Because of skyrocketing health care costs, employers are increasingly implementing health and wellness programs for employees. If employers can motivate workers to live healthier lives, employees won't tax employers' health care plans or take as much time off from work to take care of health-related issues.
In "Fit to be Paid: The Dynamics of the Wellness Reward Market," a webinar presented by Celent Senior Analyst Red Gillen, the best way to encourage employee participation is to provide them with rewards.
Gillen said companies can expect to see a 20 percent to 30 percent increase in participation if employees are provided incentives.
Employers can reduce health insurance premiums or dole out cash to workers who successfully complete smoking cessation or weight reduction programs, Gillen said. Another popular offering is prepaid cards.
According to Gillen, closed loop, private-label gift cards and open loop, network-branded, general purpose reloadable prepaid (GPRP) cards are the most popular types. But Gillen asked, "Which one is more attractive to being a motivational tool?"
Retailer gift cards are popular because of their low cost; they are two to five times less expensive than GPRP cards, Gillen said.
But GPRP cards are popular with employees as well because they can be used anywhere the card brand (Visa Inc., MasterCard Worldwide or American Express Co.) is accepted.
For that reason Gillen admits GPRP cards seem more engaging. But the counter argument is that GPRP cards will be swallowed up in employees' day-to-day living expenses. They will use the cards to buy gas or pay for groceries, not as a special treat or gift to themselves for completing wellness programs.
Like most markets in which prepaid cards are utilized, wellness programs require several players: health plan providers, wellness program vendors, rewards aggregators (program hubs that integrate the various systems) and rewards vendors that are responsible for fulfillment of rewards to program participants.
Gillen cited American Express Incentive Services LLC, Citi Prepaid Services and TSYS Loyalty Inc. as examples of rewards vendors.
Traditionally, many employers have opted to institute what Gillen called "simplistic" wellness programs in which employees receive rewards at the successful completion of programs. Gillen believes programs based on points systems, while being more complex to operate, can also be more effective.
Gillen compared a wellness points program to an airline's mileage program. As travelers accrue miles of travel via an airline, they earn points that can be redeemed for flight upgrades, free flights and discounts on car rentals.
Wellness programs can be structured the same way, with points earned for successful completion of stages in programs; rewards are triggered once a certain number of points are earned.
Gillen predicts the wellness rewards market will explode in the next few years - exceeding $2.7 billion by 2013. The market is expected to be dynamic because the need for businesses to reduce health care costs will be enormous.
"The idea behind wellness is that if you can address employees or individuals' health conditions early on - nip them in the bud - you basically avoid a lot of costs," Gillen said. "Look at smoking, stress, obesity and so forth," he continued. "It's widely accepted that the common cause of these chronic conditions and diseases is due to behavior. So people smoke - that's a behavior. Perhaps people eat too much - that's a behavior. People don't exercise - that's a behavior.
"But the underlying thought is that if you can somehow reverse this behavior, you could correspondingly reduce the costs associated with these chronic conditions."
Addressing chronic conditions before people get sick is increasingly being done through the use of wellness programs, Gillen said. With programs tied to prepaid cards, ISOs and merchant level salespeople can improve the health of their bottom lines.
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