Behavioral Economics, Dr Paul Terry

© 2010. StayWell, NextSteps and StayWell Online are registered trademarks of The StayWell Company, LLC. All rights reserved. 1

Dec 14, 2010

Behavioral Economics:

Review concepts, supporting research, and

modifying company policies for the better

Presented by:

Paul Terry, Ph.D.

CEO, StayWell Health Management

Behavioral EconomicsThaler, R.H., & Sunstein, C.R. (2009). Nudge: improving decisions about

health, wealth, and happiness (2nd ed.). New York: Penguin Group.

http://www.danpink.com/drive

http://danariely.com/

http://www.alfiekohn.org/books/pbr.htm










© 2010. StayWell, NextSteps and StayWell Online are registered trademarks of The StayWell Company, LLC. All rights reserved.

Overview and General Concepts

Choice Architect

Responsibility for organizing the context in which people make decisions

Libertarian Paternalism- “Free to Choose”

Libertarian

Free to make choices and opt out of undesirable arrangements should

they want to do so

Do not want to burden those to want to exercise their freedom

Paternalism

Influencing other people’s behavior in order to make their lives longer,

healthier, and better

Nudge

Any aspect of the choice architecture that alters people’s behavior in a

predictable way without forbidding any options or significantly changing

their economic incentives

Not mandates (i.e., putting healthier food at eye level rather than banning

junk food)

3


Overview and General Concepts- cont.

Econs

Reject paternalism- claim that human beings do a terrific job of making

choices

Thinks and makes choices well

– Think like Albert Einstein

– Store as much memory as IBM’s Big Blue

– Exercise the willpower of Mahatma Gandhi

Respond primarily to incentives

Humans

Humans predictably error. Decision making is not great

Research shows that people stick with a default option

Humans respond to incentives, but also influenced by nudges

4

Group DiscussionModifying Company

Policies for the Better


Mock Company Policies:

Nudges, Pushes, or Kicks?

The following exercise will allow you to analyze company

policies using your new choice architecture perspective.

Directions:

Everyone will score each policy on a scale of 1 to 10:

–A paternalistic nudge will score 1-3

–A well-meaning push will score 4-7

–A mean kick in the butt will score 8-10

Discuss and Share! Once we have scored each policy, we

will evaluate each and work together to improve the policies

that fall outside of the paternalistic nudge range.

Note: The following policies are examples and used for

discussion purposes only.

6


Tobacco Cessation-Group Discussion

Company provides ongoing and generous resources for all

smoking employees who are ready to quit smoking. In addition

to providing a smoke free workplace to discourage smokers from

smoking and to protect our staff from second hand smoke, we

also have established smoke free grounds surrounding our

building/campus. (Research shows that more restrictive policies

result in higher quit rates and reduced heart disease.) Smokers

are asked to smoke in offsite areas.

How would you score this policy?

A paternalistic nudge will score 1-3

A well-meaning push will score 4-7

A mean kick in the butt will score 8-10

7

Smoking Cessation Research- 2009

Smoking is the leading preventable cause of

premature death in the United States.


Incentive Research, Smoking Cessation

Study 1: A Randomized, Controlled Trial of Financial

Incentives for Smoking Cessation

Randomly assigned 878 employees to two groups

– Group one received information about smoking-

cessation programs

– Group two received information about smoking-

cessation programs plus financial incentives

– $100 for completion of smoking-cessation program

– $250 for cessation of smoking after six months

– $400 for abstinence for an additional six months

– Confirmed by biochemical test (saliva or urine

cotinine test)

Source: Volpp, K.G., Troxel, A.B., & Pauly, M.V. A Randomized, Controlled Trial of Financial

Incentives for Smoking Cessation. New England Journal of Medicine, 2009; 360(7):699-709.


Results and Findings

Financial incentives can have major impact on smoking-cessation

Smoking-cessation rates among employees who were given both

information about cessation programs and financial incentives to quit

smoking were significantly higher than those that were given program

information but no financial incentives

Incentive group participants had higher rates of enrollment in a

smoking-cessation program

– 15.4% vs. 5.4%

Incentive group had higher rates of smoking-cessation program

completion

– 10.8% vs. 2.5%

Incentive group had significantly higher rates of smoking cessation

than did the information-only group.

– 6 months (20.9% vs. 11.8%)

– 9 or 12 months (14.7% vs. 5%)

– 15 or 18 months (9.4% vs. 3.6%)

Source: Volpp, K.G., Troxel, A.B., & Pauly, M.V. A Randomized, Controlled Trial of Financial

Incentives for Smoking Cessation. New England Journal of Medicine, 2009; 360(7):699-709.

