One increasingly popular way to motivate people to improve their health habits is to provide financial incentives, which is a practical application of the burgeoning field of behavioral economics. It’s not exactly a new idea: Life insurance companies have long charged nonsmokers less than smokers, for instance, and now may offer discounted premiums and other financial inducements to members who eat more healthfully and meet other health goals. Some health insurance companies pay members if they go to a gym, say, 50 times over six months.
Today, more and more companies have wellness programs that use various kinds of financial incentives to motivate employees to stop smoking, eat better, exercise more, take their prescribed medication, get prenatal care, and lead healthier lives in other ways. Team efforts are sometimes used-for instance, exercise groups are offered prizes for achieving set goals.
The Affordable Care Act has encouraged employers to offer a range of financial incentives for wellness programs. In addition, some states reward Medicaid enrollees for making healthier decisions, in hopes of saving money down the line.
Quite a few well-designed clinical trials have focused on financial rewards for smoking cessation. One, published in The New England Journal of Medicine back in 2009 found that a $750 incentive tripled the quit-smoking rate among General Electric employees.
In 2015, another study published in that journal found that a financial incentive ($800) nearly tripled the six-month quit smoking rate among CVS Caremark employees (or their relatives or friends), compared to those not offered a reward. In an added twist, some smokers were randomly assigned to a program involving a “deposit-based” contract, in which they had to put up $150 of their own money. If they quit smoking for six months, they got their money back, plus $650; if they didn’t succeed, they lost their $150. Most declined to take part in the deposit program, not willing to risk losing their money, but among those who did take part, the success rate was about twice as high as that in the simple reward group.
Some studies have also found that financial incentives, especially deposit contracts, can encourage obese people to lose weight. Conventional financial rewards may not be effective, however. That was seen in a 2016 study in Health Affairs, which found that obese workers promised a $550 annual reduction in their insurance costs did not lose more weight than workers not offered the incentive.
One promising variation is for employers to give money to all people in a weight loss or smoking cessation program and then take it away from those who don’t succeed. Such incentives may work better than simple rewards because people tend to be “loss averse”-that is, the pain felt upon losing a sum of money tends to be greater than the pleasure felt upon gaining the same amount. Thus, the threat of monetary loss can be a more powerful motivator than possible gain.
Put your money where your goal is
If your employer doesn’t offer financial incentives for kicking bad health habits or if you are retired, you can sign up with some companies that help you along. A dozen websites try to help you achieve health goals by utilizing principles of behavioral economics.
For instance, StickK, launched by two Yale economics professors, allows you to pick your behavioral goal, sign a commitment contract, and then pledge money to back up this attempt. If you don’t succeed, you forfeit the money, which goes to a friend you’ve chosen, a favorite charity, or a despised cause (people who select such “anti-charities” tend to do best, according to the company). Beeminder, another goal-tracking site, lets you create a contract with yourself, tracks your progress, sends reminders, and takes your money if you don’t succeed.
The problem with external motivations like financial incentives is that when they end, participants are likely to revert to their old bad habits. But there’s no magic bullet for changing habits, and financial carrots and sticks are worth adding to the tools available to individuals and companies.