Change is hard. And unless people absolutely need to make changes or are incentivized to do so, they often won’t. Economic incentives—both carrots and sticks—can be highly effective ways of nudging people to take the actions you want them to take, like engage in wellness initiatives and become more engaged heath care consumers.
Incentives are among the strategies we deployed recently in campaigns that were grounded in behavioral science. But the success of incentives isn’t just about the incentive arrangement itself. Equally important is how choices are structured and communicated. Here’s how we put these factors together for 2 of our clients—both universities—to achieve the business results they needed.
University System Realigns the EVP
A state university system was experiencing a substantial operating budget shortfall: State funding and tuition revenue weren’t keeping pace with operating costs. Pay levels were generally below market, and raises were rare. But benefits were above market.
The university system formed a task force of leading academic and professional staff to address pay and benefits issues and realign the employee value proposition.
We helped the university redesign the health and wellness benefit program and communications approach using incentives and intentional nudges. Then, using a variety of media selected for different audiences, we worked with the task force on socializing its recommendations with leadership and various campus communities. The communications approach (which won an IABC Gold Quill Award) and the integrated health and wellness program design resulted in dramatic increases in engagement across the system’s 19,000 employees:
- 99.7% of the population made an active choice.
- Wellness participation rose from 31% to 82%.
- Consumer-driven health plan participation rose from 7% to 42%.
An Effective Lesson in Health Care Consumerism
A local public university facing rapidly rising, unsustainable health benefits costs asked us to recommend dramatic changes to alter their course and rein in runaway health care cost increases.
Our recommendations included cost shifting through higher deductibles and out-of-pocket limits while integrating carefully crafted, sizeable incentives to motivate employees and spouses to engage in wellness and consumer initiatives. The University encouraged faculty and staff to accept change and to engage in positive behaviors that would benefit them as well as the institution.
As a result, engagement improved dramatically among the university’s 2,000 employees, and employees’ overall health has improved, too, as measured by 11 of 13 clinical metrics. Plus, health benefits costs are finally under control.
- Wellness program participation increased from 24% to 88%.
- 60% of employees elected the CDHP in its first year.
The Right-Choice Architecture Makes All the Difference
Although the strategies we applied to our work for these clients aligned with the business objectives and unique circumstances of each, both campaigns included these 3 common threads:
Mandatory active enrollment. People can't be expected to engage in their health and in consumerism when they are allowed to passively roll over their benefits from year to year.
Multi-channel communications. We presented a strong platform for change—boldly announcing the changes across a variety of different media, asking people to take action very directly, and clearly communicating the incentives.
Behavioral economics. We carefully considered and designed the choices through a behavioral science lens. Incentives are an effective motivator, and they work even better when they’re coupled with a strategically crafted choice architecture that makes the right decisions easier.
The choice architectures we helped our clients design included thoughtful selections around plan names, sequencing, anchoring, and defaults. Here’s why those factors were important.
- Plan names. Names create both first and lasting impressions. Naming a medical plan the High Deductible Health Plan highlights the most unattractive feature of the plan. Healthy Saver Plan, Balanced Saver Plan, Smart Consumer Plan, and similar names create a more positive reaction.
- Sequencing. Present multiple benefit options by featuring the smarter choices first and last. Why? A wealth of research demonstrates that the first and last items in a list are selected more often than those buried in the middle of a list. The peak end rule is also relevant here: What people remember most about an experience is what they see or feel during its final moments, and what impressed them most during the experience (either positive or negative).
- Anchoring. You can emphasize specific or targeted options without making the material too complex or lengthy by merely placing less emphasis on the non-targeted choices (i.e., saying less about them).
- Defaults. Use defaults to encourage the right behaviors; too often, they’re used to reduce the burden on HR instead.
With an incentive approach that takes into account the way individuals fully view their options, you can make big changes make sense. Behavioral science provides a range of tools to do so.
Want more behavioral economics tips? Check out our guide, which goes into detail about the barriers that prevent employees from taking action, how to use behavioral science to overcome those barriers, and easy ways you can incorporate smart techniques into your communications.
We're proud to work with organizations that value their people. If you want to learn more, we’d love to talk.