Weight Loss Research- 2008

Obesity falls just behind smoking as a preventable

cause of premature death.


Exercise-Group Discussion

Physical activity is strongly encouraged for all company

employees, regardless of department or pay type. Managers

are required to provide their verbal approval of exercise during

the work day at staff meetings, or via team email messages. For

salaried employees, exercise time is at their own discretion,

provided it does not interfere with their work function and/or

priority commitments such as meetings and projects, not to

exceed 1 hour per day. For hourly employees, the combination

of two 15 minute breaks, and the gift of another 15 minutes,

allows for a total of 45 minutes of physical activity in the workday

without sacrificing paid time.





12


Incentive Research, Weight Loss

Study 2: Financial Incentive-Based Approaches for Weight

Loss, a Randomized Trial

57 healthy participants aged 30-70 years with a BMI of 30-40

were randomized to 3 weight loss plans:

– Group one- Monthly weigh-ins

– Group two- A lottery incentive program

– Group three- Deposit contract that allowed for

participant matching, with a weight loss goal of 1 lb per

week for 16 weeks.

Outcome measurement- Weight loss after 16 weeks

Source: Volpp, K.G., John, L.K., & Troxel, A.B. Financial Incentive Based Approaches for Weight

Loss: A Randomized Trial. Journal of the American Medical Association, 2008; 300(22):2631-2637


Results and Findings The use of economic incentives produced significant weight loss

during the 16 weeks of intervention.

The longer-term use of incentives should be evaluated

Incentive groups lost significantly more weight than the control

group

Compared with the control group

– Lottery group lost an average of 13.1 pounds

– Deposit contract lost an average of 14.0 pounds

Half those in both incentive groups met the 16-lb target weight loss

(47.4%), whereas 10.5% met the goal in the control group

Net weight loss at the end of 7 months follow-up was larger in the

incentive group (not statistically significant)

– Control- 4.4 pounds

– Lottery- 9.2 pounds

– Deposit Contract- 6.2 pounds

Incentive participants weighed significantly less at 7 months

whereas the controls did not

Source: Volpp, K.G., John, L.K., & Troxel, A.B. Financial Incentive Based Approaches for Weight

Loss: A Randomized Trial. Journal of the American Medical Association, 2008; 300(22):2631-2637


Nutrition-Group Discussion

Soda, high fat, and high sugar products with little to no

Nutritional Value (NV), as determined by a panel of dietitians

and nutrition experts, offered in the lunch room will be sold at

twice the value that it currently retails for. However, food

products offering unquestionable NV (e.g. water along with low

fat, low sugar, high fiber, and protein) will be sold at a wholesale

price.

Additionally, high NV foods at company events will be offered for

free, while low NV foods will need to be purchased at some

value (TBD).





15

Best Practices

Research

Impact on Population-

Level Engagement & Risk

Reduction


StayWell Best Practices Research

Study Methods

Study sample included 22 companies from the StayWell

book of business

– 767,640 eligible employees, spouses, and retirees

52% of companies were first year clients

Rated on 9 best practice components identified by literature

and industry experts using standard reports, internal

documents and structured interviews with staff

Calculated total weighted score and split companies into two

groups: standard practice vs. best practice

Compared engagement rates, prevalence of best practices

and health risk impact

Source: Terry PE, Seaverson EL, Grossmeier J, Anderson DR.

J Occup Environ Med, 2008;50:633-641


StayWell Best Practices Research

Best Practice Elements

Comprehensive program design

Integrated incentives

Integrated, comprehensive communication plan

Strong senior management support

Dedicated onsite staff

Multiple program modalities (telephone, mail, online)

