1. Enhancing Healthy Campus Efforts with Applied Behavioral Economics and Better Choice Architecture Christopher Goldsmith, SPHR, CCP, CEBS Sibson Consulting 216.687.4432 cgoldsmith@sibson.com

2. Have You Seen These Suboptimal Behaviors? People spend little time making their annual employee benefit plan elections and a majority regret the decisions they made. People persist in behaviors which they know to be unhealthy and expensive People neglect biometric screening and physical exams even when those services are free or associated with an incentive When making decisions about surgery, hospitals and surgeons, few consumers access the substantial amount of data that is available about: – hospital costs-- readmission rates – mortality rates-- hospital-acquired infection rates People don’t: – optimize their voluntary contributions to 401(k) and 403(b) plans – choose target date fund investments – choose annuities at retirement when they expect longevity New retirees ask a friend which Medicare Plan to purchase

3. What is Behavioral Economics? “Behavioral economics is the study of how real people actually make financial choices; it draws on insights from both psychology and economics.” 1 Research based critique of rational decision theory The science of trying to understand how and why individuals make suboptimal and optimal consumer choices Stockholm’s Piano Subway Staircase makes musical sounds as you walk on it. 66% of people choose the stairs over the escalator. Source: Craig Lambert, Harvard Magazine. March-April 2006

4. Today’s Agenda The Human Capital Context: What is a Healthy Campus? Incentives Must be THE ANSWER to Improving Wellness ! EACUBO Audience Poll Behavioral Economics and Choice Architecture – Introduction – Debrief the Polling Results (Comparing EACUBO to Indiana, Oklahoma and Rocky Mountain CUPA) Behavioral Economics in Action Behavioral Segmentation and Behavioral Messaging

5. Every Campus has Something Health Interest Surveys Nutritional Counseling EAP counseling Preventive Exams after a $20 copay Preventive Services after 10% Coinsurance Flu Shots Insurance Company Services Exercise Clinic with Assessments Ergonomic Evaluations Recreational Services with Fees Programs need to be orchestrated. Walkways to Wellness Health and Nutrition Letter Bike to Work Week Fitness Assessments

6.  Wellness Practices  Health Plans  Time-Off Programs  Workplace Support  Behavioral Health  Communications  Organizational Behavior  Measurement / Metrics  Q1. How effective are your smoking cessation programs? Q2. How effective are your fitness programs? Q3. How effective are your wellness coaching programs? Q4. How effective is your worksite healthy eating policy?  Healthy Enterprise Survey Methodology The Healthy Enterprise model frames the discussion of investments by element and item, to provide a detailed understanding of the Healthy Enterprise Index. INDEX ELEMENTSITEMINDEX ANALYSIS Healthy Enterprise Index  Health Care Costs  Health Cost Increase  Turnover  Unscheduled Absence  Extended Absence  Workers Compensation  Participation OUTCOMES CORRELATION Source: Sibson Consulting

7. A Healthy Enterprise Achieves Better Outcomes Sibson tested its model across each outcome metric and identified the key factors that lead to improved outcomes. Top QuartileAll Others Percentage Difference Healthy Enterprise Index785056% Annual Health Cost (PMPY) $3,431$3,769-9% Annual Health Cost Increase $235 $302-22% Turnover8.1%12.1%-33% Extended Absence3.9%6.1%-36% Workers Compensation Cost0.74%0.89%-17% COMPARISON OF AVERAGE ADJUSTED OUTCOME METRICS FOR THE TOP QUARTILE Organizations in the top quartile achieved 9% to 36% better outcomes. Source: Sibson Consulting

8. Healthy Enterprise Index Scores HEALTHY ENTERPRISE INDEX LOW SCORES MEDIUM HIGH SCORES 81 HEALTHY ENTERPRISE RESEARCH Source: Sibson Consulting

9. What Characterizes a Healthy Campus? Climate of trust and respect, corporate responsibility, work/life balance, ethics Behaviors conducive to physical, intellectual, emotional, financial, social and spiritual wellbeing Behaviors consistent with institutional values to promote a productive and supportive workplace, such as collaborative, fun, dependable, safe

10. Strategic Drivers Support Programs PREVALENCE All practices are fairly prevalent. Effectiveness varies widely within each program, with a smoke-free worksite perceived most effective. EFFECTIVENESS (very effective) (neutral) Program Components and Effectiveness PROGRAM COMPONENT Programs are listed in order of their correlation with overall effectiveness. Source: Sibson Consulting

