Tracking Employee Health: Fitbit Uses Wearable Technology to Crack the B2B Market

As healthcare costs continue to rise, Fitbit is using its wearable activity trackers to help employers reduce their health expenditures.

The rise of American healthcare costs presents a huge opportunity to any company that can help control their growth.

According to the Center for Disease Control, the US spent $9,523 dollars per person on healthcare in 2014; this comes out to $3 trillion nationally, or 17.5% of Gross Domestic Product.[1] This number is even more striking when considered on a relative basis; the United States spends 50% more on healthcare than any of its developed country peers.[2]

The Center for Medicare and Medicaid Services expects these costs to continue to rise over the next decade, at an average rate of 5.8% per year (or at a population-adjusted rate of 4.8% per year), rising to 20% of GDP by 2025.[3] This rate of growth is mercifully slower than the long-term US trend in recent decades, but still far faster than projected GDP growth.[4]

Rising healthcare costs are a large and growing burden for corporations, many of whom pay the healthcare costs of their employees. According to the Bureau of Labor Statistics, healthcare costs are now on average 7.6% of total compensation paid to employees.[5] Corporations also pay for employee health in other ways—the CDC estimates that the “productivity losses linked to employees who miss work cost employers $225.8 billion, or $1,685 per employee, each year.”[6]

American corporations are pursuing a few different strategies to deal with these rising costs. They are, for example, passing more and more of the costs of healthcare onto their employees.[7] They are also, perhaps more importantly, working to attack rising healthcare costs earlier, through workplace health programs. According to the CDC, 98% of large corporations now offer corporate wellness programs of some sort.[8] These programs, if effectively implemented, can lower the direct costs associated with health insurance purchases and the indirect costs of lost productivity due to poor health.[9]

Fitbit, the leading seller of wearable fitness tracking technology, is increasingly partnering with corporations on these wellness programs, leveraging their digital health tracking technology to improve employee wellness.

Fitbit sells wearable activity trackers that monitor heart rate, movement (often measured in steps), fitness level, breathing and sleep.[10] The company was the early leader in the market, and continues to be a dominant player, with sales approaching $2 Billion in 2015.[11] The company has largely been in the B2C space, selling wearable health tracking devices to consumers. Increasingly, however, they are moving into the B2B space, turning their device into a corporate healthcare cost reduction solution.[12]

In the B2B market, companies typically buy Fitbit trackers in bulk, or subsidize their employees’ purchases—for example, Target recently bought 330,000 for their staff.[13] Fitbit then ships the devices, and gives employees access to online dashboards where they can track their own progress and compare themselves to their peers.[14] The idea is that this tracking will incentivize employees to exercise more and live healthier—and that the social component will incentivize healthy behavior while simultaneously improving company culture and morale.[15] One value proposition for corporations is that healthier employees in turn reduce the indirect costs to employers from reduced illness and fewer missed days of work.

For companies buying the service, however, employee behavior change is only half the battle. To decrease direct healthcare costs, employers need to convince insurers that their employees are, in fact, healthier. To realize the full value of healthy employees, Fitbit has created a data capture and analytics capability that allows companies to aggregate the Fitbit health data and send it to their insurers. Based on the data, companies can receive significant discounts from insurers.[16]

Although the current version of the corporate program is relatively new, the anecdotal data that has been reported is all positive. One client, Appirio, saved 6% on their healthcare premiums by showing their insurer the Fitbit data, for example.[17] If Fitbit can replicate these results, they will be able to capture a large share of the growing Corporate Wellness market. For now, the strategy is working well; their 2015 B2B revenue came in around $180 million, and is growing fast.[18]

For now, Fitbit is the market leader in this field. However, they are facing a number of challenges going forward. The market for wearables is increasingly competitive, involving many of the major technology companies, notably Apple; and it’s far from clear that workers will accept corporate tracking of their health.

Going forward, Fitbit should consider focusing on the cost savings to their clients. They can do this by showing the reduced health expenditures of using their products, and packaging this information in a way that insurers will easily understand. They will also, however, need to be careful in the speed of their implementation, being sure to not provoke negative reactions from employees worried about privacy concerns.

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Featured Image: Fitbit Website, “Developers”. https://dev.fitbit.com/, accessed November 2016.

[1] Center for Disease Control and Prevention: National Center for Health Statistics, “Health Expenditures”. http://www.cdc.gov/nchs/fastats/health-expenditures.htm, accessed November, 2016.

 [2] The Commonwealth Fund, “US Spends More on Health Care Than Other High-Income Nations But Has Lower Life Expectancy, Worse Health”, October 8, 2015.  http://www.commonwealthfund.org/publications/press-releases/2015/oct/us-spends-more-on-health-care-than-other-nations, accessed November 2016.

[3] Center for Medicare and Medicaid Services, “National Health Expenditures Projections 2015-2025”. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2015.pdf, accessed November 2016.

[4] ibid

[5] US Department of Labor: Bureau of Labor Statistics, “News Release: Employer Costs for Employee Compensation—June 2016”, 8 September 2016. http://www.bls.gov/news.release/pdf/ecec.pdf, accessed November 2016.

[6] Center for Disease Control and Prevention, “At a Glance 2015: Workplace Health Promotion: Using the Workplace to Improve the Nation’s Health”. http://www.cdc.gov/chronicdisease/resources/publications/aag/pdf/2015/aag-workplace-health.pdf, accessed November 2016.

[7] Benefit News, “Employers Passing Rising Healthcare Costs onto Employees”. Otto, Nick, 30 August 2016. http://www.benefitnews.com/news/employers-pushing-rising-healthcare-costs-onto-employees, accessed November 2016.

