Health Benefits

Opinion: Improve Employee Health Using Behavioral Economics

Nudging workers to care more about their health boosts retention and helps contain benefit claims costs.
Dr. Joseph Sanford and Dr. Kevin SextonFebruary 3, 2022
Opinion: Improve Employee Health Using Behavioral Economics
Photo: EvgeniyShkolenko

Prioritizing employee health and wellness is critical to recruiting and retaining the best talent. Healthy employees tend to be more productive and express more job satisfaction, according to the U.S. Centers for Disease Control and Prevention. But what can companies do to improve the health of workers? Defining the specific health needs of employees and taking a hard look at the organization’s wellness program is a good start. Clinical informatics and behavioral economics can help an organization make those personalized decisions.

Clinical informatics is a newly recognized medical specialty that uses technology and data science to create systems that improve health outcomes, patient care, and clinician-patient relationships. 

Behavioral economics combines aspects of psychology and economic modeling to evaluate human behavior and explain why people often do not make the best decisions — even when they have all the information and tools within reach. Behavioral economic innovations strive to make choices easy, attractive, social, and timely. 

Combining the two allows scientific methods of influencing decision-making to be adapted to the delivery of health and wellness initiatives.

Choices, Norms, and Nudges

Companies can use techniques such as choice architecture, defaulting, social norming, and nudges (all defined below) to select wellness programs, roll them out to employees, and iterate toward mutually beneficial outcomes. That is best exemplified in an unexpected industry: video games. 

Good game design teaches users intuitively through things like optimal friction and defaulting to encourage behaviors. For instance, the original “Super Mario Brothers” game used defaulting by having Mario always face the right of the screen, telling players that’s where they should go. It also had behavioral prompts: Mario could move backward only so far before the left side of the screen blocked him, but he could jump smoothly and far to the right side of the screen at will.

  • Choice architecture — Designing ways to present choices to consumers and the impact of that presentation on consumer decision-making.
  • Defaulting — Setting a desired value or option to be automatically selected if the user does not specify a substitute. For example, people with driver’s licenses having to opt out of organ donation programs instead of opt in.
  • Social Norming — Modifying personal behavior based on how we observe our peers behaving in similar situations. The Social Norms Theory posits that our behavior is influenced by misperceptions of how our peers think and act.
  • Nudges— Influencing the behavior and decision-making of groups or individuals through positive reinforcement and indirect suggestions. An example of a nudge is providing people with smaller plates to get them to eat less.

Similarly, gamification is used to design online portals that motivate people to take certain actions. A system can deliberately nudge to encourage employee participation and make preferred actions the easiest for employees to choose by assigning default choices or adjusting how hard or easy a process is without limiting a person’s autonomy. Social norming has become particularly prevalent to drive engagement. Presenting individual performance metrics next to an average across peers has proven to be a motivating strategy to get people to act. Another method in online portal design is to send push notifications when a user’s friends are online or when large events (like employee wellness webinars) happen.

Research shows that employers can incorporate these techniques into their wellness programs to encourage healthy behaviors. A 2019 report in the Journal of the American Medical Association showed that employees in a wellness program are more likely to report healthy behaviors like exercise and active weight management or dieting. Research by Katherine Milkman and others on three groups of Google employees with different exercise arrangements showed that flexible incentives work better than incentives that encourage a more rigid behavior or activity. In one study, paying participants for each day they visited the gym regardless of what time of day they went generated more gym visits than paying participants to go during a daily two-hour window.

A full-featured wellness program typically includes a user-friendly online portal, annual wellness assessment through a survey, wellness visits to medical providers, a biometric component with lab tests, and ongoing engagement with individual employees. Each component should be annually assessed for effectiveness and, in the case of testing or intervention, for adherence to best-practice guidelines. Encouraging wellness visits can help stabilize variations in health care and decrease the cost of stop-loss insurance (protection against catastrophic or unpredictable losses) for self-funded health plans. 

For example, age-appropriate screenings for common cancers can help catch early-stage cancers, when treatment leads to better outcomes at a far lower expense than late-stage diagnoses. People often dislike undergoing screenings, especially when scheduling preventive visits conflicts with more urgent matters. That is particularly true if a company does not effectively endorse medical time-off for non-urgent visits. By allowing employees to schedule time for a preventive care during the work day, managers can remove barriers to action and promote behaviors that focus on safety and well-being. New approaches to wellness that incorporate the tools mentioned above may require a shift in many companies’ cultures.

Analyzing Claims

In a self-funded insurance program, the employer takes on most or all of the cost of benefit claims. By collaborating with an employee benefits consultant to implement a self-funded plan, employers can isolate key cost drivers. With detailed claims data, it is possible to manage emerging health risks in a given population. In addition, the data can inform the design of health and wellness strategies and measure effectiveness over time.

Claims data analysis enables employers to review more claims more consistently in less time with a logical, definable, and highly reproducible process. That allows employers to have quantitative conversations with third-party administrators and other vendors. These discussions may impact what insurance covers, how reimbursements occur, and which steps are required for payment approvals.

To be successful self-funded employer wellness programs should be highly customized to each individual. Providing a mix of behavioral economics incentives and clinical informatics-based data analysis helps employees achieve personal wellness goals while ensuring participation in routine preventive health care that lowers costs for employers.


Dr. Joseph Sanford and Dr. Kevin Sexton lead Datafy and partner on Medical Claims Analytics with Stephens Insurance.