the right incentive type was selected Results demonstrated that the right incentive value was assigned ($100 $300 per person per year range) Confidential property of OptumHealth. Do not distribute or reproduce without express permission from OptumHealth. 29

30 Thank You optumhealth.com/wellness For more information about Care Solutions from OptumHealth, contact your OptumHealth sales executive or visit OptumHealth Optimizing Health and Well-Being OptumHealth, Inc All Rights Reserved. 12/03/09

Workplace Wellness Programs and Regulatory Requirements

Workplace Wellness Programs and Regulatory Requirements Alliance for Health Reform Briefing June 22, 2015 Karen Pollitz, Senior Fellow Kaiser Family foundation Among Firms Offering Health Benefits, Percentage