[8] Center for Disease Control and Prevention, “At a Glance 2015: Workplace Health Promotion: Using the Workplace to Improve the Nation’s Health”. http://www.cdc.gov/chronicdisease/resources/publications/aag/pdf/2015/aag-workplace-health.pdf, accessed November 2016.

[9] Center for Disease Control and Prevention, “At a Glance 2015: Workplace Health Promotion: Using the Workplace to Improve the Nation’s Health”. http://www.cdc.gov/chronicdisease/resources/publications/aag/pdf/2015/aag-workplace-health.pdf, accessed November 2016.

[10] Fitbit Corporate Website, “Fitbit Charge 2”. https://www.fitbit.com/charge2, accessed November 2016.

[11] Forbes, “Fitbit’s Game Plan for Making Your Company Healthy”. Olson, Parmy, 18 January 2016. http://www.forbes.com/sites/parmyolson/2016/01/08/fitbit-wearables-corporate-wellness/#2c174a1e4527, accessed November 2016.

[12] ibid

[13] ibid

[14] Fitbit Corporate Website, “Group Health”. https://www.fitbit.com/group-health, accessed November 2016.

[15] ibid

[16] Forbes, “Fitbit’s Game Plan for Making Your Company Healthy”. Olson, Parmy, 18 January 2016. http://www.forbes.com/sites/parmyolson/2016/01/08/fitbit-wearables-corporate-wellness/#2c174a1e4527, accessed November 2016.

[17] Forbes, “Fitbit’s Game Plan for Making Your Company Healthy”. Olson, Parmy, 18 January 2016. http://www.forbes.com/sites/parmyolson/2016/01/08/fitbit-wearables-corporate-wellness/#2c174a1e4527, accessed November 2016.

[18] Forbes, “Fitbit’s Game Plan for Making Your Company Healthy”. Olson, Parmy, 18 January 2016. http://www.forbes.com/sites/parmyolson/2016/01/08/fitbit-wearables-corporate-wellness/#2c174a1e4527, accessed November 2016.

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8 thoughts on “Tracking Employee Health: Fitbit Uses Wearable Technology to Crack the B2B Market

  1. This is really interesting! In practice, do you know how successful companies have been in getting their employees to wear Fitbits (or similar devices) and subsequently obtaining discounts from their insurers? I ask because I think this idea only works if everyone in the company agrees to wear the device– if, for example, only the healthy ones wore the device (which I think is a totally reasonable assumption), then the Fitbit data provided to insurers would not account for the unhealthy individuals (who probably have higher costs and would thus significantly influence the premium the company has to pay).

    Also, I am wondering what the true value of tracking employee health with a Fitbit would be for insurance companies? When it comes to determining premiums, I feel like they could simply just use real data (i.e., look at all of the claims/expenditures) instead of using less accurate, less reliable data from a Fitbit. I see how Fitbits can encourage employees to be healthier (which would eventually drive down costs), but the idea of sending Fitbit data to insurance companies to reduce premiums seems a bit strange to me.

  2. Very interesting post. While reading your post I wondered about the validity of data from FitBits. I participated in a FitBit challenge at my former employer, and I was impressed by the wealth of non-traditional uses of FitBits to game the system (e.g. shaking them around while sitting at your desk, putting them on your kid while they play on the playground, tying them to your ankle while tapping your foot at your desk). I wonder if employees would have a similar incentive to skew the data of their FitBits and if health insurance companies would be able to truly validate the data they receive.

  3. Interesting post! I would be curious to know whether any insurance companies use Fitbits as negative reinforcement (eg raising premiums on inactive people) in addition to the positive reinforcement (discounting premiums). In my limited knowledge of this, it seems like offering insurance discounts to perceived healthier individuals (or vice versa) can be a pretty controversial field. For example, what if people get injured on the job and become less mobile, leading to higher premiums? On the other hand, as you mention, these insurance costs can be pretty burdensome for companies. Maybe rewarding the active will save enough money such that companies don’t have to punish the inactive?

  4. I am a loyal FitBit user and have used my device more or less daily for 4 years now. When I was working at TI, our insurance provider gave us discounts if we had an activity tracking device and we would have challenges within our teams for the most amount of steps walked in a day/week/etc. I always saw the issue of accountability. While I can say I own an activity tracker, there is little way for the insurance companies to take my word for it or have proof that I actively use it. Maybe insurance companies should work on a way to link the data.

    1. Regan,

      This is my biggest worry with Fitbit’s strategy. I’m unconvinced that the data that Fitbit is generating is really accurate, and whether they are in fact delivering the savings. I think their biggest strategic challenge is to get their data and accountability good enough that they can get insurers to believe the results. Easier said than done!

      Spencer

  5. Interesting post. As you alluded to in your post – I think the biggest threat to FitBit is Apple integrating the technology into the Apple watch. In light of this how would you position FitBit, should it expand into new products or position itself for sale to Apple? Also do you think medical companies should be able to target ads towards customers based on their health data? Seems like that could be an additional (and controversial) revenue stream for FitBit??

  6. Great post Spencer, I wonder about user experience with fitness trackers. I currently use a product and it seems that battery life and connectivity are major issues that the company needs to resolve. Its a pretty interesting conundrum that to charge the products you have to take them off and thereby lose the ability to collect data while it is charging. Have you come across anything else on the technological side that the company is doing to enhance the user experience?

  7. Great post, very interesting. Do you know if any of the companies that have instituted FitBit programs provide monetary or other incentives to their employees to encourage them to wear the devices? I agree with the comments above highlighting accountability as a potential concern. However, if companies are willing to share some of the eventual health care cost savings with employees it could be a win-win situation.

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