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[17 comments]

Will Cash Rebates Get People to Eat Healthier Foods?

March 27, 2013

Auto insurers offer a range of discounts for safe driving. Should health insurers be in the game of offering discounts for healthy eating?

Financial incentives as motivation to buy more nutritious foods are being tested in the U.S. following a successful experiment in South Africa. Results from research conducted by the RAND Corporation, published in the American Journal of Preventive Medicine (AJPM), showed "rebates on healthy food purchases lead to significant changes in what people put in their grocery carts."

According to the AJPM, rebates in the test could be claimed by consumers in over 400 designated supermarkets. Credit card data for 170,000 households, of which 60 percent enrolled for rebates, were scanned over four years, although the study only tracked purchases at one chain per household.

"Rebates of 10 percent and 25 percent for healthy foods are associated with an increase in the ratio of healthy to total food expenditure ... and a decrease in the ratio of less desirable to total food expenditure," the AJPM reported.

Cash-back offers were given for fruit and vegetables, non-fat dairy products and a range of other healthy food at a specified supermarket.

Lead researcher Roland Sturm said even the smaller rebate was "enough to change behavior. The take-home message here is clear: lowering the cost of nutritionally preferable foods — the healthy foods — can motivate people to significantly improve their diet."

Health insurers support both the South African study and the current American trial. In the U.S., Humana is linked with Vitality, which owns Discovery, South Africa's largest insurer.

Rebates of only five percent were given in the American experiment compared to ten in South Africa or 25 percent if participants complete questionnaires.

Vitality's senior vice president, Derek Yach, acknowledged that 10 percent was better than five, according to NPR. Mr. Yach believes RAND's findings are significant, demonstrating that nudging can result in people modifying their diets.

Voice of America pointed out participants were self-selecting, possibly indicating a predisposition to eating healthily; nor were purchases from other sources tracked.

More recently, Medica began working with technology company, Solutran, to automatically upload discounts from healthy food manufacturers to members' cards at the checkouts of retailers across the U.S. Whichever way you look at it, insurers want consumers to be healthy, paying up front to increase wellness and decrease preventable illnesses that could cost more long term.

FINANCIALS:     [ NYSE:HUM] [ ]

Discussion Questions:

Should insurers be involved in offering rebates to consumers who buy more nutritious foods? What do you see as the pros and cons of such rebates for retailers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much of an effect will cash rebates, regardless of the source, have on what types of foods that consumers purchase?

Comments:

I see the big con being that the rebates would most likely only be offered at supermarkets where the prices are jacked up to include the rebate in the pricing. I can't see getting a rebate shopping at Aldi. What I would do would be to put and end to Food Stamps and replace them with vouchers for rice, beans, and a handful of fresh produce items, period. Insurers don't have to be involved. Simply get the government to stop allowing people the opportunity to make poor choices when they are getting their food for free. I think once the non nutritious food is no longer free, its consumption will drop.

David Livingston, Principal, DJL Research

So couponing should be brought to the produce aisle, is that what we're saying? Just one question: Who pays for the discount: The grower, grocer or Wall Street?

Someone pays for that discount. It's time we acknowledge there is no free lunch, er...or Honey Crunch Apple.

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Bob Phibbs, President/CEO, The Retail Doctor

I actually think this is a great idea. With any discounts or coupons, companies will need to test the waters to find out how much of a discount will have an impact. The other problem, of course, if for people who typically spend their money at stores and restaurants that don't sell much fresh food.

Then, of course there will be debates about which food products qualify for the discount. Who is going to make those decisions? I don't think we want to get into a situation where we need to establish a new government agency or committee for this.

Pros - healthier people.
Cons - can't think of any.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

Too many forces are working too hard to change the way people eat, live, vote, and think. We are probably overworking social engineering. As David said, the government—and insurers too—should stop allowing people to make choices when they're getting food free or with rebates.

It's a given: Everybody should eat nutritious foods.  Retailers usually go with the prevailing flow. And when there are no freebies or rebates, people will eat the foods that taste good to them. Hopefully they will be nutritious.

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Gene Hoffman, President/CEO, Corporate Strategies International

There's nothing wrong with insurers offering consumers cash for healthier eating. The question is, "Does it really work?" Obesity is a problem in America. We all pay for this problem through increased medical costs and health insurance premiums. Any program that gets Americans to eat healthier diets is a positive step.

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Max Goldberg, President, Max Goldberg & Associates

Forgive my cynicism, but the business model for health insurance companies in the U.S. demands a population that is sicker, not healthier. That is one of the reasons health insurers never supported preventive practices. It took government intervention to force covering of some prevention. Escalating health costs are used to justify escalating revenue for health insurers. As long as the revenues are increasing faster than the costs, the health insurer makes more money.

The reverse is also true. If health costs started declining, premiums would have to decline. If premiums decline (revenues), the bottom line declines. What health insurance CEO would opt for that? Therefore, as a CEO of a health insurance company, why would I promote a program to generate a healthier population?

Private health insurance is not a social service, it is a profit making business.

