(Bloomberg) — To fight rising medical costs, oil company BP Plclast 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 FitBitInc. to earn points toward cheaper health insurance. With thegadget, the 51-year-old walked more than 1 million steps overseveral months, wirelessly logging the activity on the device.Twelve months later, Slagle has added to his new exercise regimenby trading burgers for salads and soda for water, dropping 70pounds (31.8 kilograms) and 10 pant sizes in the process.

“I can see my toes now,” said Slagle, a middle-schooladministrator whose wife, Kristi, works for BP in Houston. Thecompany's program, he said, is “pushing me to get off the couch andmake the right decisions.”

Slagle's wife is thrilled with his thinner frame — as is BP. Hisonce-high blood pressure and cholesterol are now in a normal range,significantly lowering BP's risk of covering treatments related toheart trouble or other medical problems.

Slagle's experience is an example of how companies, facingrising health expenses, are increasingly buying or subsidizingfitness-tracking devices to encourage employees and theirdependents to be more fit. The tactic may reduce corporatehealth-care costs by encouraging healthier lifestyles, even ascompanies must overcome a creepy factor and concerns from privacyadvocates that employers are prying too deeply into workers'personal lives.

Insurers too

Apart from BP, insurers including UnitedHealth Group Inc.,Humana Inc., Cigna Corp. and Highmark Inc. have also createdprograms to integrate wearable gadgets into their policies. The aimis to get people more invested in taking care of themselves.Consumers wear the device and the activity data is uploaded to anonline system so it can be verified to give a person theirreward.

“What employers want is the person to take an active role intheir health,” said Dee Brock, who has incorporated wearabledevices into wellness programs for Pittsburgh-based HighMark.

Privacy flags

The adoption of wearable devices by companies and insurers isincreasing as spending on corporate wellness incentives has doubledto $594 per employee since 2009, according to a study by FidelityInvestments and National Business Group on Health. Technology iscreating new forms of wellness programs to measure whetheremployees are making improvements, similar to a trend in thecar-insurance industry where drivers who put a monitoring sensor ontheir vehicle can earn lower rates based on how well they aredriving, instead of their driving history.

Yet the moves also let employers and insurers gather more dataabout people's lives, raising questions from privacy advocates.Wearable gadgets are advancing beyond tracking steps, with sensorsto monitor heart rates, glucose levels, body temperature and otherfunctions.

“The focus on preventive health at the expense of privacy isdangerous,” said Pam Dixon, founder of the World Privacy Forum inSan Diego, which focuses on health privacy issues. “Right now it'stracking steps per day, and the reach isn't that far with thesedevices, but in time it will be quite sophisticated.”

When financial incentives are involved, Dixon said it forcesemployees' hands and narrows the question of whether or not theyshould participate. The gathering of health data also opens thedoor for people to eventually be charged more or less based on theinformation, she said.

Security requirements

These are among the ethical questions still to be addressedabout the appropriateness of companies tracking the physicalactivity of employees, said Harry Wang, a researcher for ParksAssociates who has been studying the market. With wearable devices,collecting more sensitive information is likely to bring toughergovernment oversight, he said.

“There will be high levels of privacy, security and compliancerequirements,” Wang said. “There will be high expectations fromconsumers about how the data will be used.”

Companies and insurers said they protect the privacy of peopleusing wearable gadgets, and comply with federal laws that preventemployers from seeing certain health information about employeeswithout consent. The wearable programs are voluntary and oftenadministered by third-party vendors like StayWell, which works withBP.

Aggregated only

As part of the BP program, employees who use a FitBit to log 1million steps earn half of the 1,000 points needed each year toqualify for lower co-pays, deductibles and out-of-pocket healthexpenses. BP bought 25,000 FitBit devices for North Americanemployees, including those at refineries and drilling rigs. Pointscan also be earned by getting an annual physical, taking an onlinehealth class and other initiatives.

“We think the device is easy to use, gets people aware of howlittle 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 ofthe 1 billion smartphones shipped globally last year — so creatinginterest 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 fromcorporate-wellness programs, according to Parks Associates. Theincentives an employer or insurance company can offer is a way tokeep people using the gadget, instead of throwing it in a draweronce the novelty wears off.

Targeting businesses

Under the Affordable Care Act, the new national health-care law,companies can spend as much as 30 percent of annual insurancepremiums on rewards for healthy behavior.

Technology companies are taking note. Apple Inc., which has newhealth-tracking software called HealthKit that will be releasedthis year and is said to be developing its own wearable device, hastalked with UnitedHealth, the biggest U.S. insurer, and Humana,about its health initiatives, executives at the insurance providerssaid. The companies wouldn't provide specifics about theconversations. Apple declined to comment.

FitBit has a sales force dedicated to pitching employers andinsurance companies, and touts software to make it easier to logthe activity of workers, down to specific individuals if a companywants, said Amy McDonough, who coordinates deals for FitBit withcompanies. Other makers of wearable devices, including Jawbone,Samsung Electronics Co. and iHealth Lab Inc., have also targetedbusinesses.

Insurance link

Some employers are encouraging the use of wearables without thegadgets being tied to lower insurance rates. Houston Methodist,owner of a chain of hospitals in the Houston area, got about 6,000FitBits 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 AutodeskInc.

“Walking alone isn't going to beat diabetes, but it's certainlygoing to help,” said Marc Boom, chief executive officer of HoustonMethodist. “Being more active results in better health. That'sindisputable.”

At Scotty's Brewhouse in Indianapolis, where the $15 “Big AssBrewhouse Burger” includes four quarter-pound beef patties andAmerican cheese, owner Scott Wise offers an extra day of vacationfor managers at his 11 restaurants who use a Jawbone UP device tolog an average of 10,000 steps a day for three months. That hassome managers like Brian Winnie exercising more to earn time offfor a trip he wants to take to Memphis, Tennessee.

“Outside of work, I picked up riding my bike to add extra stepsthat way,” Winnie said in an interview.

Valuable data

Despite some early enthusiasm, many companies are waiting to seewhether the use of wearables is a fitness fad. No major researchhas been done that shows the use of these devices leads to lowerhealth-care costs and many employers want to know “if this issomething that's a passing trend or something that has stayingpower and can have proven results,” said Eric Herbek, who runsdigital engagement for Cigna.

The gadgets have been worthwhile for Chris Barbin, CEO ofAppirio Inc. in San Francisco. He said about 40 percent of hisstaff, which numbers around 1,000, participates in a voluntaryfitness program that includes uploading their activity withFitBit.

$300,000 discount

While health costs weren't the priority for the program, Barbinsaid that by sharing the data with the company's health careprovider he negotiated $300,000 off his company's roughly $5million in annual insurance costs by showing his staff is gettinghealthier. He said privacy protections are in place for those whowant to keep the data secret. The program has become one of themost popular forums on Appirio's internal social network, hesaid.

“We had an initial batch of data about people who had lostweight, 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 theprogram injects more fairness into the system because those who arehealthier currently end up shouldering more costs for those whoaren't.

“I like that BP is making people more accountable,” shesaid.

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