Six years ago, The Jackson Laboratory was in trouble. In 2007, The Jackson Laboratory's per capita health costs were 40% higher than its provider Aetna's book of business, large ly because of its location in Maine, where 55% of adults are overweight, and 38% of teens and 76% of adults don't exercise. Health care costs are 19% of the state's gross domestic product (other states average 13%), and health care is the strongest job creator in Maine, a sign that more people use the health systems there.

Jackson Labs, a genetic research laboratory and supplier of more than 1,000 strains of mice for lab testing worldwide, was getting killed on costs, so the company made a big investment in a two-pronged approach: drive employees to use the more cost-efficient and outcomes-based area hospital, and build health incentives into its benefit design to change behavior.

The company went to the Maine Health Management Coalition, a nonprofit organization with over 60 members, including public and private employers, hospitals, health plans and doctors, that collects data and helps members assess where their trouble areas are and how to reallocate funds to drive change. MHMC employers represent 93,000 Maine employees and 110,000 family members of those employees.

MHMC spit back numbers that Jackson's employees were spending 25% more than other employers in the coalition. "It was a cost crisis that created the need to do something. We knew the costs were high, but we didn't know why or from where. We explained it away a lot of times," says Wayne Gregerson, director of total rewards at Jackson Labs, adding that they had explained away their costs because of Maine's overall costs. "It's not us, it's everybody."

Using the data from MHMC, Gregerson found that overall medical costs were not outrageous, but bills from hospitals were 50% more per capita than other members' in-hospital payments. However, its incidence of disease was lower than the aggregate coalition members. "It wasn't the state of health [driving costs]," Gregerson says.

Gregerson, along with executives from Jackson Labs, met in 2010 with the four regional hospitals about this discrepancy and ultimately put their business up for bid, in the end choosing one hospital that had the best outcomes. The change did not come without conflict, however, and local media picked up the story as a controversy between the employer and area hospitals.

But in the end, the approach to go straight to the health care provider worked.

The company then incentivized employees to receive care from that one hospital - Jackson Labs pays 95% of the bill if employees go to the designated provider, but only 80% if employees go to other hospitals.

Of course, getting employees to better-performing and lower-cost providers is only one step.

At first, Jackson Labs tried everything, a "Chinese menu approach," as Gregerson calls it, which was moderately effective. There were $50 gift cards for taking a health risk appraisal or for meeting with a health coach. Eventually, the company launched a high deductible plan in 2011. It then set up a wellness program called "Passport to Better Health." Employees can earn "stamps" in their passports for completing a variety of wellness activities and can earn incentive credits to get their deductible back to $0.

The Passport program uses external motivators to prompt behavior change, and though the program only showed a 1% increase in better nutrition among employees and a 7% increase in better exercise, it's essentially about providing an opportunity for employees to see a need for change.

"You can help people to participate if they're not ready, but if you have small successes, it'll trigger internal motivation, which is the key to long-term behavior change," says Heather Provino, CEO of Provant Health Solutions.

Jackson Labs has seen a 35% decrease in high blood pressure from 2007 to 2011, an 82% decrease in high blood sugar, a 33% decrease in the incidence of tobacco use and a 13% decrease in overall weight. There was an increase by 50% of "low-risk" employees between those same years, and a 67% drop in "very high risk" employees.

Gregerson says he thinks these numbers not only mean they have lowered costs, but that the company has also improved employee health. Jackson Labs saw a 19.4% decrease in annual member cost from 2009 to 2010 and a 30% decrease in in-patient medical costs.

The days of providing gift cards for biking to work or doing a health screening are gone, but some experts question whether these more advanced health incentives built into benefit design really work.

Ted Rooney, Pathways to Excellence project advisor at MHMC, says the key to making incentives work long term is to engage beyond external motivators.

"If you look at the incentive as the intervention, then of course it'll go away if you stop paying - it's just an economic incentive," he says.

Incentives get employees in the door, but "if you can't find a way to get into their heart, nothing will change. The incentive is the tip of the iceberg; incentives by themselves do nothing. It's incentives in a good program that work," says Rooney.

For the employee to connect that what they are doing will have an effect on their lifespan and productivity, there has to be someone on the ground, Rooney maintains. And while putting a person on the ground is not always the cheapest option, it's imperative if employers want employees to make that connection.

Jackson Labs, for example, noted that its insurance company's chronic disease program didn't work for the employee population, so it partnered with its hospital of choice to aid in the building of a chronic disease unit and, in return, the nurses from the unit come to Jackson Labs to meet with employees.

Even with all these changes, Jackson Labs still has employees who drive up costs and make not-so-smart lifestyle choices. But human nature doesn't fit neatly into one program.

"I wish this was easy. I think that's why some people put in an incentive program and expect magic bullet," Rooney says.

Gregerson sees the program as a success. In 2010, Jackson Labs was only 16.5% higher in total medical costs than Aetna's overall book of business, a marked decrease.