Population-based awareness building activities

Biometric health screenings

Vendor integration

18


Best Practices ResearchEngagement Rates

47%

67%

34%

84%

68%

85%

48%

85%

0%

20%

40%

60%

80%

100%

Health Assessment Participation

Coaching Eligibility

Coaching Participation

Coaching Completion

Standard Practice Best Practice

Source: Terry et al, 2008


Best Practices ResearchUse of Best Practices

% I

mp

lem

en

tin

g P

rac

tice



Best Practices ResearchPopulation-Level Health Risk Change

3.46

3.393.43

3.27

3.20

3.25

3.30

3.35

3.40

3.45

3.50

Baseline Health Assessment Follow-up Health Assessment


Nu

mb

er

of

He

alt

h R

isk

s

-4.7%

-2.0%


1-year


Best Practices ResearchIntervention-Level Health Risk Change

4.09

3.83

3.63

3.37

3.25

3.50

3.75

4.00

4.25

Baseline Health Assessment Follow-up Health Assessment


Nu

mb

er

of

He

alt

h R

isk

s

-6.5%

-7.0%


1-year


401 K- Group Discussion

All eligible company employees are automatically enrolled in the

company 401k program after 6 months of employment. Based

on their age, and the risk profile they complete during benefit

enrollment, their money is invested in the appropriate

portfolio. Each employee must elect the percentage of their

salary as part of the benefit enrollment forms; they cannot leave

it blank. There is a calculation tool that allows employees to

determine how much money they want to elect, and the

company recommends that they elect the minimum required to

receive the company match. Employees are also encouraged to

sign up for a 15 minute appointment with the HR

department/manager in order to help determine their

contribution amount.





23

Engagement Research – 2006


Engagement Research

Study 3: Impact of Financial Incentives on Health

Assessment (HA) Participation

Companies offering incentives for HA participation

Examined employee HA participation only

Excluded companies requiring spouses to participate in HA

or requiring participation in multiple programs (e.g., HA and

activity) to get incentive

Final sample: 36 StayWell customers

Source: Anderson DR, Grossmeier J, Seaverson ELD, Snyder, D. The Role of Financial Incentives in Driving Employee

Engagement in Health Management. ACSM’s Health & Fitness Journal, 2008;12(4):18-22.


Impact of Incentives on HA Participation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0 $100 $200 $300 $400 $500 $600

Source: Anderson et al, 2008

Estimated Incentive Value

HA

Pa

rtic

ipa

tio

n R

ate


Impact of Incentive Type on HA Participation

0%

20%

40%

60%

80%

100%

$0 $100 $200 $300 $400 $500 $600

Non-Financial Cash Benefits-Integrated

Source: Anderson et al, 2008

Estimated Incentive Value

HA

Pa

rtic

ipa

tio

n R

ate


Engagement Research

Study 4: Impact of Communications & Culture on HA

Participation

Structured interviews with Account Managers

Communications during program year

– Delivery modalities

– Types of communications

– Perception of quality

Worksite culture

– Factors related to cultural support for employee health

– Perception of cultural support


Culture Score Definition

Management Support

Executive & mid-level management support

Infrastructural Support

Demonstrated efforts around health policy, promotion of

nutrition and/or physical activity, flexible schedule for

wellness activities, company mission statement

Wellness Team

Member of management actively participates in team

Integrated Program

Data exchanged between vendors or warm-transfer of

participants to additional services

Onsite Staff

Dedicated onsite staff, including all vendors


HA Participation by Communication &

Culture

Comm. Culture Comm. Culture Comm. Culture

Non-Cash

Incentives (n=4)

Cash

Incentives (n=16)

Benefits-Integrated

Incentives (n=16)

HA

Pa

rtic

ipa

tio

n R

ate

Source: Seaverson ELD, Grossmeier J, Miller, TM, Anderson DR. The role of incentive design, communication strategy and

worksite culture on health assessment participation (in press).

27%

33%

41%44%

51%

65%

33%37%

53%

41%

51%

69%

0%

20%

40%

60%

80%

100%

Weaker Strong


Conclusions

Financial incentives can have major impact on HA

participation

Healthy culture and effective communications are essential

to realize potential value of incentives

Integration of incentives into health plan design most

effective

Need more research on independent and combined impact

of these and other best practices on program engagement

and outcomes


Volunteerism Policy- Group Discussion

Employees are expected to volunteer one week per

year. Supervisors are evaluated on the level of volunteerism in

their departments and are rated per their efforts in corporate

citizenship. Supervisors will remind staff if they are short on

their expected number of volunteer service hours.





32


Green Policies- Group Discussion

All company employees will receive a reusable dining set containing a

plate, silverware, and water bottle for use at work.

Interested employees can receive and sign an environmental

contract/covenant stating:

They agree to use these materials the majority of the time for their

everyday work eating needs (not including company events)

Will recycle appropriately

And agree to rethink the need of single use products around the office

The individuals that sign the covenant can then earn a credit from

company to make a $20 donation at the end of the year to an

environmental/nature group of their choice (default choice- TBD)





33

Education

Behavioral Economics, Dr Paul Terry