Improving the Structure of Financial Incentives for Exercise: Insights from Behavioral Economics

In the face of spiraling health costs, policy makers, employers and insurance companies are increasingly investing in wellness programs to target a range of problematic health behaviors.  Despite the interest in these programs, however, there is little research or consensus about how incentivized wellness programs should be structured. The structure of a typical incentive program is such that the incentives are constant over time (e.g., $10/visit).  However, it is unclear that this structure uses limited resources most efficiently. In particular, economic models of habit formation suggest that incentives that start higher and decline over time could possibly be more effective. The intuition is two-fold:  health behaviors become easier as one does them repeatedly and people with self-control problems have difficulty overcoming the hurdle of the initial investment period needed for change.