Why one startup thinks laying a few bets could help companies convince employees to slim down

I like going to baseball games for the camaraderie, ice-cold beer and general excuse to sit out in the summertime sun.  But the only way I can actually pay attention to what’s happening on the field (unless maybe it’s the last inning of the last game of the World Series) is if I have some money on the line.

It’s not that I’m a big gambler (whenever I’ve ever been to Vegas, I’ve wanted to spend more time poolside than tableside), it’s just that shelling out a few bucks into a hat with the prospect of winning a mini-windfall makes me see the game in a whole different way.

Similarly, a new startup, called LifeVest, hopes that by tying employee health goals to the opportunity to win or lose cash — through what it calls a “stock market for health” — it can encourage people to see their health differently and take the necessary steps to make it better. It may not be the right solution for every company, but I think it underscores an important lesson for many employers trying to get their employees to improve their health: having skin in the game can be a powerful motivator.

In theory, we all know that being healthy is a reward in itself — in matters of our health and wellness, we always, literally, have skin in the game. But when it comes to incentivizing people to lose weight, quit smoking and lower their blood pressure, a clean bill of health often isn’t a big enough carrot and the threat of chronic disease often isn’t a severe enough stick.

Blending carrots and sticks

Facing rising health care costs, more employers have started upping the ante for employees with wellness programs that either financially reward or penalize employees depending on how active they are in improving their health. CVS (s CVS), for example, recently generated a ton of buzz for its decision to penalize employees who didn’t participate in its wellness program. And UnitedHealthCare (s UNH) is one of an increasing number of employers that offer employees financial rewards for getting their weight down and taking healthy steps.

But LifeVest, which spun out of heathcare IT company Trizetto, offers employers a model that blends rewards and penalties.

“We’ve got this notion of a stock tied to your health, which is powerful because it does a few things,” said CEO and co-founder Jon Cooper. “It changes the way people think about their health and [for a company] … markets are effective way to optimize an incentive budget.”

To start, employers can choose to invest a minimum amount in each employee, which can depend on the demographics of their employee base and their goals. Then, each employee, as well as his family and friends, can add to the amount with their own investments. Employers can opt to match outside investments up to a certain amount.

The more employees improve their weight, blood pressure and other health indicators, the greater their earnings and the less they improve, the less they stand to get paid (and the more they lose of their own investment).

Getting an upfront commitment

A Mayo Clinic study earlier this year supported the notion that financial incentives can lead to greater weight loss. But some argue that the fear of losing money can be a more powerful incentive for action than the prospect of gaining money and others say the effects may be short-lived.

What I like about LifeVest is that it enables companies to carry a big stick while still giving employees some choice — in contrast to some penalty-based programs, like that promoted by CVS, employees that don’t want to participate aren’t forced to pay, while those that want to participate can still benefit from the “loss aversion” incentive. Sure, you might have some holdouts. But it lets the company focus on the people who are interested in making a change — and the promise of a financial prize could even be a way to get non-health-enthusiasts to the table.

Also, similar to Stickk.com, a goal-setting site launched by Yale economists, it gets people to make the all-important upfront commitment. Just like paying for a membership to a gym or subscription to the philharmonic, it gets people invested in — and therefore more likely to follow through on — the activities we would like to have done but don’t always want to actually do.

Amid the crowd of companies pitching employers with this or that approach to boosting employee health, LifeVest is a relatively small and new player — it just launched in October and recently graduated from the Tigerlabs health tech accelerator. And it doesn’t include all the health-tracking and engagement features of bigger companies like Keas or WellTok (although Cooper said it could be complementary to services like those).

But I think its approach to incentivizing employees makes it an interesting company to watch — I don’t have any skin in this particular game, but you can be sure I’ll be paying attention.