11. Why Compare Higher Ed with Health Care? Strategic Drivers Support Programs PREVALENCE Organizations with a health care mission scored highest and had better outcomes! EFFECTIVENESS Higher Ed Health Care Providers (very effective) (neutral) Source: Sibson Consulting

12. Continuum of Maturity Category Focus on Treatment Focus on Prevention/ ManagementFocus on Optimal Behavior Health PlansProvides high quality and cost effective treatment Reduces health risks and manages conditions Optimizes health and fitness Workplace Support Treats minor injuries and/or handles medical emergencies Detects and prevents problems to avoid more serious health issues Promotes a culture of health Behavioral HealthTreats personal and work- related mental health/addiction issues Addresses factors contributing to addiction and mental health issues Promotes a “whole-life” approach to maximize all aspects of personal wellbeing—mind, body, spirit CommunicationsClarifies benefit coverageShapes behaviorPromotes proactive approach to health and wellbeing Workplace Behavior Addresses unacceptable behavior Shapes desired behaviorLeaders model behavior consistent with institution’s values A Continuum of Maturity Source: Sibson Consulting In our model, other characteristics include Aggression, Emotional Resilience, Financial Literacy, Metrics.

13. Environmental Factors Health Cost Property/ Casualty Cost Absence Cost Productivity Impact Workers' Compensation Cost Disability Cost Long Term Care/ Custodial Care Cost Life Insurance, Retirement, Retiree Health Progression of Health (Conceptual Foundation for Actuarial Model) Complications/ Morbidity Litigation/ Accident/ Property Loss Absence Presenteeism Workplace Injury Disability Loss of Activities of Daily Living Mortality Stroke/ Kidney Disease Asthma/COPD Diabetes Heart Disease/ Heart Attack Cancer Other Chronic and Non-Chronic Conditions Hyperlipidemia (Elevated Cholesterol/ LDL Level) Hypertension (Elevated Blood Pressure) Obesity (Weight/BMI/ Body Fat) Hyperglycemia (Elevated Blood Sugar/Glucose) Hypertriglyceridemia (Elevated Fatty Molecule/ Triglycerides) Anxiety/ Depression Stress/Anxiety Exercise/Physical Activity/Fitness Diet/Nutrition/ Healthy Eating Addictive Behavior (Smoking/Tobacco/ Alcohol/Other Substance Consumption) Risky Lifestyle Behavior Sleep Demographics Physical Environment Genetics Education Socio Economic Status Culture Actuarial Impact Actuarial Outcomes Disease States Risk Conditions (measures) Lifestyle Factors Outcomes deteriorate as we neglect environmental, lifestyle and medical management factors. Source: Sibson Consulting

14. Incentives Must be the Answer to Improving Wellness! PREVALENCE BY TYPE OF INCENTIVE Source: Sibson Consulting

15. Moving Beyond Incentives? PERCENTAGE OF EMPLOYEES COMPLETING HEALTH RISK ASSESSMENT BY AMOUNT OF INCENTIVE* While participation increases as incentives increase, other efforts are needed to optimize participation. Source: Sibson Consulting

16. When Incentives May Go Wrong Individual Incentives 1 – Too low: Fail to motivate behavior change – Too high: Higher than necessary to obtain the desired behavior – Too distant: Uncertain or too far off to overcome the “costs” of behavior change today – Crowding Out: Intrinsic motivation is crowded out because the rewards “cheapen” a task that may be interesting, fun or noble. Group Incentives – Confidentiality: Is confidentially effectively breached by indicating an individual’s health status to others? – Non-Participators: Is voluntariness of program undermined by making non-participants uncomfortable or putting them at risk? – Culture Focus: Is a wellness culture and program in line with institutional priorities? 1 Source: Behavioral Economics and Psychology of Incentives. Emir Kamenica. University of Chicago Booth School of Business. August 2011

17. Incentive design is: Designing Incentives… Institutions should provide an incentive for: – Healthy people to stay healthy and – Unhealthy people to change their behavior to reduce or eliminate risk factors Reward program participation + program completion + risk factor reduction Consider an “incentives budget” of at least $200 – $500 per employee per year That’s why incentives are so hard to get right and often require changes from time to time. 1/3 things you cannot control 1/3 art 1/3 science

18. Making Incentives Work Incentives work best with extrinsically motivated individuals Rewards must be large enough to gather attention and motivate behavior change Rewards can’t be too large or they may create a “choking” effect There are very different timing approaches used with lifestyle change when leveraging behavioral economic principles Participate in Wellness Program or Attain Goal Earn Incentive Maintenance (retain reward) Relapse (forfeit reward) Expectancy Theory is not as useful as Applied Behavioral Economics in motivating lifestyle changes.

