Behavioral economics can increase plan participation.

There is much employers can learn from the three principles of behavioral economics — loss aversion, social norms and hyperbolic discounting (a.k.a. procrastination) — when it comes to employee health care.

That was the message at ignite09, a May 27 symposium sponsored by the American Benefits Council, PBM Express Scripts and Hewitt Associates.

So why should benefits professionals care about these principles? By applying them to benefits package designs and wellness programs, you can overcome common obstacles to compliance and participation.

Example: With a goal of 90% employee participation in their wellness program, Nationwide Insurance Co. offered employees a $35 credit for completing an HRA. When that only got 30% participation, they tried adding $10 to the bi-weekly paycheck of participating employees the next year. That got them 60% participation. There was no money to up the incentive, so Nationwide rethought their carrot-only approach — this time invoking the principles of both hyperbolic discounting and loss aversion.

This year, the company "doubled the financial incentive," Jack Towarnicky, Nationwide's associate VP of benefits planning told attendees, by introducing a $260 added contribution for medical coverage that they then waived for wellness program participants. Consequently, participation rose to 85%.

"A lot of other companies who only use carrots, who only use positive incentives, many of them didn't achieve their participation and utilization goals as well," Towarnicky said. "Because using only positive incentives allows non-participants the option to maintain the status quo."

Have you experienced this situation with your wellness initiatives? Share your thoughts below.