Michael Dermer, president and chief executive of IncentOne, works with health plans, health service companies and self-insured employers to boost consumer and provider engagement. The Lyndhurst, N.J.-based company launched its first incentive program in 2004 and now has more than 350 customers.

EBA spoke with Dermer about the latest developments in incentives and the key to building a client base and effectively engaging plan participants.

What is the motivation behind IncentOne's business philosophy?

What was very clear to us, and the vision behind IncentOne, was that everything comes down to consumer and provider behavior. If you believe that incentives are critical to driving that behavior, then incentives are really the solution that everyone needs to have to try to move the needle. My dad is a diabetic and he knows what he needs to do and he still doesn't do it.

At its simplest form we came across information such as a pregnant women not following their prenatal care, [which is a potentially] huge cost to the system. It seems natural that incentives should be one of the most critical tools that anybody who bears the risk for the cost would need to employ.

How does the methodology help employers achieve savings?

We try to align the incentives spending through a series of actions that are a mix of immediate and long-term savings.

For example, it might be something as simple as going to a lower cost MRI provider. [Participants] can go to one that costs $2,000 or one that costs $800; there's a significant cost savings, so you can give someone an incentive.

From a long-term perspective, on the other end of the spectrum is helping people manage weight, nutrition [and] exercise plans.

What we really try to do is break up the use of incentives between the proper mix of immediate return on investment and longer term so they can put money in their pocket today at the same time [they're] investing in some of the long-term initiatives that impact costs.

How is your philosophy different from the field of value-based benefit design?

They're complementary. If you think about plan design it has within it all different kinds of co-pays, carrots and sticks.

Plan design should work as far as it can. However, as we all know, if plan design drove 100% of what we wanted, everybody would be taking generic drugs [and] would be going to the lower cost MRI provider.

What about disincentives, do those play into the picture?

Every program should have both carrots and sticks, so when we say we [offer] incentives that also includes disincentives. We'll have programs that actually give people dollars and we'll have programs that take away dollars.

There's an appropriate mix and that's really the special sauce. We don't think they're in conflict with each other, they're just really a different type of incentive.

What is the state of the incentive industry as a whole?

These days there are two types: outcomes-based incentives and immediate return on investment. There isn't a lot of disagreement on what you want to get a diabetic, smoker, or a pregnant mother to do. There's experts out there that develop programs for all different types of risks and conditions and there's a little debate here and there, but for the most part [the message is] 'take preventive care.'

That's not the issue, the issue is: How do I get people to actually do it? We have to leverage the expertise and the science to the people that are developing the programs to act as the engagement engine, and that goes back to the vision of IncentOne.

With health care reform changing the landscape, what does this mean for your company?

The reform has been a huge proponent of incentives. In the stimulus package, even before health care reform, there was $19 billion dollars in incentives for e-prescribing for physicians.

Then in [the Patient Protection and Affordable Care Act] there was a specific increase of the use of incentives from 20% to 30% and in some cases from 50% of someone's premium could now be given away in terms of incentives.

It's one of the things both sides of the aisle really like. There wasn't a lot of debate about this provision because it was accepted by both sides. Almost everybody believes if you're going to be healthier you can be rewarded and everybody benefits from that.