AB 1636
Page 1
Date of Hearing: April 10, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
ABPCA Bill Id: AB 1636 (Author:Monning) – As Introduced: Ver: February 9, 2012
SUBJECT: Health and wellness programs.
SUMMARY: Requires the Department of Managed Health Care (DMHC), in collaboration with the California Department of Insurance (CDI), the California Health Benefit Exchange (Exchange), and the California Department of Public Health (DPH) to convene a special committee (committee) to review and evaluate health and wellness incentive and rewards programs offered by health care service plans (health plans), health insurers, and employers. Requires the first meeting of the committee to be conducted by March 30, 2013. Specifically, this bill:
1) Requires the DMHC, in collaboration with the CDI, the Exchange, and DPH, to convene a committee to review and evaluate health and wellness incentive and rewards programs offered by health plans, health insurers, and employers.
2) Requires the committee to focus on the study of programs that provide incentives and rewards for enrollees, insureds, and employees to become more engaged in their health care and make choices that support health promotion and wellness, including worksite wellness programs and programs that offer or require health risk appraisals, screening services, smoking cessation, health premium reductions, differential copayment or coinsurance amounts, and cash payments related to health promotion activities.
3) Requires the committee to evaluate these programs for effectiveness based upon scientific evidence, and examine the extent to which these programs may result in discrimination based upon income, age, gender, race, ethnicity, medical condition, genetic information, claims experience, medical history, evidence of insurability, or any other health status-related factor.
4) Requires the committee to meet publicly and engage experts and stakeholders in its deliberations, with the first meeting to be conducted no later than March 30, 2013.
EXISTING LAW:
1) Establishes DMHC to regulate health plans; CDI to regulate health insurers, DPH to protect and monitor public health and regulate specified health care facilities; and the Exchange to compare and make available through selective contracting health coverage to individuals and small businesses as authorized under the federal Patient Protection and Affordable Care Act (ACA).
2) Prohibits under the federal Health Insurance Portability and Accountability Act of 1995 (HIPAA) issuers offering group health insurance coverage, from requiring any individual, as a condition of enrollment or continued enrollment under the plan, to pay a premium or contribution which is greater than such premium or contribution for a similarly situated individual enrolled in the plan on the basis of any health status-related factor; and indicates that this shall not be construed to restrict the amount that an employer may be charged for coverage under a group health plan; or to prevent an issuer offering group health insurance coverage, from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.
3) Establishes the ACA, which among other provisions, imposes new requirements on individuals, employers, and health plans; restructures the private health insurance market; sets minimum standards for health coverage; limits the rating factors which can be used to determine health insurance rates to age, geography, family size, and tobacco-use; and, provides financial assistance to certain individuals and small employers.
4) Establishes under the ACA a program of health promotion or disease prevention to be a program offered by an employer that is designed to promote health or prevent disease that meets the specified requirements. Wellness programs that do not discount, rebate or reward for participation based on an individual satisfying a standard related to health status are permitted if all similarly situated individuals and specified requirements are met. Wellness programs that do discount, rebate or reward for participation based on an individual satisfying a standard related to health status are permitted if the reward does not exceed 30% of the cost of employee-only coverage under the plan, if dependents can fully participate, the wellness program is reasonably designed to promote health or prevent disease, is not overly burdensome, a subterfuge for discriminating based on a health status factor, and is not highly suspect in the method chosen to promote health or prevent disease.
5) Requires under the ACA the Secretary of Health and Human Services (HHS), in consultation with the Secretaries of the Treasury and Labor, to establish a 10-state pilot program no later than July 1, 2014. Participating states must apply the wellness program provisions to health insurers in the individual market.
FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee.
