Using behavioural economics to improve health and lower costs

That’s where behavioural economics comes into play—an emerging field which offers real-world insight into people’s day-to-day behaviour on what guides them to make decisions. This strategy is already being used by progressive organizations in the U.S. and is paying off in both better employee health and lower benefit costs.

Using behavioural economics, employers are able to predict when poor choices will be made and take measures to counteract them. In particular, they can determine how to engage, educate and motivate individuals to make more informed and cost-effective healthcare selections.

The reality is that people may need a “nudge” to help them make the right decisions. This encouragement can take various forms, including marketing and messaging.

“Marketing” behaviour change
Behavioural economics includes using marketing principles to grab attention, create relevance and motivate action. Employers should consider the following points when determining whether the approach they take—particularly with respect to employee communication—is likely to prompt desired healthy behaviours.

Put people before plan designs
Benefits managers can get caught up in the details of plan design, financials, and making sure that employees understand all the details. They may forget that what employees and their families really care about is what’s in it for them.

People need to understand enough of the details to pick and use their health benefits, but what they really need to grasp is how a plan will help them in their own lives. How will it help them stay healthy? Lose weight? Stop smoking? Deal with diabetes, high blood pressure, or cancer? Protect their families financially in case of health emergencies?

Employers need to answer those questions from the consumer point of view and not just the corporate one. Doing so can motivate the right behaviour.

Remember that money isn’t everything
The best marketers know that price is important, but that it’s only one part of the purchasing equation.

Most employers would like their employees to know and appreciate how much their company spends on healthcare benefits. However, they can’t expect that knowledge to change anyone’s behaviour. Focusing on dollars alone will not drive health-motivated actions. People don’t always behave rationally when it comes to healthcare and money. For example, some employees continue to over-insure for healthcare “just in case” they need that coverage.

Go for the head and for the heart
If employers want their employees to do something different, they must use an approach that combines rational arguments with appeals to self-interest and emotion. Great marketers know that emotion can create personal relevance in a way that reason can’t touch.

After all, if reason and logic alone were enough, people would have stopped smoking years ago and would be eating right, exercising and getting health screenings. People know what the right health answers are, but they won’t act until something makes those issues relevant to them personally. If employee communication can create an emotional connection to a health issue, it helps establish the relevance that can lead to action.

Live by the rule that “once is never enough”
One of the cardinal rules of marketing is to repeat the message as often as possible.

If employers send a health message only once a year and expect real behaviour change, they will be disappointed. The chances are great that someone will miss or ignore that one message. And, even if they do see it, if it’s not repeated, they may forget it.

A better approach is to pick the top two or three health issues that are affecting employees, absenteeism (sick leaves, and short and long-term disability) and healthcare costs and focus on them all year long. Good “campaigns” include a variety of media to reach people in different ways and in different places.

Talk to the health decision-makers
Sometimes it’s not the employee who makes most of the household healthcare decisions, but the spouse or partner at home. If the employer is only talking to employees, the best opportunity to influence their and that of their families might be missed.

A deeper understanding of why people do what they do offers the potential to effectively promote positive changes in behaviour, so employers should take behavioural economics into account. That includes using marketing principles in communicating about healthcare. If employers do so, they will stand a much greater chance of actually getting employees and their families healthier and, at the same time, helping company financials.

Sarah Beech is Managing Principal, Consulting for Hewitt Associates in Canada.

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