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Using Behavioral Economics in Employee Benefits and Workplace Wellness

David Rook

So what exactly is behavioral economics and why is it a useful tool for motivating behaviors?

Behavioral economics is the use of psychological, social, cognitive, or emotional factors to influence a person's behavior when it comes to making economical decisions. 

An excellent example of this in workforce wellness is when employers use incentives to encourage or discourage a specific thought or action.

In a blog post earlier this year, Compensation Cafe used smoking as an example of a behavior that many employers may want to discourage, since it's both unhealthy and disruptive. The challenge is doing so in an effective and non-offensive manner.

The following are five different types of behavioral economics to facilitate change, using smoking cessation as an example.

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Topics: Employee Benefits, Behavioral Psychology

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The Upside of Auto-Enrolling Your Workforce in Disability Insurance

Jeff Griffin

New this year, per the U.S. Department of Labor, is the ability for employers nationwide to auto-enroll employees in disability insurance coverages for ERISA-covered plans.

The implications of this decision are far reaching and merit serious consideration by employers offering disability benefits, which are designed to prevent income disruption in the event of a qualifying disability. (As with other auto-enrollment options such as 401(k) contributions, employees retain the opportunity to opt-out if they choose not to take the coverage.)

For those employers who don’t yet offer disability coverage, we strongly encourage you to read our blog post from earlier this year on why disability insurance is one of the most valuable benefits you can offer.

The Gap Between Interest and Action

At present, one in four 20-year-olds in the workforce can expect to be out of work for at least a year before they reach retirement, due to a disabling condition - that’s according to probability tables developed by the Social Security Administration.

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Topics: Enrollment, Behavioral Psychology, Long-Term Disability, Short-Term Disability

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Four Ways Employers Can Reduce Smoking Rates Among Their Workforce

David Rook

Smoking has been in steady decline in the United States for decades, with Gallup reporting that smoking rates among adults have dropped from 45 percent in 1953 to 16 percent in 2018.

Nevertheless, according to the CDC,  almost 38 million adults in the country still smoke cigarettes regularly (defined as “every day” or “some days”). This doesn’t even take into account anyone who enjoys pipe tobacco, cigars or other cigarette alternatives.

The malignant effects of these habits are well documented. In addition to the personal health issues individuals suffer, smoking also impacts non-smokers, both in terms of health risks and more expensive healthcare.

The following is an exploration into just how much smoking costs businesses each year and what measures employers can take to reduce smoking rates among their employees.

The Added Cost of Employing Smokers

CDC research places the increased cost of employing a smoking adult at nearly $6,000 per smoking employee, per year. Much of this figure comes from lost productivity and increased healthcare costs, but it also takes into account other less obvious expenses.

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Topics: Cost Containment, wellness, Behavioral Psychology, Smoking

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5 TED Talks on Decision-Making and What They Mean for Employers

David Rook

Editor's Note: This post is a follow-up to one of our most popular blog posts, "3 Great TED Talks in The Era of Consumer-Driven Healthcare (CDHC)". This post features new Ted Talks for fans of our past article to enjoy.

When it comes to the decisions we make, it can sometimes feel like we are strangers in a strange land. Our motivations are often a mystery to us. But researchers in the world of behavioral economics are able to give us some insight into what informs our decision-making and why it often defies logic.

Over the years, there have been some incredibly useful TED Talks that can help us better understand the human mind and the motivations that drive our decisions. As an employer who must consider the decision-making process of your employees, you too can gain some important insights that can help guide you in creating more effective employee benefits packages.

Here are five TED Talks which we consider to be some of the very best on this subject:

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Topics: Employee Benefits, Behavioral Psychology, Consumer Driven Healthcare, Decision Tools

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How to Motivate Employees to Participate in HSAs

Jeff Griffin

As the cost of traditional group health insurance has gone up, high deductible health plans (HDHPs) with tax-advantaged health savings accounts (HSAs) have become increasingly popular among employers of all sizes. But offering a HDHP is only helpful if employees, assuming they’re given a choice, then choose to adopt them. And employees who are most satisfied with HDHPs are the ones who make the most of a HDHP’s best feature, the HSA.

HSAs (which are only available with a qualifying HDHP) are primarily designed to help employees offset the high out-of-pocket costs which come along with HDHPs by allowing both employers and employees to contribute dollars into a special savings account. (Employee contributions are made on a pretax basis.) Because HSA funds roll-over and can eventually be converted into retirement savings, savvy employees have quickly learned how to take advantage of these accounts and those who can afford it are maximizing this benefit to the full extent of the contribution limits, which currently stand at $3,400 for an individual and $6,750 for a family.

