Copyright © 2016 by The Segal Group, Inc. All rights reserved.

EMPLOYEE WELLNESS: A HOLISTIC APPROACH

CBIA 2016 Compensation & Benefits Conference June 22nd, 2016

J. David Johnson, MBA Vice President, Senior Consultant djohnson@sibson.com 202.833.6482

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Understanding the Challenge

Leveraging Behavioral Economics to Help Employees Make Better Decisions Regarding their Health and Retirement Savings

Establishing a Framework for Effective Incentive Design

Some Practical Tips

For Additional Information

Discussion Overview

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Understanding the Challenge

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Source: Rand Corporation – 2013 Workplace Wellness Programs Study

51% of US employers with

50+ employees have a

wellness program

Sample Efforts to Promote Healthier Behaviors

Among employers offering wellness programs:

56% provide Disease Management programs; among these:

85% target diabetes

60% focus on asthma

59% target coronary artery disease

54% focus on heart failure

44% regularly evaluate wellness program; only 2% measure financial impact

80% screen employees for health risks

77% offer lifestyle management interventions; among these:

79% provide nutrition/weight management programs

77% offer smoking cessation

72% provide fitness resources

52% offer stress management programs

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Despite Employer Efforts Limited Engagement

Source: Rand Corporation – 2013 Workplace Wellness Programs Study

21%

10%

16%

Fitness

Smoking Cessation

Weight/Obesity

Disease Management

Participation Rates for Employees Identified

through Screenings or Claims Data

7%

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31% of non-retired Americans reported having no retirement savings or pension

Alarmingly, among those ages 55 to 64, the number is 19%

Almost half of adults were not actively thinking about financial planning for retirement

24% had given only a little thought to financial planning for their retirement

25% had done no planning at all

Of those who have given at least some thought to retirement planning, 25% didn't know how they will pay their expenses in retirement

The Great Recession pushed back the planned date of retirement for two-fifths of those ages 45 and over who had not yet retired

American’s Are Not Saving for Retirement

Source: “Report on the Economic Well-Being of U.S. Households, the Federal Reserve Board, August, 2014

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Leveraging Behavioral Economics to Help Employees Make Better Decisions

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What is Behavioral Economics?

What rationale people should do

What sometimes irrational people actually do

Traditional Economics Behavioral Economics

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Completely

Rational Utility

Maximizing

Person

Behaviors driven by:

Incentives

Information

Capabilities/Resources

CRUMPs vs SIRPs Behavioral Economics in the Workplace

Sometimes

Irrational Real

Person

Behaviors driven by:

Nudges

Guardrails

Habit Cues

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1. Employees often make poor decisions—in a predictable manner

2. Heuristics (mental shortcuts), can influence choices more than a person’s conscious intentions

3. Incentives can be quite effective, if used appropriately

4. Incentives are just one of the myriad tools employers can use to drive healthier behaviors

5. Intrinsic motivation can be the most effective motivator

Helping Employees Make Better Decisions

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Factors Impacting Employee Health

Individual

Drivers

1. Nutrition

2. Physical activity/sleep

3. Avoiding risky behaviors

4. Emotional health

5. Preventive care

Employer

Drivers

1. Culture

2. Environment

3. Programs/resources

4. Incentives

5. Communications

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Spending little time planning for retirement

Not estimating retirement income needs

Not making (or increasing) contributions

Under-choosing target date funds

Under-selecting annuities

Over-reacting to the latest stock market report

Not taking advantage of employer-provided educational resources:

Educational materials and presentations

Income and contribution calculators

Investment guidance, advice and/or managed advisory services

Factors Impacting Retirement Savings

Key Question: Should employers help EE’s make better decisions?

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Converting Good Intentions into Healthy Habits

This year, I plan to:

Drink more water

Walk 10,000 steps a day

Sleep 7 hours a night

Don’t let work stress me

Eat more fruits & vegetables

Quit smoking

Drink less alcohol

Visit my PCP

Get preventive screenings

This quarter, I have:

Completed an HRA

Done biometric screenings

Joined a walking group

Attended a nutrition seminar

Called the Tobacco Quit Line

Scheduled a visit to my PCP

Participated in health fair

Listened to a webinar on Reducing Workplace Stress

On most days, I now:

Take the steps at work

Walk at lunch

Opt for nuts or fruit when I need a snack

Keep my water bottle refilled

Avoid places where people smoke

Proactively change things that create stress at work

Take my medications

Focus of Most Wellness Programs

Key Question: How much impact do these really have—

if they don’t ultimately lead to sustained behavior change?

