How Rewards Programs Create Smarter Health Care Consumers

And, lead to major employer savings

Employers are investing more than ever on health care benefits but unfortunately, those investments aren’t being fully utilized by employees. Since 2013, utilization rates have remained stagnant – which could explain why 72 percent of employers are looking to enhance employee benefits engagement, according to PwC.

 

Behind low benefits utilization rates is a lack of employee awareness about what should be considered when choosing and using their benefits. Employees repeatedly pick the wrong health plan, even when offered better options.    
 
To drive ROI of their benefits investments, employers need to educate and incentivize employees to use their benefits effectively.

One way organizations can drive utilization of their health care benefits investments is through a rewards program. Rewards programs can take many shapes and forms, but the idea is that employers offer employees an incentive (usually a financial incentive) for best utilizing their benefits. Rewarded behaviors might include making plan selections early or identifying and choosing lower-cost providers for treatment.

While it might feel counterintuitive to offer monetary rewards to employees as a way to lower expenses, employers generally find that when employees are incentivized to understand and use their benefits, they make informed, cost-conscious health care decisions that, in return, save their employer a great deal.

One area where a rewards program can be particularly effective is with health care transparency services. These services allow employees and their family members to run cost-comparison reports for various treatment needs so they can understand price discrepancies amongst providers. Many employers now offer rewards to employees who select the lower-cost option revealed in the cost-comparison reports.

DirectPath has found that employers with rewards programs have higher utilization rates of their transparency services, compared to customers who do not employ rewards – demonstrating real ROI. A cash rewards programs for transparency services answers the question that employees will inevitably ask when an employer requests that they conduct research on health care costs, which is “what’s in it for me?” The answer to this question is particularly important when it comes to preventative procedures that are completely covered by insurance.

If the employee won’t be paying for the service regardless of cost, they have no incentive to find savings for the employer. For example, if an employee needs a routine mammogram that’s covered by their insurance, they likely will pick the provider that’s most convenient for them—instead of the one that costs less. But if they could receive money for picking a less expensive provider, it gives them no reason not to do the work.

Now that it’s clear why rewards programs are beneficial, here’s what to consider when establishing one within your organization. Setting up a monetary rewards program will often take buy-in from stakeholders outside the HR department since finances are involved. HR professionals need to reassure decision makers who may be hesitant about the value of these types of models that the potential for health care savings is too great to pass up. Additionally, HR professionals can explain to their CFO that because the money for the rewards is coming from the savings found by the employee who selected a lower-cost option, it’s a net gain for the budget.

Another barrier to implementation that HR departments might face is bandwidth. Small, already stretched HR teams may be unable to design, implement and manage a robust rewards program. Those departments might consider outsourcing this service to outside vendors who can handle every step of the rewards program – leaving only the check writing to the HR team once the savings have been identified. Once buy-in is secured and ownership is defined, the actual employee incentive must be determined.

Many opt for rewards programs where an employee can receive a reward of 10 to 20 percent (capped at $1,000) of the savings found from choosing a lower-cost service. However, more and more we’re seeing employers get more creative with their rewards. The 2019 Medical Plan Trends and Observations Report found, for instance, that some employers have set up points systems for employees to earn gift cards or other prizes for making smart health care decisions.

It’s not enough to just develop a fantastic rewards program – HR needs to “sell it” to employees so they understand that it exists, how it works and what they can get out of it. A robust communications program is critical here. HR professionals can follow these best practices to ensure employees understand and utilize rewards programs:
 

 
A rewards program is a mutually beneficial system for employees and employers alike. Employers have the potential to save hundreds of thousands on health care when they help their employees best utilize their health care benefits. While a rewards program can incentivize employees to do so, simply implementing the program is not enough to fully realize these potential savings. Without a robust communications program, employers could be leaving large sums of money on the table.