A growing number of employers are using a new approach in their wellness programs, borrowing from the world of behavioral economics to provide both a carrot and a stick for employees.

The programs use the principle of “loss aversion” by requiring that employees use their own money and take part in contests that encourage competition and peer pressure.

“People are more motivated by avoiding loss than getting gains,” Mitesh S. Patel told Bloomberg Law. Patel is assistant professor of medicine and health-care management at the University of Pennsylvania’s Perelman School of Medicine and Wharton School.

Most employer wellness programs are...