Loss Aversion

DOCTOR: "1-2 smokers die."
PATIENT: "It will never happen to me!"

Later that day...

FRIEND: "1 in 80 million win powerball."
PATIENT: "This could be my lucky day! "

As silly as this example may seem, it's funny because it's true. In general, humans are not very rash in decision making. Billions of dollars have been spent over the years by advertising agencies, food companies and the like on researching exactly how our brains work as consumers in order to properly influence us to do what they want. Now it is the employer and the healthcare industry's turn. How do we make health promotion programs work for perverse decision makers? By now, most people have heard the statistics on quality of life and life expectancy if you smoke, or don't exercise, or have a poor diet. Most will not argue the facts and figures when it comes to how our own choices dramatically influence our health. 80 percent of chronic conditions are PREVENTABLE, but yet we have one of the unhealthiest nations in the world.

Loss aversion: The pain of losing something is twice as great as the joy of winning something.

To date, most of our clients who run a comprehensive health promotion program offer some type of incentive to encourage employee participation... a gift card, a premium contribution reduction, cold hard cash... But clients have not seen close to full participation in these programs that not only pay employees for participating, but will help to make them healthier and live longer! While it may be unpopular, it is time to educate employee's on the true cost of healthcare and realize how a healthy lifestyle can drastically reduce the employee's medical costs.. The health and productivity of the workforce, and the viability of a company who is paying the medical claims for this workforce, depends on it.

Behavioral economics shows that being the irrational decision makers that we are, we are much more likely to do something because our benefit will get taken away if we don't participate, than we are to win a $100 gift card. So why keep wasting our time and money on the latter? While yes, incentives are a must for successful participation rates, I think it is time to change how we think of incentives.

My summer reading list will consist of reading more about these economics in "Nudge," "Sway," and "Predictably Irrational. I challenge you to do the same- let's discuss in the fall, just in time for open enrollment in your benefit programs!