When Michael Vittoria joined the Portland, Maine-based MaineHealth hospital system as its vice president of corporate benefits services in January 2012, it did not take him long to identify fundamental deficiencies in its approach to employee health.

Just a few months after starting, Mr. Vittoria spearheaded an overhaul of the hospital system's employee health benefits and wellness programs rooted in behavioral economic principles.

Prior to 2012, Mr. Vittoria said the hospital system was spending as much as $1.6 million annually on rewards meant to motivate employees toward taking an active role in their health management. However, participation in the program struggled to reach above 55% of MaineHealth's workforce in a given year.

Additionally, Mr. Vittoria said, MaineHealth's wellness program hadn't yielded any meaningful reductions in the hospital system's health care costs, which in 2011 outpaced the national average by nearly $2,500 per covered employee.

“We felt like we could get a lot more mileage out of our wellness programs,” Mr. Vittoria said in an interview with Business Insurance. An analysis of MaineHealth's medical claims costs from 2007 to 2011 revealed that employees not participating in the hospital system's wellness program generated an additional $1,200 per employee in annual claims costs vs. program participants, Mr. Vittoria said.

“We also saw a significant difference in terms of the frequency of disability claims, but also the length of their claims, so we realized that we had a lot to gain by getting our employees more engaged in health management,” he said.

For the 2013 plan year, MaineHealth introduced two new medical coverage plans alongside its existing HMO plan, and arranged the plans in a tier structure that rewarded basic levels of wellness participation with more attractive coverage options.

Under the new structure, employees who complete health risk assessments and biometric screenings and select an in-network primary care physician are granted access to the hospital system's original medical plan, renamed “Healthy HMO Plan,” as well as a new consumer-driven health plan, named the “Healthy Saver Plan.”

Employees who choose not to submit to wellness screenings are limited to a new “basic” plan in which employees pay a much higher percentage of the total cost of coverage than either of the “Healthy” plans.

Mr. Vittoria said the tier structure is designed to leverage two principles of behavioral economics: loss aversion and choice architecture.

“We made a conscious choice to keep the payroll deductions and plan design the same, because we wanted people to see that they could keep the same plan they had the prior year or lose it if they didn't participate,” Mr. Vittoria said.

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Simultaneously, MaineHealth used choice architecture — the careful selection or omission of specific language or contextual clues in order to influence individual choices — to frame the separate benefit plans. By purposefully avoiding words and phrases that might indicate the relative quality of the consumer-driven plan vs. the legacy HMO option, Mr. Vittoria said MaineHealth was able to migrate 22% of its HMO enrollees to the consumer-driven health plan for the 2013 plan year.

“We did that because we wanted employees to see the CDHP as being of equivalent value,” he said. “We wanted employees to pick the plan that works best for their families.”

MaineHealth also made substantial changes to its wellness incentive strategy for the 2013 plan year. Previously, employees were given cash rewards for merely participating in wellness initiatives and abstaining from tobacco use. Under the revised program, all of MaineHealth's cash incentives are tied to specific health status goals.

The hospital system also scrapped the $3-per-pay-period award it had been giving employees for abstaining from tobacco products, and instituted a $1,200-per-year penalty for tobacco use.

“I went to my boss one day and (told) her that we were going to spend almost $400,000 in 2012 to pay 5,400 nonsmokers not to smoke,” Mr. Vittoria said, adding the hospital system has seen the percentage of its employee population testing positive for tobacco drop one full percentage point in less than one year.

“We sent a powerful message to the smokers, which was that the time to really work on quitting is now,” he said. “And, as far as I know, none of the nonsmokers started smoking because we took away the reward.”

The reduced frequency of tobacco use among its employees is just one metric in which MaineHealth is seeing positive development since the overhaul, Mr. Vittoria said.

“The bottom line is that you have to make sure whatever you do is about the employee and not the company,” Mr. Vittoria said. “We want people to have a good health plan, and we want them to understand that those benefits are an investment in their health. All of our communications about these changes focused on that and, over time, I think people understood that.”