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Aug. 21 (Bloomberg) -- To fight rising medical costs, oil company BP Plc last year offered Cory Slagle -- a 260-pound former football lineman -- an unusual way to trim $1,200 from his annual insurance bill.
One option was to wear a fitness-tracking bracelet from Fitbit Inc. to earn points toward cheaper health insurance. With the gadget, the 51-year-old walked more than 1 million steps over several months, wirelessly logging the activity on the device. Twelve months later, Slagle has added to his new exercise regimen by trading burgers for salads and soda for water, dropping 70 pounds (31.8 kilograms) and 10 pant sizes in the process.
“I can see my toes now,” said Slagle, a middle-school administrator whose wife, Kristi, works for BP in Houston. The company’s program, he said, is “pushing me to get off the couch and make the right decisions.”
Slagle’s wife is thrilled with his thinner frame -- as is BP. His once-high blood pressure and cholesterol are now in a normal range, significantly lowering BP’s risk of covering treatments related to heart trouble or other medical problems.
Slagle’s experience is an example of how companies, facing rising health expenses, are increasingly buying or subsidizing fitness-tracking devices to encourage employees and their dependents to be more fit. The tactic may reduce corporate health-care costs by encouraging healthier lifestyles, even as companies must overcome a creepy factor and concerns from privacy advocates that employers are prying too deeply into workers’ personal lives.
Apart from BP, insurers including UnitedHealth Group Inc., Humana Inc., Cigna Corp. and Highmark Inc. have also created programs to integrate wearable gadgets into their policies. The aim is to get people more invested in taking care of themselves. Consumers wear the device and the activity data is uploaded to an online system so it can be verified to give a person their reward.
“What employers want is the person to take an active role in their health,” said Dee Brock, who has incorporated wearable devices into wellness programs for Pittsburgh-based HighMark.
The adoption of wearable devices by companies and insurers is increasing as spending on corporate wellness incentives has doubled to $594 per employee since 2009, according to a study by Fidelity Investments and National Business Group on Health. Technology is creating new forms of wellness programs to measure whether employees are making improvements, similar to a trend in the car-insurance industry where drivers who put a monitoring sensor on their vehicle can earn lower rates based on how well they are driving, instead of their driving history.
Yet the moves also let employers and insurers gather more data about people’s lives, raising questions from privacy advocates. Wearable gadgets are advancing beyond tracking steps, with sensors to monitor heart rates, glucose levels, body temperature and other functions.
“The focus on preventive health at the expense of privacy is dangerous,” said Pam Dixon, founder of the World Privacy Forum in San Diego, which focuses on health privacy issues. “Right now it’s tracking steps per day, and the reach isn’t that far with these devices, but in time it will be quite sophisticated.”
When financial incentives are involved, Dixon said it forces employees’ hands and narrows the question of whether or not they should participate. The gathering of health data also opens the door for people to eventually be charged more or less based on the information, she said.
These are among the ethical questions still to be addressed about the appropriateness of companies tracking the physical activity of employees, said Harry Wang, a researcher for Parks Associates who has been studying the market. With wearable devices, collecting more sensitive information is likely to bring tougher government oversight, he said.
“There will be high levels of privacy, security and compliance requirements,” Wang said. “There will be high expectations from consumers about how the data will be used.”
Companies and insurers said they protect the privacy of people using wearable gadgets, and comply with federal laws that prevent employers from seeing certain health information about employees without consent. The wearable programs are voluntary and often administered by third-party vendors like StayWell, which works with BP.
As part of the BP program, employees who use a Fitbit to log 1 million steps earn half of the 1,000 points needed each year to qualify for lower co-pays, deductibles and out-of-pocket health expenses. BP bought 25,000 Fitbit devices for North American employees, including those at refineries and drilling rigs. Points can also be earned by getting an annual physical, taking an online health class and other initiatives.