19. Let’s Break Into Two Groups

20. Behavioral Economics Explores Mental Short Cuts in Cognition Heuristics Endowment Effect Loss Aversion Status Quo Bias Clue Seeking Bias Expert’s Certainty Bias Preference for Now v. Future Sentinel Event Sensitivity Optimism Bias Choice Architecture Framing Naming Ordering Default Options Priming Anchoring Foot in the Door Behavioral Messaging Heuristics are mental short cuts every person uses every day in decision-making. It is intuitive thinking; it’s very easy, very fast and automatic.

21. Why Do People Make Suboptimal Decisions? My parents smoked tobacco and lived to 100 years old. Why should I quit? I know I need to lose weight. When my diabetes gets worse, I will change my diet. My driving skills are in the top 10%, I don’t need to wear a seat belt. Anchoring to Old Value Systems Inconsistency in Present Behaviors and Future Promises Overly Confident and Ignore Chance Mental Shortcuts as BARRIERS TO CHANGE Examples in Health and Benefits

22. Leverage Human Bias to Improve Outcomes Mental Shortcuts as BRIDGES TO CHANGE Examples in Health and Benefits Have you heard about Bob’s weight loss? He is off those painful meds. Twenty other people had the same result! Jumping on the Bandwagon Nudging & Simplicity (use obvious cues) A. Healthy Choice Plan C. Catastrophic Plan B. Thrifty Consumer Plan D. No Coverage Clue Seeking Get your biometrics done and the Company is offering free lottery tickets. The Powerball is up to $100 million! Overvaluing Low Probabilities of High Rewards APPLIED BEHAVIORAL ECONOMICS

23. 2012 EACUBO Polling Results Which medical plan do you want?Group AGroup B PPO Plan % Healthy Living or Consumer Directed % How many servings of fruits & vegetables are eaten per day? Group AGroup B Average Will Americans reduce tobacco use in the next three years? Group AGroup B Optimistic % Pessimistic %

24. 2012 Focus Group Results Architecture Influences Choices and Beliefs Note: This slide will be available at the EACUBO presentation on October 16, 2012.

25. Choice Architecture Nudges Benefit Plan Decisions Note: This slide will be available at the EACUBO presentation on October 16, 2012.

26. Influence Views and Social Norms with Anchoring APPLIED BEHAVIORAL ECONOMICS Note: This slide will be available at the EACUBO presentation on October 16, 2012.

27. Prime the Workforce with Positive Messages APPLIED BEHAVIORAL ECONOMICS Note: This slide will be available at the EACUBO presentation on October 16, 2012.

28. Behavioral Economics Examples of Behavioral Economics in action: If you tell people they can no longer buy desserts in the cafeteria, they will rebel If you allow people to use their lunch debit card to buy meals but make them pay with cash for dessert, fewer desserts are purchased Lesson learned? Allow freedom of choice, just make the bad choice more difficult to accomplish How can YOU cleverly deploy applied behavioral economics at your campus?

29. Behavioral Economics in Action Maximize status quo bias and complexity aversion: Default: Automatically schedule next appointment for doctor, dentist, lab tests; accompany with email, text, phone call or postcard reminder) for patient to cancel is an inconvenience (must make a phone call) In cafeteria arrange healthy food near the front, by the checkout line. Complexity: Make unhealthy food more difficult to reach (back of cafeteria, highest shelf) and higher priced than healthy options. Default: After two to three maintenance drug retail fills must use mail order pharmacy …can opt out to retail if want, but that is inconvenient because you have to call to change this process

30. Case Study: Using Incentives with Applied Behavioral Economics Situation – A health system introducing an Accountable Care Organization and Health Savings Account based plan struggled to get 17% employee participation in its Health Risk Appraisal despite $175 in incentives Approach – Restructure the benefit plans, contribution structures, incentives and communications using lessons learned from behavioral economics research – Align benefits with the broader hospital system strategy, promote PCP relationships to increase participation and support the desired workplace environment Result – PCP utilization increased, while admits & ER decreased – Employee participation increased from 17% to 91% – Initial spouse participation of 85% – Budget, including incentives, projected to save over $1M – Stage set to increase focus on outcomes It takes more than incentives to get employees to embrace your initiative. HEALTH ASSESSMENT PARTICIPATION CASE STUDIES

