How Using A Fitbit Could Lower Your Healthcare Costs

Image source: Fitbit.

Good news for wearable fitness tracker users -- and the companies that make them: Insurance companies are increasingly adopting and expanding programs that allow members to wear fitness trackers and get rewarded with a premium discount or health savings account (HSA) bonus if they meet certain criteria. This trend just got a huge bump from UnitedHealth Group (UNH -1.13%) and Qualcomm's (QCOM 0.97%) newly expanded partnership, announced on January 3, along with Fitbit's (FIT) new updated features.

Get F.I.T., get rewarded

UnitedHealthcare Motion is an add-on program that UnitedHealthcare-insured companies can sign up for along with their regular employer-sponsored healthcare plan. The Motion program gives employees an incentive to get active each day. If employees meet their pre-set activity goals on a regular basis, UnitedHealthcare will put up to $1,500 per year into their HSA (or HRA, health reimbursement account, depending on what system your state uses).

Image source: Fitbit.

In the pilot year of the program, it was only available in 12 states and on a relatively limited scope. Starting in 2017, UnitedHealthcare Motion will now be available to any employer with more than 100 employees in all but 10 states. A similar plan called All Savers Motion is available in many states to smaller companies with five to 100 employees.

UnitedHealthcare Motion uses a tracking system called "F.I.T." which measures frequency (walking six times per day, with at least 300 steps within five minutes), intensity (3,000 steps within 30 minutes) and tenacity (10,000 total steps each day). This formula is meant to more accurately assess daily activity rather than just counting steps over a longer period.

Higher activity could lead to more happy and productive employees, according to research laid out by Zane Research, but there's also a direct healthcare savings for the companies as well. As part of the program, employers are able to receive a premium cap (6% flat increase for the following year) if they can achieve 60% compliance across all three goals among their employees. 

There may be more benefits to such programs, other than the premium cap that UnitedHealth is offering participating companies. Fitbit released a report in October which found that employees who opted into a Fitbit corporate wellness program paid 25% less per person on average in total annual healthcare costs than a control group. 

How Fitbit is taking charge in this space

Fitbit has built a specific software update that can be sent to any existing Fitbit Charge 2 device that will then show the user how they are meeting their F.I.T. requirements. UnitedHealth Motion calls itself a "bring your own device" program, but it's really a set list of devices that meet certain accuracy and compatibility requirements ensuring Qualcomm can connect the devices to the Motion app and on to UnitedHealthcare.

Fitbit seems to have taken the early mover advantage in becoming the leading wearable for these kinds of programs. In an interview with Amy McDonough, VP of Fitbit Group Health, she said that Fitbit's mission has remained unchanged: it strives to be a health-first company, focused solely on being the best at both quality and price, with enough diversification in products to meet all consumers. 

Even though Fitbit's market share leadership has dropped significantly over the last two years, it is still the most widely used Fitness tracker based on the most recent numbers from the IDC, with nearly a quarter of global market share. McDonough also noted that there is some network effect at play: the more users connected to one type of device, the more likely they are to engage at the water cooler or among friends and family about their devices and activity levels.

Image source: Fitbit

Data suggests that this network effect leads to an average of 11% more activity among those users. Additionally, Fitbit is already well integrated into corporate culture through its Corporate Wellness Program, which allows companies to give trackers to their employees. Target and 70 other fortune 500 companies have already signed up. 

Those kinds of stats give Fitbit and its bullish investors reason to believe that it can remain dominant in this space, even though multiple other device makers are looking to become contenders, including cash-heavy companies like Apple, whose Apple Watch is making moves in this space as well.

These kinds of wearable healthcare incentive programs are evolving. Though it takes time due to the need for regulatory approval state by state; still, we are already seeing some other interesting ways that wearables could play a big part in healthcare in the near future. Remember that Fitbit announced a new partnership in December with healthcare device company Medtronic to create an easy way for diabetes patients to track activity and correlate increased activity with their insulin needs and overall health.

As Fitbit CEO James Park said in the most recent earnings call.

The market we are targeting, healthcare services, is large, and the need is great. With our devices, services, and our installed community and the strength of our consumer-facing brand, we offer the healthcare ecosystem the unique ability to comprehensively monitor and effectively engage patients and consumers to drive better health outcomes. This is difficult to replicate and makes us a partner of choice for all the participants in the healthcare ecosystem.