Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Pay for Prevention at Ochsner Health System

By Brian Schilling

Among the more interesting health benefits questions facing employers today is this: Can employers buy healthy behavior? That is, can a company pay its employees to eat better, exercise more, stop smoking, and otherwise live healthier lives? To say that a lot is riding on the answer to this question is an understatement. About 40 percent of U.S. adults are sedentary; two-thirds are overweight; 20 percent still smoke; nine in 10 have too much salt in their diets. This dispiriting string of statistics plays a major causal role in many chronic illnesses, the treatment of which accounts for about three-quarters of the nation's health care costs.

Can you simply pay people to take better care of themselves?

Starting in 2014, employers will have broad latitude to find out. That's when the federal cap on wellness program incentive payments rises from 20 percent to up to 50 percent of the cost of an employee's health premiums. In other words, employers will be able to tell employees that if they take very good care of themselves, they can save 50 percent of the cost of their health coverage.

Evidence is mounting that this just might work.

A good case in point is the experience of Ochsner Health System—a Louisiana-based nonprofit with eight hospitals, 35 clinics, and about 7,100 benefits-eligible employees. Ochsner began tinkering with home-grown wellness programs in 2003, to promote wellness in the work place including educational seminars and incentives for healthy lifestyle behaviors. The company's experience mirrored that of many other organizations that go the wellness route.

"About 40 percent of our employees participated," said Dorothy Cain, R.N., who coordinated Ochsner's efforts. "That's actually quite good and we felt like the programs had value, but we thought there was room for improvement. We were still watching our health care costs go up every year."

With the full support of the management team, Susan Piglia, director of corporate wellness, and the corporate wellness team started to look for a program that could significantly increase participation. How, exactly, was an open question. "Our goal was to lower costs and engage more of our employees in a healthier lifestyle," she said. In particular, Ochsner wanted to focus on obesity and getting employees moving again.

Virgin HealthMiles
Ochsner found what it was looking for in Virgin HealthMiles, a small and perhaps improbable arm of the Virgin empire that spans music, airlines, banking, and telecommunications. HealthMiles got its start in 2005 after Virgin founder and chairman Sir Richard Branson concluded that the only way to tackle the preventable lifestyle-related disease epidemic was to make it motivating and rewarding. Or, in other words, to make it fun.

There is, of course, a lot more to what Virgin HealthMiles does than simply tying to make staying healthy fun, but fun is a significant part of what makes the HealthMiles program effective. The program encourages participants to issue "challenges" to their fellow employees to, for instance, see who can walk more steps in a day, week, or month. Such challenges are not rare: There are about 5,000 such challenges registered and tracked on the HealthMiles site at any given time.

"Sometimes the challenges can be quite mercenary," said HealthMiles President Sean Forbes, who is himself a longtime participant in the program. "When people notice that I'm a little thicker around the middle, they think I'm soft and can beat me." He confessed that he doesn't always win challenges, but, "the important thing is that I'm always motivated."

The other major component in HealthMiles is cash. The program is billed unapologetically as a "pay-for-prevention" initiative and participants can earn hundreds of dollars in incentives and better still, save thousands on their annual health care premiums by meeting certain activity levels.

At Ochsner, the program works in the following way: employees who wish to participate are given an "activity tracking device" (a sophisticated pedometer) and access to an online platform that helps them accurately capture and track their daily activity. They also check in regularly at one of the 16 kiosks in the Ochsner system to take key health measurements (e.g., body mass index, blood pressure, weight). Based on their level of activity and the results of these check-ins, employees could earn "HealthMiles" or points that allow them to reap up to $300 annually in cash rewards. Employees that reach the Center for Disease Control's (CDC's) recommended activity levels earn a $500 reduction on their annual premium costs, or $2,000 for those with family coverage. In 2010, Ochsner discontinued the cash rewards and currently only gives the insurance premium discounts.

The HealthMiles program makes it easy to participate. The activity tracking device uploads a user's steps via USB cable right at his or her's PC. If an employee wants credit for aerobics classes or cycling to work, he or she can enter that data, too. Members can log in to their personal HealthMiles portal and get information about whether they're getting enough activity, how they're faring against other challengers, and more. Human resources staff receive anonymous, in-depth reporting about aggregate member progress on a quarterly basis. "It's great to see the aggregate reports showing that our people are being more active and getting healthier, but what really means a lot to me are the e-mails that I get from people saying that the program has helped them lose weight or lower their blood pressure," said Cain. "It's a wonderful community builder, also."

The program's first year results speak for themselves: more than 80 percent of Ochsner's employees participated. Nearly 90 percent of employees either improved or maintained their body mass index. About 40 percent of employees have already reached the CDC's recommended levels of activity. And Ochsner's employee-only medical claims were down over $3 million from 2008 to 2009, which is even more impressive than it sounds, considering it includes claims from new employees added to the growing company.

Virgin's Forbes is quick to note that Ochsner's experience is not unique. Virgin HealthMiles has more than 120 clients nationally, with about 500,000 employees participating at any given time. Ochsner's 80 percent participation rate is higher than the average rate of 40 percent, but other companies have done even better. Case studies are posted online at the VirginHealthMiles site.

"It's important to put real money behind any wellness program if you want people to participate," said Forbes. "Where you start to see a big jump is around $500 or so, but it varies from company to company. Ochsner has a $2,000 family premium discount. That kind of money doesn't just matter to entry level workers—it matters to the CEO too."

