Smart devices that aim to help consumers get skinnier, run faster, and sleep better are no longer solely for personal use: A growing number of trackers are being used in corporate programs to help employers keep track of their workers' health, according to Forbes' Aaron Tilley and Parmy Olson.
Companies are tapping into the lucrative business of selling the terabytes of data collected from wearable devices, which employers can use to manage their health care budgets. New regulations under the Affordable Care Act have expanded the incentives that employers can provide their workers, including boosting cash rewards on premiums or deductibles by 20% to 30%. Small companies can apply for a portion of the $200 million that's been set aside for such initiatives.
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Fitbit, a wearable device that tracks daily activity, began its corporate wellness program in 2010. Today, the company sells its trackers in bulk to "thousands" of employers, along with sophisticated data analytics that can incent office-wide weight-loss competitions or show how active certain employers are, among other things.
According to CEO James Park, corporate wellness represents one of the fastest-growing segments of the company's business. BP America in 2013 provided 14,000 employees, 6,000 spouses, and 4,000 retirees with no-cost Fitbit trackers as part of a wellness program that reduced the company's health care costs to below the U.S. average growth rate of 6%. A few thousand more employees have enrolled in the program this year.
Could device data impact insurance pricing?
Currently, opting into corporate wellness programs is voluntary for workers, and for privacy reasons, employers must bring in a neutral third party to manage the data. Though it is unclear whether Fitbit data currently plays a role in pricing negotiations between employers and health care providers, a Cigna spokesperson says fitness trackers "may" impact group insurance pricing down the road.
Last year, Fitbit competitor Jawbone paid $100 million to acquire BodyMedia, a manufacturer of high-tech armbands that track a person's activity level, sweat production, and body temperature. The acquisition led to a pilot project with Cigna in which the armbands were used to track several thousand people considered at risk for diabetes. Remote coaches encouraged the less-active individuals to exercise.
Cigna spokesperson Joe Mondy says the test program led to double-digit improvement in users' risk profiles, moving some from classifications of "chronic" to "at risk." The insurer wants to expand to millions more employees in the coming years. Mondy predicts that the right "consumer-oriented product" could result in a 13% year-over-year decline in the amount insurers charge employers based on their workers' risk profiles. "We can literally bend the cost curve," he says.
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A risky venture?
Fibit says it will likely take three-to-five years before the company can definitively say its devices and analytics can drive lower health care costs. Moreover, it may take years for Fitbit's and Jawbone's enterprise businesses to become profitable. Currently, both companies have free and open application interfaces that link devices with smartphone apps from insurers, employers, and third-party services.
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Gadget makers entering the data-broker model also make themselves more vulnerable to hackers or staff that might manipulate the data to reduce health care costs. Data breaches at hospitals in 2013 resulted in a 15% error rate for medical diagnoses, according to the Ponemon Institute.
Nir Zuk, chief technology officer of the corporate security firm Palo Alto Networks, says consumers will likely be the ones leading the push for enhanced security. "I don't think security is at the top of the minds of these Internet of Things companies," he says.
Jawbone vice president of product management Travis Bogard says security will depend on how much personal data consumers are willing to share in exchange for lower insurance costs. The "quantified self" was just a first step, he says, adding that it "will definitely be about the data as we move forward" (Olson/Tilley, Forbes, 4/17).
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Daily roundup: April 23, 2014