“We think the device is easy to use, gets people aware of how little they are walking and helps trigger people to get active,” said Karl Dalal, director of health and wellness benefits at BP. “BP doesn’t see any of the data except in the aggregate.”
The market for wearable devices is small -- about 2 percent of the 1 billion smartphones shipped globally last year -- so creating interest from employers and insurance companies is key to growth. Some 22 million fitness-tracking devices will be sold this year, and 66 million by 2018, with about a third coming from corporate-wellness programs, according to Parks Associates. The incentives an employer or insurance company can offer is a way to keep people using the gadget, instead of throwing it in a drawer once the novelty wears off.
Under the Affordable Care Act, the new national health-care law, companies can spend as much as 30 percent of annual insurance premiums on rewards for healthy behavior.
Technology companies are taking note. Apple Inc., which has new health-tracking software called HealthKit that will be released this year and is said to be developing its own wearable device, has talked with UnitedHealth, the biggest U.S. insurer, and Humana, about its health initiatives, executives at the insurance providers said. The companies wouldn’t provide specifics about the conversations. Apple declined to comment.
Fitbit has a sales force dedicated to pitching employers and insurance companies, and touts software to make it easier to log the activity of workers, down to specific individuals if a company wants, said Amy McDonough, who coordinates deals for Fitbit with companies. Other makers of wearable devices, including Jawbone, Samsung Electronics Co. and iHealth Lab Inc., have also targeted businesses.
Samsung leads the smart wearable-band market, according to a report today from Canalys. The researcher estimated the wearable band market grew almost eightfold in the first half of 2014 from a year ago.
Some employers are encouraging the use of wearables without the gadgets being tied to lower insurance rates. Houston Methodist, owner of a chain of hospitals in the Houston area, got about 6,000 Fitbits this year and is offering employees the chance to win $10,000 if they walk more steps than the company’s top executives. Fitbit said it also works with Time Warner Inc. and Autodesk Inc.
“Walking alone isn’t going to beat diabetes, but it’s certainly going to help,” said Marc Boom, chief executive officer of Houston Methodist. “Being more active results in better health. That’s indisputable.”
At Scotty’s Brewhouse in Indianapolis, where the $15 “Big Ass Brewhouse Burger” includes four quarter-pound beef patties and American cheese, owner Scott Wise offers an extra day of vacation for managers at his 11 restaurants who use a Jawbone UP device to log an average of 10,000 steps a day for three months. That has some managers like Brian Winnie exercising more to earn time off for a trip he wants to take to Memphis, Tennessee.
“Outside of work, I picked up riding my bike to add extra steps that way,” Winnie said in an interview.
Despite some early enthusiasm, many companies are waiting to see whether the use of wearables is a fitness fad. No major research has been done that shows the use of these devices leads to lower health-care costs and many employers want to know “if this is something that’s a passing trend or something that has staying power and can have proven results,” said Eric Herbek, who runs digital engagement for Cigna.
The gadgets have been worthwhile for Chris Barbin, CEO of Appirio Inc. in San Francisco. He said about 40 percent of his staff, which numbers around 1,000, participates in a voluntary fitness program that includes uploading their activity with Fitbit.
While health costs weren’t the priority for the program, Barbin said that by sharing the data with the company’s health care provider he negotiated $300,000 off his company’s roughly $5 million in annual insurance costs by showing his staff is getting healthier. He said privacy protections are in place for those who want to keep the data secret. The program has become one of the most popular forums on Appirio’s internal social network, he said.
“We had an initial batch of data about people who had lost weight, and people who had moved from high risk to moderate risk,” he said. “When we could show all that information to our insurer, that’s pretty powerful.”
Kristi Slagle, whose husband slimmed down through BP’s program, isn’t concerned about privacy with the gadgets. She said the program injects more fairness into the system because those who are healthier currently end up shouldering more costs for those who aren’t.
“I like that BP is making people more accountable,” she said.