Is Improved Behavior Here to Stay?
As promising as Ochsner's experience is, the effort is only two years old, begging the question: Will results hold up over time? The issue is being studied aggressively, with ongoing experiments with pay-for-better-behavior going on around the country. The government is setting up a 10-state pilot program to evaluate the efficacy of wellness programs with a "pay" component, and literally hundreds of corporations are doing the same thing on their own.

Starting in 2014, employers will be allowed to offer rewards worth the equivalent of up to 50 percent of an employee's health premiums for participating in wellness programs and meeting health benchmarks—hence the interest in using such incentives to shape behavior. Previously, such rewards were capped at 20 percent. Given the pending ability to offer such rewards, employers naturally want to know whether or not they'll work.

The key, according to Alan Garber, professor of medicine and economics at Stanford University, may be maintaining the incentives indefinitely. "Behavior tends to revert to baseline after incentives are eliminated," he said. "However, I would be reluctant to generalize too much from those studies. For instance, if employee experiences tangible health benefits from a behavior change—not just a change in a number like a cholesterol level—they may no longer need cash incentives to maintain behaviors."

Purchasing High Performance previously reported on another behavior-shaping effort that involved cash payments (see What Happened When GE Paid Employees to Stop Smoking?), which indicated much the same thing: behavior tends to revert to baseline, absent incentives. But if those payments result in a net positive return for employers, as they appear to, they may not care. Certainly, there's no shortage of employers getting their feet wet with incentives. A recent survey by Buck Consultants found that 56 percent of employers offered some form of incentives as part of their wellness program and another 26 percent plan to offer them in the future. Another survey found that of employers that offer incentives, 25 percent offer some sort of medical insurance discounts, 30 percent offer contributions to health savings accounts, and 29 percent offer free health and fitness awards.

"The program works and we're very happy with the return on our investment," said Cain of Ochsner. At General Electric (the subject of a previous Purchasing High Performance article on behavior incentives), what began as a time-limited study in a single location is now becoming another element of GE's benefits package for all employees.

When Is a Reward a Punishment?
Using incentives to shape behavior is not without its detractors. Certain groups, like the American Diabetes Association and other advocates for people with chronic illnesses, have come out against laws that would give employers the added flexibility to offer these very large incentives. AARP has concerns, as well.

Their concerns are not unreasonable. A reward that is very difficult for people with a chronic illness to qualify for becomes, in effect, a punishment for people with chronic illnesses. If everyone in a given company qualifies for an incentive except for certain chronically ill employees, is one group being rewarded or is the other group being punished?

"We have real concerns that incentives tied to a person's premium is a backdoor way to discriminate against people with chronic disease," said Tekisha Everette, director of federal government affairs at the American Diabetes Association. "We have to ensure that if a workplace wellness program uses incentives, they are just that—incentives not penalties tied to premiums that can lead to people being driven out of coverage."

And it's not just a concern is not limited to individuals with chronic diseases. Are 60-year-old employees likely to qualify for rewards under the same program that might work well for 20-year-olds? What about employees who are blind? How would a program like Virgin HealthMiles accommodate an amputee, a person with a bad back, or an expectant mother?

Professor Garber thinks an agreeable middle ground exists. "You want incentive programs to reward outcomes that patients are able to influence by their behavior, not to reward or punish them for outcomes that are beyond their control." Diseases like diabetes have elements of both, but, he says, that wouldn't make it impossible to tease out and reward the modifiable behaviors. Garber suggests using the same standard applied to medicines to assess whether or not they deserve a place in the health care system, "If properly designed incentive programs improve health, we should adopt them just as we adopt medicines that work well. After all, most effective medicines do harm some patients, but it's a risk we take if the health benefits are large enough."

Looking Forward to 2014
With 2014 still a few years off, the real impact of raising the cap on incentive payments won't become clear for some time. But Garber expects the matter to play out in the market in short order. "Employers have been interested in changing employees' health behavior for years. They will experiment with this."

In fact, they already are: half of 600 large employers surveyed by Hewitt and Associates were planning to adopt the kind of "carrot" incentive payments encouraged by the new law. On the flip side, the "stick" approach may be just as popular, with employers expressing equal levels of interest in financial penalties for employees who smoke, won't undergo a health screening, or those who don't participate in relevant disease management programs.

What is clear is that in a few years, employers will be able to exert an enormous amount of financial pressure on employees to act or not act in certain ways. The 50 percent cap on incentives means that for an employee with family coverage, an employer could potentially put almost $6,700 of incentive payments, discounts, and penalties at stake. For employees with single coverage, the amount would be $2,400.

That's not the kind of money many people can afford to ignore, which makes structuring penalties and rewards in an ethical, fair manner all the more important. Those amounts could also make bending the cost curve a tantalizing proposition for employers and wellness vendors like Virgin HealthMiles.

"Incentives are an effective tool in encouraging employees to make intelligent choices about their health," said Forbes, of HealthMiles. "I expect we'll see [employers] get creative about the types and value of incentives that align best with their particular corporate cultures, particularly as government legislation on the matter continues to evolve."

To learn more about HealthMiles, visit

To read more about public and private efforts to leverage behavioral economics, read this article in Modern Healthcare:

For more on the ethical considerations involved in using incentives to encourage healthy behaviors, read this article in The New York Times:

Publication Details