31. Triggers and Methods Leading to Workforce Engagement Motivation Basis Emotional Triggers Leading to a Response Methods to Gain Attention Intrinsic Reward Seekers Appeal to Intellect and to Personal Curiosity Inspire Thinking about New Possibilities Extrinsic Reward Seekers Appeal to Financial Gain and Personal Vanity Provide Incentives and Socialization Disengaged Instill Fear and Convey Hope Intervention DIVERSITY IN MOTIVATION CREATING ENGAGEMENT : BEHAVIORAL MESSAGING Source: Sibson Consulting

32. Stages of Change 1 VARIED READINESS FOR CHANGE Source: Prochaska and DiClemente’s Stages of Change Model (Transtheoretical Model). Pre-contemplation: People are not intending to take action in the near future. Contemplation: People intend to change within the next 6 months. Preparation: People intend to take action and have a plan for change. Action: People have modified their behaviors within the last 6 months and have made some progress. Relapse is possible. Maintenance: People are working to prevent relapse. CREATING ENGAGEMENT : BEHAVIORAL MESSAGING

33. Differences in Cognition (Rational and Intuitive) To Encourage Rational Thinking To Encourage Intuitive Thinking Establish cognitive ease by using easy-to-read fonts. Set a good mood and ask your audience to smile. Ask your audience to agree by nodding their heads up and down. Use reds and bright blues. Use “numbers of people” for impact statements and avoid statistics. People are more alarmed by “50 of your 10,000 coworkers died from a preventable disease” than by “0.5 percent of Americans die from preventable diseases.” Source: Daniel Kahneman, Thinking Fast and Slow, Farrar, Straus and Giroux, 2011

34. Behavioral Segmentation Model Stage of Behavioral Change Intrinsically Motivated Extrinsically MotivatedDisengaged Pre-contemplation Inspire with messaging and imagery Advertise to get attention Intervene to capture attention Contemplation Provide high-quality resources and support Provide rationale and incentives Frame the choice architecture with consequences Preparation Allow the patient and practitioner relationship to flourish Provide easy-to-use resources Reinforce gains and lost opportunities Action Satisfy basic security and psychological needs Eliminate barriers during change process Monitor compliance and enforce accountability MaintenanceInvite them to help others Create new workplace social norms Advance to new goals BEHAVIORAL SEGMENTATION MODEL FOR HEALTHY ENTERPRISE WORKFORCE ENGAGEMENT Encourage intuitive thinkingEncourage rational thinking What the cell colors above signify: Source: Sibson Consulting

35. Use Behavioral Messaging in Your Campaigns CREATING ENGAGEMENT : BEHAVIORAL MESSAGING Source: Sibson Consulting

36. The Institution’s Role in a Behavior Change Campaign The institution should engage in behavioral messaging: Establish personal relevance by using familiar references and consistent branding. Nudge caring leaders in workforce communities of interest who are admired and liked. Trigger emotional responses (hope, fear, excitement, love, greed, caring). Define clear choices about health and illness, about consumerism and waste. Convey value in making smart choices (save money, save time, feel better, perform better). Ask employees to complete a small task related to a larger goal (crumble up one cigarette, take the stairs instead of the elevator, identify a freestanding urgent care center near home). Channel employees to the best High Quality / Easy to Use resource available (schedule an appointment for them, provide directions and a map to them). Source: Sibson Consulting

37. Engage Communities of Interest with Applied Behavioral Economics Communities of Interest are Defined by: Proximity/ Location Generation A Hobby A Disease Other Cohorts Lessons from Behavioral Research  People are inherently social and biased toward cooperating within their peer group  Involve caring leaders, who are admired and liked (wellness ambassadors)  Influence perceptions with priming and instill new beliefs with anchoring  Use / monitor social media to encourage positive developments and to quash availability cascades

38. Recommended Readings and Benchmarking 1300 E. 9 th Street, Suite 1900 Cleveland, OH 44114 T 216.687.4432 F 216.687.4490 www.sibson.com Christopher Goldsmith, SPHR, CCP, CEBS Vice President cgoldsmith@sibson.com Free Benchmarking: http://www.sibson.com/healthy-enterprise/index.php “Nudging Employees Towards Better §401(k) Plan Decisions with Behavioral Economics” Christopher Goldsmith and Stewart D. Lawrence, Sibson Perspectives, October 2012