Improving Employee Wellbeing, Challenges & Considerations


Subject to a multitude of drivers, annual US healthcare expenditure/capita has far outpaced annual GDP/capita growth. Under half of Americans receive health insurance through their employers, and annual healthcare cost increases continue to place tremendous pressure on employees, employers, and health carriers. In the current paradigm, employers and carriers must maintain a difficult balance; control costs versus maintaining competitive employee benefits.

Data provided by Center for Medicare and Medicaid Services. Healthcare expenditure/capita calculated with national health expenditure (NHE) estimates. NHE estimates are imperfect; the figure does not control for utilization, intensity, mix of goods and services, and demographics.¹

To combat rising costs, carriers may engage providers in favorable contracting to funnel volume, but given the carrier market concentration, this may be a zero-sum game with no long-run cost reductions.2 Another approach is to focus on high quality providers for stronger preventative care, but this may lead to greater demand and increase the cost of care. This leaves a third option: to improve employee health through employee behavior change via a wellbeing platform. A wellbeing platform is an employer provided benefit that aggregates and drives engagement across a spectrum of wellbeing (e.g., fitness, health, financial, and emotional wellbeing). It essentially encourages employees to make better decisions, which in turn mitigates the number of claims. This option is not new, with the big five health carriers playing in this space next to specialist wellbeing platforms like Limeade, Virgin Pulse, Welltok, and Castlight. While these companies vary in size, they share many commonalities including engagement platforms, integrated targeted programs (smoking cessation programs), and incentives. While they have similar frameworks there are many issues that the industry lacks a consensus on. Questions like how do we adequately engage a majority of the population? What engagement metrics are actually meaningful? How do we drive sustainable outcomes, and demonstrate ROI among independent variables? Further, as a compounding factor, the science of behavior change is still in its infancy.

There are, however, five considerations to building an effective program, that when applied correctly, yield both claim reductions and have wider benefits for employees, employers, and carriers:

  1. Dynamic incentives for motivation
  2. Nudges to drive further engagement
  3. Smart targeting to make effective use of incentives
  4. Employer buy-in to best optimize the incumbent program
  5. Demonstrable ROI to help internal buy-in

Detailed findings:

1. Dynamic Incentives for Motivation

The fundamental tool to impact employee behavior change is a gamified incentive that builds extrinsic motivation.3 This can be anything from a currency to use in a marketplace to literal cash paid to the employee for making better health decisions through both personal goals and winning challenges. Different incentives should be applied to different tasks, e.g. fitness rewards for fitness tasks. Additionally, the platform should offer a diverse set of rewards to align with buyer preferences; does the employee want a discount on a mountain bike or an Amazon gift card? The gamification of the incentive encourages even higher engagement within the population. Gamification can include leaderboards, competitions within a company, or personal challenges.

Incentives are, however, imperfect and made ineffective from several effects. Employees can abuse the system, and for example specifically target highly incentivized tasks like biometric exam while ignoring more productive tasks like fitness or take advantage of hardware like pedometers to show higher levels of activity. Another issue is that the incentives are only appealing and earned by those who already make healthy decisions, e.g., incentivizing the marathon runner to take more steps. And like other things of value, incentives are subject to diminishing returns.4 Diminishing returns of incentives affects the platform’s ability to drive sustainable employee behavior change. Low value incentives may de-motivate employees and lead to a feeling of manipulation.5 Incentives alone may also not combat temptation bundling (the act of an employee rewarding themselves for healthy task completed that offsets the healthy task). An example of this could be an employee walking 10,000 steps (earning 25 points), feeling good about their activity, the employee rewards themself by eating a 10-Piece McNugget Meal.6 A further complication to the effectiveness of incentives, is a recent study by Behavior Change for Good (an initiative through the Wharton Business School of The University of Pennsylvania) which found that incentives can be detrimental to self-worth and therefore intrinsic motivation.7

2. Nudges to Drive Further Engagement

Nudges are the next layer to prompt behavior change and remedy some shortcomings of incentives. A nudge is essentially a passive encouragement to make a better decision, often an environmental factor.8 While the incentive itself falls into the nudge category, others can be added to the program. One such nudge would be ease-of-use. Ease-of-use goes beyond just UX-design, to ease-of-enrollment and ease-of-participation. Applied to an employer sponsored wellbeing program, ease-of-enrollment can be accessibility to a wide proportion of the population or automatic enrollment (with an initial and limited privacy policy). Automatic enrollment in the voluntary benefits space was pioneered by Richard Thaler, Nobel Prize winner and father of behavioral economics, for 401(k) plans. He found that automatically enrolled employees participated upwards of 90% while voluntary enrollment remained around 50%.9

The next nudge layer would be what is presented on the platform landing page – essentially personalized design. Instead of a generic list of wellbeing programs and various competitions it should be customized to best fit the employee; which clinical management program would benefit the employee the most and should the employee walk 5,000 or 10,000 steps per day? This presents the third consideration, smart targeting. Inclusion of social aspect to the wellbeing platform can also provide additional passive motivation to employees and drive engagement, through competition, accountability, and teamwork.