Making incentives work

Some in the industry say that incentives don't work, that they only work well as long as they're in place and the employer keeps the incentive going, and that if employees switch jobs or the employer doesn't keep communication about the incentives fresh, the effect wears off and behavior goes back to ground zero.

Linda K. Riddell, principal at Health Economy, LLC, says that keeping the effects of incentives going long term is a challenge for employers, especially for those that have an employee population comprised of younger workers who only stay at a job for two or three years.

"For an employer, that might not be bad, because I don't know that many employers have long-term workforces, so if you only have them for even five years, that's OK," she says. But creating incentives also brings behavior change to a "market norm." "The problem is when a person gets paid to do something. It brings the transaction into what behavior economists would call a 'market norm' vs. a 'social norm.' It's like Tom Sawyer whitewashing the fence and convincing the other kids that it's the best thing to do vs. when the social motivation is driven by the money."

Riddell says behavior change also has to take into account the context of health. Jackson Labs did this by getting data about the Maine population: The state overall ranks 32nd in per capita income, and low-income populations tend to smoke more, have poorer nutrition, more substance abuse, obesity and subsequently untreated chronic illness.

"You can talk a blue streak about nutrition, but that's not what a person thinks about when they go to their mother's house for Sunday dinner - it's not relevant. Mom makes mashed potatoes and gravy and that's Sunday dinner," she says. "It's the thousands of details around someone's life, and you can do more for the high-school educated workforce by training managers to listen vs. pumping up a walking program."

A good incentive program can take anywhere from 24 months to five years to see outcomes, and if a current benefit design is more paternalistic, it will take longer to communicate a more aggressive approach. According to Rooney, success comes with the combination of a good vendor and the right management, culture and incentive structures.

"Where we're successful is that we don't do a bunch of glamorous things. We're in the trenches every day about health promotion. It's working with employees one by one. It's not a mass audience. We want them to achieve better health," Gregerson says.

Lisa V. Gillespie is a writer based in Washington, D.C. and a former associate editor at EBN.




Stop obsessing over wellness ROI

By Heath Shackleford

Within the span of a few short weeks, I read one study touting a 7-to-1 return on investment for wellness programs, followed by a second report stating wellness has little financial ROI, if any. I also came across multiple articles citing the popular Harvard study, which concluded that wellness produces a 3.27-to-1 ROI, and blog posts refuting the validity of the same Harvard study, questioning its ability to offer decisive evidence that wellness programs generate financial returns.

My reaction to these dueling headlines is simple. As an industry, we should step away from the calculators, stop torturing the numbers and gain a bit of perspective. There is no return on obsessing over the ROI of wellness programs.

The only thing these headlines confirm is that ROI is hard to measure. There are lots of variables and variability among programs. Intangibles that are difficult to quantify. Value that is hard to fully claim without regard to the rest of the health care equation. Not to mention accounting for things that would have happened but didn't because of wellness interventions.

Our obsession with ROI started logically enough. In a quest to establish credibility, legitimacy and meaningful impact, proponents of wellness turned to financial ROI as the central value proposition. Maybe that was necessary to recover from a history where wellness was too often seen as a feel-good, nice to have perk instead of a mission critical driver of positive business outcomes.

But because of the hard sell on financial performance, we have perpetuated a myopic view of wellness and all that it has to offer. What's more, we've placed unnecessary pressure on wellness to generate results that are largely unrealistic, i.e. deliver immediate financial value.

Wellness is about more than reducing health care costs. It's about creating massive value for organizations. Some might suggest this is stretching reality a bit. Those people have never seen a wellness program properly implemented and continually supported over time.

One recent report cited, almost apologetically, that although there was no short-term financial return, the wellness program in question did reduce hospitalizations by 40% for targeted conditions. It's a sad day when there's not enough value in preventing numerous employees from having heart attacks to unequivocally declare such a program as being a wild success, simply because these outcomes didn't immediately deliver a hard financial return.

What we need to do now is remember why we started offering wellness in the first place, which was not solely to generate a financial return. And we need to shift our attention to helping employers address some of the more pressing issues that are actually holding wellness back, such as engagement.

If we want to continue getting better at calculating the financial returns associated with wellness, then so be it. But we need to be honest and ask ourselves what are the chances that we'll find a bulletproof, undisputed methodology for measuring ROI that can be consistently applied across populations and programs? And are there better ways to invest our time and energy?

Companies like Apple have proven again and again that if you focus on doing things the right way, you'll succeed. I think the same is true with wellness. In the case of iPhones and iPads, it's all about creating a high-quality product that brings with it a powerful user experience. For wellness, it's taking care of your people the best way you can. Do that, and the financial rewards will find you. No calculators required.

Heath Shackleford is the founder of Good.Must.Grow, a marketing agency focused on social enterprises, health and wellness and nonprofits.This article originally appeared on EBN's blog, Employee Benefit Views. To join the discussion, go to

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