This reminds me of what economists call "asymmetric information." This is a situation in which the seller knows more about a product than the buyer (sometimes the buyer knows more about something important like how healthy or risky they are as it relates to insurance). These markets do not operate optimally. If insurance companies don't know how healthy or risky you are, they can't be sure of how much your premiums should be. But with fitness tracking, they learn more about you. My students might recall I discussed this after we played the supply and demand game in class. A good example is the used car market. Sellers usually know alot more about the product than the buyers.
Excerpts from the article linked above:
"You know you need to exercise more, but there's always next week, or the week after. To entice you to stop procrastinating, your company or insurer might soon reward you for wearing a fitness device to track your steps, heart rate and more.
For instance, in one program announced Wednesday, some workers can buy a $350 Apple Watch for just $25 by meeting exercise goals for two years. Miss goals, and see your discount shrink. Vitality, a provider of disease-prevention and lifestyle programs, is initially bringing the offer to U.S. employees at three companies, along with John Hancock life-insurance customers. It has been testing the program in South Africa since December.
Other programs let you redeem points from fitness activities for gift cards and other rewards. Submit to biometric screenings and nutrition classes, and in some cases you can earn insurance discounts."
"Adrian Gore, CEO and founder of Vitality parent company Discovery Group, says that for many people, the benefits from exercise might not be apparent for a few decades. Reward programs make the payoff more immediate."
"On Tuesday, health insurer UnitedHealthcare started offering up to $1,460 a year in credits toward deductibles for meeting daily goals while wearing a custom tracker. Oscar, which sells health insurance directly to consumers, has been giving out free Misfit trackers for opportunities to earn up to $100 a year in Amazon gift cards. Fitbit works with employers such as Indiana University Health and Emory University in Atlanta to subsidize fitness trackers for their staff."
"These programs are typically voluntary, but you must be willing to share data to earn the most rewards and insurance discounts.
Sound creepy? Program officials say that data from fitness trackers typically go to outside administrators, such as Fitbit or Vitality. Employers and insurers get only broad totals to verify eligibility and not details on heart rate and sleep. But participants need to trust that these systems won't get hacked.
Mike Doughty, president and general manager of John Hancock Insurance, says premiums won't rise if a screening uncovers higher blood pressure or other risks. Rather, he says, wellness incentives are about promoting longer lives — and collecting life-insurance premiums longer.
There's no proof that providing fitness trackers directly lowers health care costs, but there's plenty of evidence that exercise leads to better health, which in turn can improve productivity and reduce absences. Michael Staufacker, Emory's director of health management, describes the thinking as a "value of investment and not a hard-dollar return on investment as it relates to medical or pharmacy costs.""
"Programs from Vitality and others typically won't let you earn insurance discounts simply by exercising. You'll need to earn additional points by completing questionnaires and getting flu shots. You sometimes get bonus points simply by staying within recommended limits for cholesterol, blood pressure and other measures. Smokers can also get points for joining programs to help them quit.
"You change one thing about your behavior, and you can be more motivated to work on these other aspects," says Tammy Smith, who manages the employee wellness program at IU Health.
DaVita HealthCare Partners says health care spending by its employees slowed significantly after it offered tracker-based incentives through Vitality. But DaVita also increased the deductible on claims and started such initiatives as Fresh Fruit Wednesday. That makes the effect of the fitness program difficult to isolate.
With the Apple Watch program, you must pay back Vitality each month you miss your fitness goals, which typically call for four substantial workouts a week. The goals are meant to be achievable, but tough enough to change habits."
Some research shows that if the reward is not delayed, people are put in groups where only those succeeding get rewarded (since people hate to see others get a prize they could have had) and if the participants lose money if they don't meet the goal (called loss aversion), the policy is more successful. See Paying Employees to Lose Weight.
Older posts on similar topics:
Should Overweight People Pay More For Health Insurance?
Should We Pay People To Adopt A Healthy Lifestyle?