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Gene Detroyer, Professor, Independent

Companies are profiting off the shape of America, whether it be healthy with leafy green vegetables or not-so-nourishing processed foods. There are so many factors that contribute to the health of a nation, but certainly, people should be helped in trying to be more nutritious just as much as they are tempted to be unhealthy.

With insurance companies offering rebates, it may spark those who otherwise cannot afford or aren't as aware of healthier options. Whether people realize it or not, they are being targeted in some way to be persuaded to act in a particular way that produces a desired outcome. In this instance, even if the end result is beneficial for insurance companies, it's actually favorable for the individual as well.

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Zel Bianco, President, founder and CEO, Interactive Edge

"Should insurers be involved...?" It's not really a question of should. Until such a day that insurers dictate customer diets, it's an incentive program that consumers can take advantage of or not. It's doubtful that many Americans who are already addicted to the SAD (standard American diet) will make efforts to give up their lifestyle for a few bucks. And in this example "Voice of America pointed out participants were self-selecting, possibly indicating a predisposition to eating healthily...."

If there were really any buy-in to such incentive programs to the point that supermarkets had to change their inventory/product mix to keep up, CPG and junk food manufacturers would have the biggest concerns. I don't see it worrying them.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

I like this program. I can also see insurers giving rebates on health insurance premiums if an insured person lives a healthier lifestyle, by (for example) logging daily exercise, or submitting receipts for healthy foods, etc.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

I'm cautiously optimistic about this. But David Livingston raises an excellent point. Junk food causes health problems that the entire society has to pay for. If the government is going to give out Food Stamps to the needy, which I certainly think it should, why not steer recipients to healthier choices? No doubt I'll get slammed by some for being politically incorrect, but....

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Do we need to reward people into doing what is right? Giving someone a rebate on fresh foods sounds good, but who will pay for it? We all will, as this will be the next cash for clunkers program, from our nannies in D.C. The food stamp program, which directly benefits me, should be revised, but that is not going to happen, as it would inconvenience the folks who want to buy 2 liter pop, and sheet cakes on their EBT cards.

We have s surplus of nutritional food out there, that can dramatically lower our deficit by using it to help the poor, but many will not want this, as it would force folks to actually cook more meals, instead of microwaving a french bread pizza. We don't need rebates, we need common sense, and that starts in the home, and with your family doctor.

So here is my free advice.

Don't smoke.
Don't eat pizza and pop 6 days a week.
Learn how to cook.. It is actually fun.
Talk to your kids about eating better.
Grab an apple once in a while instead of a Reeses Cup.
Take a walk outside, instead of Facebooking all day.

Problem solved...okay, next crisis please!

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Tony makes a lot of sense. My elderly parents get all the nutritious food they want for free at a local food bank. They don't actually go there and certainly don't need the charity. What happens is the volunteers just bring over as much fresh fruit and vegetables as they need.

Seems the people who use the food banks just pass over it, even when its free. I go by my local food bank when the doors are about to open. Looks like they are having tryouts for Sumo wrestlers. Now I'm not so sure rebates would work because FREE doesn't seem to be working.

David Livingston, Principal, DJL Research

Insurers should do whatever makes them the most money. If rebates keep their clientele healthier and cost them less in claims I am sure that would be wise. However, they have no obligation to become nannies!

I don't see the retailer being involved beyond stocking healthy products. Suppliers/manufacturers may wish to package their products in a manner that lets consumers know that a rebate is available on an item. If anyone is really serious about getting people to eat healthier, then I would suggest that all of the sugar-laden non essential foods be removed from the food stamp list. If they can't buy cigarettes or alcohol they shouldn't be able to buy Pepsi, chips, or anything else that isn't nutritious. As food stamp recipients are now about 40% of the population, you could effect change here with the stroke of the pen. But we all know no one really cares about this. It's all just talk!

Ed Dennis, Sales, Dennis Enterprises

Rebates of a sort, I can go for, maybe. Rebates for the purchase of certain foods? Too much red tape for the effort.

How about the auto insurance companies that give rebates to drivers who repeatedly display good driving habits? So health insurance companies can give rebates for customers who stay healthy each year...or something like that.

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

I guess there was some code word here that I missed that alerted (certain) people to begin a rant about food stamps, but this concept has nothing—read NOTHING—to do with government: on the contrary, it's exactly the kind of voluntary, free-market solution—or attempt at a solution, really—that minimalists should cheer. In theory at least.

But I'm skeptical: this seems rather complicated, especially when combined with all kinds of other "incentive programs." What would happen to a CVS employee who gets a fail on their "voluntary" compliance, but does well here? (Just doing all the math might make them sick.)

'notcom'

Tony has this wrapped up neatly and tied with sound advice.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Insurance rebates for healthy eating sounds promising on first bite. Then my mind starts chewing out questions:
- Who decides what is "healthy" food? Based on what trusted criteria?
- How will rebates be paid—as cash back, grocery scrip, or premium discounts?
- If rebate determination is based on purchase behavior at a single store or on one credit card, wouldn't that encourage insured people to game the system?
- How will this benefit health insurers' shareholders?
- Why do I have a sneaking suspicion that even this benign program will somehow raise the costs of healthcare?

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James Tenser, Principal, VSN Strategies

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