That said, the average HSA participant can’t afford to max out this benefit. In fact, most HSA participants barely contribute enough to the HSA to cover their anticipated out-of-pocket medical costs for the year. The average individual contribution is just $833, far less than any deductible on a HDHP, thereby causing enrollees to suffer under the weight of this type of plan design. Some of this behavior is simply due to limited incomes, but some can be attributed to other factors, such as a lack of education on how an HSA works.

To ensure that your workforce fully embraces HDHPs with HSA plans, it behooves every employer to explore ways to motivate employees to participate in their HSA. Afterall, according to the Employee Benefit Research Institute, between 20 and 22 million people in the U.S. are currently enrolled in an HDHP with an HSA.

Here are just a few ideas for improving HSA participation:

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Topics: Employee Benefits, Employee Engagement, Plan Design, Behavioral Psychology, HSAs, Consumer Driven Healthcare

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3 Great TED Talks in The Era of Consumer-Driven Healthcare

David Rook

3 Great TED Talks in The Era of Consumer-Driven Healthcare (CDHC)

Initial indicators suggest that consumer-directed health plans are indeed succeeding on several fronts; primary care engagement is up, trips to the emergency room are down, health savings account (HSA) balances are rising, and most importantly, health care spending is falling by 5 to 14 percent. But there's a big roadblock to CDHC / CDHP adoption: rampant consumer confusion.

That was the chief point from Harry Gottlieb, during a keynote address last Wednesday at the Human Resource Executive Health and Benefits Leadership Conference.

At least two of the pitfalls with Consumer-Driven Health Care (CDHP) and Consumer-Driven Health Plans (CDHP) are the rampant growth in options and the fundamental belief that humans make intuitive, rational decisions. If only that were true!

So what can we do about it? Fortunately, there are a multitude of behavioral studies to help guide our understanding of this phenomenon, as well as lay out a roadmap for us to follow to facilitate better decision making.

Here are what we, as the JP Griffin Group, consider to be three of the most relevant, informative and actionable TED Talks on audience segmentation, behavioral economics and the cognitive limitations of humans when faced with choice.

#1) "Choice, Happiness and Spaghetti Sauce", by Malcolm Gladwell

Struggling to find the perfect medical plan and perfectly optimized employee benefits portfolio for your entire work force? This TED Talk makes the case that we are not one homogenous group of consumers, no matter what the category for consideration, be it coffee, soda, healthcare, financial services and even spaghetti sauce. The concept is presented in a highly entertaining fashion by one of the best storytellers of our day, Malcolm Gladwell, author of such best selling books as Outliers, The Tipping Point, Blink and other works that focus on the unpredictable things that people do in the course of their normal lives. Gladwell sets out to explain how a guy by the name of Howard Moskowitz reinvented tomato sauce – a challenge given to him by the Campbell Soup Company when he was asked to create the “perfect” sauce.

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Topics: Communications, Innovation, Behavioral Psychology, Consumer Driven Healthcare

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How to Improve Employee Medication Adherence & Why It’s Critical To Your Benefits' Budget

Jeff Griffin

When working on cost containment solutions, many employers completely overlook a critical component that could secretly be costing them tens of thousands of dollars: medication adherence. Medication nonadherence is associated with a higher rate of hospitalization (and at a higher cost) than those compliant with their medication regimen.

It seems simple enough — people are prescribed medications and they take the necessary doses, right? Well no, not necessarily. Medication adherence is a complicated topic with multiple, unrelated causes that are difficult to pinpoint and treat. And unfortunately, this problem doesn’t actually have a simple solution. But nonetheless, it’s important for employers to understand what it is so they know how they can help — and how it affects their budgets.

What Is Medication Adherence?

Simply put, medication adherence is when patients properly follow directions for taking medications as written by a doctor or pharmaceutical company on the label. For example, many over the counter pain medications allow for one or two pills to be taken every four to six hours, but never more than so many in a 24-hour period. Some asthma medications require once daily doses, while others require two (morning and night), and others require four (two in the morning and two at night). In addition, many blood pressure and cholesterol medications are taken once daily.

Some medication requires a change in diet (such as avoiding certain foods, like grapefruit, which can counteract the drug) or have strict instructions on how to take the medicine, like not eating for a certain period of time after consumption. Many times, these food restrictions have to do with a body’s inability to absorb the medication or vitamins if certain foods are present in the patient’s system.

According to the Centers for Disease Control (CDC) there are three different forms of medication nonadherence:

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Topics: Employee Benefits, Cost Containment, Education, Behavioral Psychology, employee health, Pharmacy

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