More Money, More Pounds (Off)

With rising healthcare costs and increasing evidence of the benefits of exercise, policymakers, employers, and insurance companies have been trying to develop methods to incentivize people to exercise more. The benefits of exercising have a number of dramatic positive health effects, from lowering the risk of heart disease and stroke by up to 35 percent to decreasing the risk of depression by 30 percent. The financial impact of lowering these risks would make a significant contribution to lowering healthcare costs. A recent working paper by Heather Royer, Mark Stehr, and Justin Sydnor of the National Bureau of Economic Research (NBER) aims to measure the impact of the combination of a cash incentive followed by a commitment contract on exercise patterns for employees at the headquarters of a Fortune 500 corporation.

The team designed a study to isolate the effects of both financial incentives and commitment contracts on exercise habits and to study their long term effects.  Initially, five hundred people out of a sample of one thousand individuals chosen from survey respondents at a Fortune 500 corporation’s headquarters were selected as the experimental group.  They were given a free gym membership and paid $10 for each visit to the company gym, up to $30 a week for one month.  After the first month, the group that had been paid to exercise was split again. Half were given the option of initializing a commitment contract. A commitment contract is a motivational technique in which the participant receives financial penalties for not reaching their goals. The participants then had to attend the gym at least once every two weeks for two months. If they met their goal, their money was returned in full; otherwise, it was donated to United Way.

As had been found in previous research, the financial incentive provided during the initial phase of the experiment resulted in an increase in the desired weight loss behavior. In this case gym attendance doubled. Using survey data provided by the participants, the authors estimated that at least 70 percent of the activity was completely new exercise, not simply a continuation from those who were using the gym independently prior to the start of the study or exercising at an alternate location. However, for participants who did not receive a commitment contract, the increased exercise activity quickly faded away when the financial incentives were removed.

To get a more useful representation of the long-term results, the researchers broke the participants into “members” and “non-members” to denote who had been a gym member before the study. Members who were in the incentive only group fell back to the level of the control group by the third month. Members who were in the incentive plus commitment contract group displayed a ten percent higher level of attendance than the control group during the commitment phase and their level of attendance remained higher for the next eleven months before falling back to the level of the control group.

For non-members the incentive only group retained a three percent higher level of gym use than the control through the end of the study. The non-member incentive plus commitment contract group displayed an eight to ten percent higher usage rate during the commitment contract phase. Even a year after the study, this group’s gym usage was still five to six percent higher than the control group.

Among the portion of individuals who were given the option for a commitment contract, the take-up rate was 23 percent of “members” and 6 percent of “non-members.” However, among those who took a commitment contract, 63 percent were able to successfully meet their commitment. The contract was most popular with women and individuals over 33, who were about 20 percent more likely and 17 to 25 percent more likely, respectively, to choose a commitment contract when given the opportunity.

Although the results of the study are quite positive, caution should be used when extrapolating these estimates to the general population. The experimental group was highly educated (about 65 percent of the participants had a college degree compared with less than 30 percent in the general population), slightly older (40 vs. 36.8), had a longer commute (38 minutes vs. 25 minutes), and less unhappy than the general population (7 percent were unhappy vs. 14.3 percent in the general population). However, their rates of being overweight or obese were generally comparable to the average American at roughly 69 percent.

The authors concluded the program created some long lasting impacts beyond the incentive period. Exercise activity increased by 26 percent, while the total cost of this program was only $57 per person, or 1 percent of the annual average healthcare costs per year of an individual.

The study indicates that financial incentives, when paired with a commitment contract, can effectively induce a positive and lasting increase in healthy behaviors at a surprisingly low cost.

Feature photo:cc/Ulf Liljankoski