The average cash incentive has increased from $204 in 2008 to $329 in 2009, finds a recent study on incentives in corporate wellness programs.

"For several years employers have become increasingly interested in health management and wellness programs for their employees as a way of keeping them healthy and productive. By marrying incentive programs with traditional health and wellness programs, employers can encourage and shape employees' behavior," says Katherine H. Capps, president of Health2 Resources, a Virginia-based health communication firm that sponsored the study with the National Association of Manufacturers.

The value of incentives range from $1 per pound for weight loss to annual premium reductions, the most commonly used incentive, valued at more than $1,500. After premium reductions, merchandise or tokens and gift cards top the list of popular carrots, according to the Health2 Resources study, whose 372 respondents employ 1.8 million workers.

In a separate PricewaterhouseCoopers survey, 64% of employers offer some form of incentive to encourage employees to complete a health risk questionnaire, up from 57% in 2008.

Of those employers, 12% of respondents offered cash or gift card incentives valued at $50-$299 (31% offered a similar incentive valued at less than $50), 29% offered premium incentives equaled to $100 or more (9% over $300).

Also, according to PwC, those companies that offered gift cards or cash with less than $50 value in exchange for taking a health risk questionnaire had a 42% participation rate, versus the 49% participation rate for those companies offering between $50 and $299.

Cash is king

Allied Machine & Engineering Corp. began their wellness campaign five years ago by incentivizing its health risk assessment and personal wellness profile, which garnered a 40% participation rate. The company also offered its 375 employees a discount to the YMCA and free flu shots, for which they saw a resounding 75% participation rate. From there, the company concentrated on its "Biggest Loser" campaign.

"It's gone from having a year-long challenge with gift certificates to winners, to a full-fledged 'Biggest Loser' program," says Beth Carpenter, benefits coordinator at Allied Machine & Engineering Corp.

Close to 50% participated in the "Biggest Loser" initiative, introduced in 2007, in part because of the great lineup of incentives for the winners, which included cash prizes up to $1000 for individuals and a $5,000 prize to team winners.

In addition, Allied added a Healthy Habits program in 2008, focused on encouraging people already in ideal health to keep up the good work. Employees could earn points for exercising and staying within their weight range. The participants were entered into drawings for gift certificates to local businesses.

Despite the recession, Allied has continued both programs, but due to thinning pockets the prizes are not as grand as they once were. Now they offer company merchandise as incentives and award prizes each week, with a grand prize for the top three winners at the end of a 12-week session.

Unfortunately, as the incentives flagged, so did participation levels - now at about 25% participation for the Healthy Habits series. Once the economy picks up, Allied execs are hopeful to reinstate the more attractive incentives.

Even with the more modest awards, the company's efforts have paid off, as a significant number of employees now have reduced their medication levels, which is "in itself a prize," says Carpenter.

"Once people get into it, they realize it's not just about the prizes," she adds. Nevertheless, "people are motivated by 'what's in it for me.' Anything that helps entice them, you're getting them going in the right direction."

Further, companies of all sizes are including spouses and dependents in their wellness outreach, with more than half of the 372 companies interviewed offering wellness or disease management benefits to spouses and dependents.

"[Offering wellness incentives to spouses] has two advantages. One is that about half of the cost of the medical plan is, in fact, for dependents - primarily spouses. Secondly, often spouses can be key influencers on the overall family environment around health. If we can engage the spouses and win their minds and hearts then we can help to accelerate the changes in people's lives," says Michael Thompson, a principal in the global human resources services practice at PricewaterhouseCoopers.

In addition, nearly three out of four employers offer incentives to workers who participate in a health risk assessment, ranging up to $300 annually, with approximately 10% to 15% exceeding $300, finds Health2 Resources.

In the PwC survey, 64% of employers currently give employees incentives to complete a health risk questionnaire, compared to 57% in 2008.

"Incentives have turned out to be one of the key elements to engage people into these programs," says Thompson. "As wellness strategies have evolved, they've started to incent more programs, and some of the more sophisticated programs may incent not just participation in the program, but completion of key milestones within the program as well," he adds.

Measuring results

Moreover, employers are measuring the results from these programs with greater consistency and are finding promising results. In 2007, only 14% of employers measured the ROI of these programs, but two years later 73% are monitoring their results, Health2 Resources uncovered.

Of those measuring, 83% say the programs return better than 1:1 on their investment. As employers' momentum steadily increases, the friction against program success lessens. Nearly every challenge that employers face has abated over time, including the most difficult task of motivating employees.

"A lot of [the direction of incenting wellness programs] is going to depend on where we get in terms of health care reform ... [the uncertainty of health insurance reform] is not stopping employers in adopting these programs, managing these programs and putting them in place, because they know that they work." says Capps.

Employers are clearly looking to the future as two-thirds (67%) of respondents to the PricewaterhouseCoopers survey indicated they were focused on expanding and improving wellness for their U.S. operations - the number one strategy cited by respondents.

A strategy that Carpenter and her team share. "My passion is putting these people first and trying to create programs that will help them and educate them and hopefully make a difference in their lives." But making a difference takes some spurring. With incentives, employers can realize their goals of lowering health care costs while showing employees that they're serious about their health and success.