3. Smart Targeting to Make Effective use of Incentives

Smart targeting has two layers; which programs/challenges are targeted to whom, and how do you incentivize the task? An effective wellbeing platform should understand which employees qualify for specific programs, and among those programs, which ones will make the greatest wellbeing impact. The scope of wellbeing incentivized should be broad enough to include what else would benefit an employee beyond health and fitness, to financial and emotional wellbeing. Then, the platform should nudge that employee to participate.10 A very effective wellbeing platform might be able to target, direct, and incentivize employees who are vulnerable to a specific condition to the proper resources. This step requires intimate knowledge of what conditions are driving claims, and where the employer and employees could further benefit.

4. Employer Buy-in to Best Optimize the Incumbent Program

The wellbeing platform may have optimized targeting, incentives, and nudges but without employer buy-in, it can still be ineffective. Just like how on an employee level, incentives must be diverse to accommodate for different preferences, employers are diverse based on industry and demographics. Essentially one-size does not fit all. A firm with a wellbeing program in place, should monitor incentive use and engagement on a regular basis and be willing to increase incentive values accordingly; think of the wellbeing needs and marginal effect of a dollar incentive for shipping company versus an investment firm. The willingness to re-evaluate and adjust requires high-level buy-in beyond the CHRO to the entire c-suite. Not only are dollars on the line, but programs offered reflect on company culture.11 A proactive employer, with a proactive wellbeing platform can for example help its employees navigate COVID-19 through supported transition plans and emotional wellbeing. The flip side is a laissez-fair employer that institutes a furlough but allows employees to earn points for a prize in the wellbeing marketplace; this can be demeaning to furloughed employees. The best way to get employer buy-in, is a demonstrable ROI.

5. Demonstrable ROI to Help Internal Buy-in

ROI of a wellbeing program, in its base form, is demonstrated as claims reduction. This, however, is imperfect as is, because employees do not interact with the wellbeing platform in a vacuum, and there are millions of external variables. Furthermore, there is a time delay for when claims data is available.12 This creates the need to adopt a wider perspective of ROI, to value of investment (VOI). VOI metrics are softer, harder to calculate, but have wide ranging benefits. These benefits could include reduction of absenteeism, employee retention, development of company culture, improved employee production, improved employee sense of purpose, and social development. Engagement in itself has value; highly engaged teams saw a reduction in absenteeism by 41%, 17% increase in production, 20% increase in sales, suffered 59% less turnover, and were 21% more profitable than less engaged teams.13 Inclusion of these VOI metrics to ROI, is difficult but can be modeled; the wellbeing platform should be able to monitor VOI to create an ongoing use-case for the CHRO.


Relative to other initiatives, implementation of an effective wellbeing platform can have wide benefits to an employer, employees, and carriers beyond just claims reduction. The benefits, however, can only be realized by an effective program. An effective program requires dynamic incentives to motivate the population. Nudges to better engage the population. Smart targeting to ensure proper utilization of the platform. Employer buy-in to best optimize the platform. And a demonstrable ROI to best show an ongoing use-case.

1Centers for Medicare & Medicaid Services. NHE DEFLATOR—INTERMEDIATE SUMMARY National Health Expenditures. Goodman, J. C. (2016, May 6). Race to the Bottom: Competition in the Exchanges. Goodman Institute. Race to the Bottom: Competition in the Exchanges.

2Angelovska, N. (2019, January 20). Gamification Trends For 2019: Making Room For Game-Elements In Politics. Forbes.

3Dubner Produced by Eliza Lambert, S. J., & Lambert, E. (2017, April 5). Could Solving This One Problem Solve All the Others? (Ep. 282). Freakonomics.

4Dubner Produced by Greg Rosalsky, S. J., & Rosalsky, G. (2017, October 25). How to Launch a Behavior-Change Revolution (Ep. 306). Freakonomics.

5Abramson, A. (2019, June 21). Medium: Use Temptation Bundling to Create Better Habits. Center for Health Initiatives and Behavioral Economics.

6Kirgios, E. L., Chang, E. H., Levine, E. E., Milkman, K. L., & Kessler, J. B. (2020, July 21). Forgoing earned incentives to signal pure motives. PNAS.

7Thaler, R. H., & Sunstein, C. R. (2008). Nudge: improving decisions about health, wealth, and happiness. Yale University Press.

8Thaler, R. H. Improving Retirement Saving Using Behavioral Economics.

9Aldana, D. S. (2020, July 21). How to Design Wellness Programs That Are Successful. Employee Wellness Programs.

10Agarwal, D., Bersin, J., & Lahiri, G. (2018, March 28). Well-being: A strategy and a responsibility. Deloitte Insights.

11Purcell, J. (2020, February 11). Employee Well-Being: A New Perspective On ROI. Forbes.

12Aldana, D. S. (2020, July 1). Wellness ROI vs VOI: The Best Employee Well-being Programs Use Both. Employee Wellness Programs.

13Harter, J., & Mann, A. (2017, April 12). The Right Culture: Not Just About Employee Satisfaction.

Author: Chris Conley, Senior Research Analyst Fletcher/CSI