COMMENTS:
1) PURPOSE OF THIS BILL. According to the author, federal health reform includes many provisions emphasizing health promotion and wellness including requirements that health plans and insurers (collectively issuers) cover certain preventive services without cost sharing. Many people do not have access to preventive health care. Often because of cost, people use preventive services at about half the recommended rate. Yet chronic diseases, such as heart disease, cancer, and diabetes – which are responsible for seven of 10 deaths among Americans each year and account for 75% of the nation’s health spending – often are preventable. Cost sharing (including deductibles, coinsurance, or copayments) reduces the likelihood that preventive services will be used. The ACA prohibits issuers selling insurance products in the individual and small group markets from rating premiums based on health status, but permits premiums to vary for tobacco use (by no more than a 1.5 to 1 ratio) and specified wellness programs with rewards capped at 30% of the cost of employee coverage if certain health factor standards are met. While wellness incentive programs can be instrumental in controlling the rise of chronic health conditions and their associated costs, it is important to ensure that these programs are not subterfuge for discrimination based on health status. In administering such programs, participants must not be held to unreasonable standards and they must be given reasonable opportunities to achieve their health care objectives. Wellness incentive programs should not result in financial barriers that prevent participants from accessing the health care needed to manage chronic conditions. The author believes this bill is necessary to advance a public policy conversation in California about the evidence basis for wellness incentive programs tied to health insurance and to determine if the wellness incentive provisions in the ACA should be implemented in California.
2) BACKGROUND. On March 23, 2010, President Obama signed the ACA (Public Law 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152). Among other provisions, the new law makes statutory changes affecting the regulation of and payment for certain types of private health insurance. The ACA codifies amended implementing regulations of HIPAA related to wellness programs. Regulations require the following standard-based benchmarks: a) Rewards cannot exceed 20% of the cost of employee-only coverage under the plan or 20% of the cost of family coverage if applied to dependents; b) A program must be "reasonably designed" to promote health or disease; c) Employees must be given the opportunity to qualify for the reward at least once per year; d) All employees must have the opportunity to gain the reward, or a "reasonable alternative standard" must be available for an employee with a medical condition that would make it unreasonably difficult to meet the standard; and, e) The plan must disclose that a reasonable alternative standard is available. The ACA indicates that wellness programs that do not require an individual to satisfy a standard related to a health factor as a condition for obtaining a reward, or those that do not offer a reward are permitted as long as participation in the programs is made available to all similarly situated individuals. However, if any of the conditions for obtaining a reward are based upon an individual meeting a certain standard relating to a health factor, the program must meet additional requirements, such as the reward must be capped at 30% of the cost for the employee-only coverage under the plan (this can be increased up to 50% at the discretion of the Secretaries of the federal HHS, Labor, and Treasury Agencies.
3) WELLNESS INCENTIVE PROGRAMS. A February 2012 Georgetown Health Policy Institute report indicates that many employers are looking to worksite wellness programs to control health care costs and reduce employee absenteeism. Studies estimate the return on investment for these programs is $3 to $6 in savings for every $1 invested generally after two or more years of implementation. There are many different kinds of programs such as those that offer on-site flu shots or lunchtime walking programs or that offer reduced deductibles for taking a Health Risk Assessment or increased premiums for a high body mass index (BMI). While most programs target participation activities, a small but growing number are designed to target specific biometric outcomes and more plan to use standard-based programs in 2012, such as premium discounts when a weight goal has been attained. Some surveys indicate that the average employee incentive is between $300 and $430. A position statement from the American Heart Association (AHA) and the American Stroke Association says that a recent survey showed that because of rising health care costs and the new allowance under the federal law, 62% of employers plan on switching from incentives for participation to incentives for improvements in health metrics, shifting costs from healthy employees to their less healthy counterparts.
According to a 2009 Wall Street Journal article, Safeway's per-capita health-care expenses have remained flat, compared to the near 40% increase experienced by the rest of corporate America. The article attributes this to giving employees a financial stake in the system through health savings accounts and a program called "Healthy Measures" which is a voluntary worksite wellness program where employees are tested for smoking, weight, blood pressure, and cholesterol. For every measure an employee "passes," he or she gets a reduction in premium of as much as $1,560 for a family, per year. The article indicates that Safeway's smoking and obesity rates are roughly 70% the national average. A 2011 article in Consumer-Directed Health Care Solutions indicates that Safeway's market-based health care plan all-inclusive health care costs per capita (Safeway contribution + employee premium + employee out-of-pocket) has not changed from 2005.
