Insurance co launches a cash-for-health program

Can an insurance company save money by paying its members for healthy behavior? Oscar Health, the venture-capital-funded insurer based in SoHo, is betting it can.

Starting in January, the company will send all its members a free Misfit Flash device (which retails for $50) and pay them for walking a certain number of steps a day.

The app presents users with a daily step goal based on their history of physical activity. A patient who reaches the day’s goal gets a $1 credit; after the account reaches $20, the patient can redeem the credit for an Amazon gift card.

“We wanted to be realistic yet achievable,” said Mario Schlosser, one of Oscar’s three co-founders. “As an insurance company, we should do our best to keep people healthy. And walking steps on a daily basis is one of the simplest ways to improve your health.”

Through Misfit, a member and his or her doctor will be able to track physical history directly through an Oscar account and the mobile app.

Oscar already offers various perks to members, including paying them if they make it to the gym frequently. Last month, the company started paying $20 to members who got a flu shot and $60 to those who had a preventive visit with their doctor—a service that is already free under the Affordable Care Act.

In the approximately five weeks since those programs launched, the number of members getting flu shots more than doubled, said Mr. Schlosser.

“I’ve never heard of an insurance company actually paying its members in some form for healthy behavior,” said John Bryan, a partner at accounting firm Citrin Cooperman and co-leader of the firm’s health care practice. “It’s an interesting twist.”

For employers, trying to spur healthy behaviors with money isn’t a new concept. Similar techniques have been used in workplace wellness programs, with the logic that a patient who engages in healthy habits incurs fewer health care costs in the long term. Two years ago, the North Shore-LIJ Health System, the state’s largest private employer, offered workers who completed a walking contest the chance to win a trip to Paris. Some 15,000 workers participated, and 40 won the trip.

However, evidence on the programs’ effectiveness is still inconclusive. One unanswered question is whether the incentives reach people who aren’t already motivated to stay active.

Oscar member Lisa Menin, a real estate investment broker, goes to the gym so much that her previous health insurance company sent her a $200 rebate. But of Oscar’s incentives, she said, “I haven’t been aware enough of them, or they haven’t affected me enough, to take advantage of them.”

Studies have shown mixed results for wellness programs that aren’t mandatory, said Gerard Wedig, an associate professor at University of Rochester who studies health economics.

“If you don’t make the wellness program mandatory, then only motivated people tend to participate,” he said. “All of us have the strongest incentive to be healthy without financial incentives. If someone is choosing not to engage in these healthy behaviors, is dangling a little money in front of them going to be enough to motivate them?”

Mr. Wedig believes that in many cases, the programs are rewarding active people for things they already do, or “redistributing money from people who have less healthy behaviors to people who have more healthy behavior.”

But Oscar has larger designs than just tracking members’ steps. The app will not only let a patient’s doctor see their physical activity, but in the future, it will also be able to reliably track a patient’s gym visits and sleep patterns. That is data that doctors have had to get directly from patients.

Results from the flu-shot program make the company optimistic.

“We’ve had tremendous patient engagement,” Mr. Schlosser said. “People really really dig this. As somebody who’s been on the Internet for a long time, I know how hard it is to just make somebody click on a button in an email.”

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