Where the Real Impact Is

Once implemented, habits require less

ongoing motivation, allowing individual to

focus on creating additional healthy habits

Intentions Conscious Behaviors

Habits

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Factors Impacting Sustained Behavior Change

Intentions Conscious Behaviors Habits Coaching

Attitudes2

Self-Efficacy2

Perceived Norms2

Motivation3

Ability3

Repetition in a Stable Context4

Convenience

Readiness to Change1

Coaching

Sources 1 Transtheoretical Model developed by James Prochaska, PhD, Carlo DiClemente, PhD, and John Norcross, PhD 2 Theory of Planned Behavior developed by Icek Ajzen, PhD 3 Fogg Behavioral Model developed by B.J. Fogg, PhD 4 Research in habit formation developed by Wendy Wood, PhD

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What Can Happen When All Areas Are Not Addressed

Intentions Conscious Behaviors Habits Coaching

Attitudes

Self-Efficacy

Perceived Norms

Motivation

Ability

Repetition in a Stable

Context

Convenience

Readiness to Change

Coaching

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Establishing a Framework for Effective Incentive Design

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When Do Incentives Work Best?

More Effective

Less Effective

Periodic completion of:

Health assessment

Biometric testing

Preventive screenings

Flu shot

Participation in:

Telephonic coaching

Online learning modules

Weight management/ exercise programs

Smoking cessation

Daily routines relating to:

Nutrition

Physical activity

Sleep

Avoiding risky behaviors

Handling stress

“One & Done” “Let’s Give It a Try” Ongoing Habits

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Intrinsic Motivation

Low

High

Ability/Convenience

Low High

Employee D lacks motivation and ability, but would be willing to complete task for $200

Establishing the Optimal Incentive Amount

Employee A lack’s intrinsic motivation, but finds task is relatively easy to do, so $150 incentive is enough to drive compliance

Employee B finds task difficult to complete, but has high intrinsic motivation to do it, so the $150 incentive drives compliance

Employee C would have completed task for <$150

$150

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Maximizing the Motivational Power of Incentives

Losses Motivate More than Gains

“Opportunity Regret” Motivates

Delaying Incentive Minimizes Impact

Lotteries Motivate “What I Want”

Motivates More than “What I Need”

Team-Based Incentives Work

Simplicity Beats Complexity

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Some Practical Tips from Experiments in Behavioral Economics

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Avoid Reward Undermining

PICK-UP TIME AT DAYCARE CENTER1

PAYING FOR CREATIVITY2

1 Source: Uri Gneezy and Aldo Rustichini 2 Source: Lepper, M. P., & Greene, D., & Nisbett, R. E

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Which is more compelling?

Be Mindful of Timing and Delivery Method

Option B

Click here to complete your HRA by July 15th and immediately win a $50 gift card from Amazon.com

Option A

Sometime this year, go to our health plan website to complete your HRA and we’ll reduce your 2017 medical contributions by $50

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Leverage the Motivating Power of “Luxury” Goods

Complete your Biometric Screening and Get…

$200 Meal at a 4 Star Restaurant

$200 Direct Deposit into Your Account

Source: Choices derived from research by Kivetz and Simonson (2002)

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Avoid Choice Overload

Shoppers who stopped 40% 60%

6 kinds of jams

24 kinds of jams

Shoppers who bought jam 30% 3%

Source: Iyengar & Lepper (2000)

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If you are selecting a snack for NEXT WEEK, which would you choose?

74% choose…

If you are selecting a choice for TODAY, which would you choose?

70% choose…

Consider Pre-commitment Strategies

Source: Phelps and Pollk (1968); Akerlof (1991), Laibson (1997)

If given the choice, which snack would you prefer?

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How do we help a 30 year old view

what their life will be like at age 70?

Help Employees Meet their Future Selves

Participants who saw their

future selves contributed

6.2% toward retirement

Participants who saw their

current selves contributed

4.4% toward retirement

Source of Data: “Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self,”

Hal E. Hershfield, et al, Journal of Marketing Research Vol. XLVIII, S23–S37, November 2011

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Think about how Americans die from Heart Disease each year. Is it more or less than 5 million?

How many Americans die of heart disease annually?

Be Careful Setting Anchors

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How many of you set the clock

on your DVD player?

Keep it Simple

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A father and daughter have simultaneously decided to replace their existing vehicles with more efficient models:

• Father increases his MPG from 16.5 to 20 with his purchase

• Daughter increases her MPG from 33 to 50 with her purchase

Who will save the most gas over 10,000 miles?

Leverage the Power of Framing

Both will save about 100 gallons over 10,000 miles

Source: Based upon The MPG Illusion, Rick Larrick and Jack Soll (http://www.mpgillusion.com/)

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Father

10,000 miles ÷ 16.6 miles per gallon = 606 gallons

10,000 miles ÷ 20.0 miles per gallon = 500 gallons

Difference = 106 gallons

Daughter

10,000 miles ÷ 33 miles per gallon = 303 gallons

10,000 miles ÷ 50 miles per gallon = 200 gallons

Difference = 103 gallons

Doing the Arithmetic

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For Additional Information…

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Some Good Reading on Behavior Change

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Behavioral Economics Resource Center http://www.sibson.com/services/behavioral-economics/

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Thank you

J. David Johnson Vice President, Senior Consultant djohnson@sibson.com 202.833.6482 www.sibson.com