4) EVIDENCE BASED PROGRAMS. According to the Georgetown analysis, studies indicate that financial rewards worth more than $450 have little additional effect on rates of participation in wellness programs. Studies to evaluate the use of financial incentives to change employees' behaviors are inconclusive. Some studies have shown that some financial incentives can help employees meet certain wellness goals. However, these studies are often limited by small numbers of participants and lack of long term data. None of the studies involved premium or cost-sharing discounts or surcharges in employer-sponsored health care programs, which would directly affect the cost of obtaining coverage or care for certain workers. According to the analysis, there is no authoritative research on whether or not these programs work, even the Safeway program has only been in place since 2009 and there is no published data about its effectiveness. The AHA supports additional research to monitor the outcomes of an incentive-based approach tied to health care premiums for behavior outcomes on the quality of worksite wellness programming, employee health, and access to care. According to AHA, some of this will be done by the Rand Corporation under the ACA provisions.
5) IMPLICATIONS FOR AFFORDABILITY. Provisions of the ACA are intended to address affordability of healthcare coverage. Subsidies for purchasing health insurance will be available in the Exchange for some individuals whose coverage costs exceed a certain percentage of their income, and other individuals will be exempt from the individual mandate if costs exceed a specified percentage of their income (8%). Surcharges associated with tobacco use and standards-based incentive programs could make coverage unaffordable for some populations and take them out of the health insurance market altogether. Alternatively, such programs could drive unhealthy individuals into the Exchange where subsidies may be available. Taking tobacco rating as an example, a non-smoker with family income of $17,700 would be charged $5,200 premium for a tax-credit benchmark plan in the Exchange. With federal subsidies available through the Exchange, this individual would pay a $708 premium. A similarly situated smoker would have to pay a tobacco surcharge (50% of premium or $2,600) in addition to the $708 for a total premium (minus the subsidies) of $3,308 which represents 18.7% of his or her income. In this example, the individual could opt out of the mandate to purchase health insurance because the product is no longer affordable.
6) OTHER STATES. States such as New Hampshire, Rhode Island, and Michigan have passed legislation promoting health insurance incentive-based wellness programs; while states such as New York, Wisconsin, Alaska, and Georgia have adopted legislation providing safe harbor protections from state discrimination or unfair trade practices. Colorado allows premium incentives based on attainment of standards, with protections and provisions that go beyond the federal law. Wellness incentive programs are required to be accredited by a nationally recognized non-profit organization that accredits wellness programs. Colorado prohibits penalties for non-participation or failure to satisfy a standard, and allows individuals to request an independent external review if the carrier denies a request for an alternative standard or waiver of a standard.
7) SUPPORT. The American Diabetes Association (ADA) supports this bill because a scientific evaluation of wellness programs in California will be helpful in analyzing which types of wellness programs do achieve the goal of encouraging a healthier lifestyle without discriminating against individuals based on race, age, or medical condition. The ADA supports evidence-based wellness programs which encourage individuals to adopt healthy lifestyles. However, the ADA strongly opposes tying premium ratings to achieving health goals (i.e., lower blood pressure or cholesterol or weight loss). According to ADA, there is no evidence that wellness programs tied to premium variations are effective. The American Federation of State, County and Municipal Employees believes wellness incentive programs are discriminatory against those over 50, and low-income communities where exercising is often not safe and where cheap fast foods are more available than fresh fruits and vegetables.
The California Pan-Ethnic Health Network (CPEHN) supports this bill because the ACA expanded the practice of wellness incentive and rewards programs, even though research on the impact of the various types of programs on one’s health is inconclusive. CPEHN expresses concern that some incentives or rewards programs may actually worsen health outcomes and further contribute to inequities in the health care system. Health Access California is deeply concerned that most versions of wellness incentives are backdoor underwriting based on health status – and the eagerness of some insurers to have the opportunity to rate based on so-called wellness incentives further deepens their concerns. The California Arthritis Foundation Council supports this bill because it will help ensure that Californians have access to effective evidence-based health and wellness programs without fear of discrimination. Consumers Union supports this bill because programs that are not properly structured result in a disproportionate impact on low-income individuals, communities of color, and older populations.