Could Health Overhaul Incentives Hurt Some?

By RONI CARYN RABIN, New York Times, April 12, 2010

The new health care law promises to extend coverage to millions of Americans and to cut costs by cultivating healthy habits and preventive care. But could its emphasis on wellness undermine one of its central achievements: putting an end to the practice of charging sick people more for health insurance?

Workplace wellness programs are becoming more and more popular as businesses try to rein in runaway health costs. At American Express, for instance, employees are offered a $100 reward just for coming in for a health assessment; the company also provides an array of free support services, including health coaching, maintenance drugs and preventive care.

The program helped Wade Hindell, 37, of Jersey City, a technology director at Amex’s New York City headquarters, lose more than 40 pounds last year after a cafeteria health check alerted him he was overweight — obese, actually — and had high cholesterol and triglycerides. “My wife was very happy about it,” he said. “I don’t snore anymore.”

The new law gives employers more leeway to offer workers an even more valuable incentive: steeply discounted health insurance for those who reach certain goals — for example, keeping their weight, blood pressure, blood sugar or cholesterol within normal range.

While advocates for people with chronic ailments like diabetes, cancer and heart disease say they welcome initiatives that enable employees to incorporate exercise or weight counseling into their workday, they warn that tying premium discounts to achieving certain health standards (which American Express does not do) will inevitably shift costs to less healthy employees.

“On the one hand, it’s a great idea — let’s encourage people to be healthy,” said Timothy Stoltzfus Jost, a law professor at Washington and LeeUniversity specializing in health and a consumer representative to the National Association of Insurance Commissioners. “But if I have pretty serious asthma, there are a lot of wellness programs that I can’t be a part of. Isn’t this going to mean people who are already unhealthy are going to pay higher premiums?”

Though the law promises to end discrimination in coverage based on health status, Mr. Jost called the wellness provisions “a loophole big enough to drive a semi through,” adding, “Insurers know darn well this will allow them to continue to underwrite based on health status.” Many consumer advocates worry that premiums will be raised significantly across the board first, and then individual discounts will be applied.

The law does include several provisions intended to protect against discrimination in implementing wellness programs. The programs must have “a reasonable chance” of improving health or preventing disease, and cannot be “a subterfuge for discriminating based on a health status factor.”

If people have a medical condition that precludes them from achieving one goal, they must be offered a “reasonable alternative standard,” the law says.

But Bev Dochstader, a 48-year-old cancer survivor from Wellsboro, Pa., said she suffered so many complications from her breast surgery and reconstruction that she would not have been able to participate in any wellness program for many months. “I hobbled around for a long time,” she said.

Businesses are increasingly pointing to unhealthy habits, including tobacco use, poor diet and sedentary lifestyles, as the main reasons for rising health care costs, saying that people who don’t engage in those behaviors should not be paying the price for those who do.

“Right now, the employees who are healthy and living a healthy lifestyle are paying for those who are not,” said Helen Darling, president of the National Business Group on Health. “They are overpaying almost twice as much for the unhealthy: the obese, the smokers, people like that. You, an employee who is healthy and doesn’t smoke, are subsidizing the medical claims, with your premiums going up every month, to pay for someone who smokes, for someone who is obese.”

Premium discounts for people who achieve health objectives — or who are thin, have normal blood pressure or do not smoke to begin with — are minor adjustments, she said, adding, “All the employer would be doing is taking the numbers and doing a little bit of rebalancing of some of the imbalance.”

Currently, discounts pegged to specific health outcomes cannot exceed 20 percent of an employee’s premiums; the law lifts that cap in 2014, allowing for discounts of 30 percent and possibly up to 50 percent in the cost of individual or family health care premiums. It also calls for applying wellness discounts in the individual market; an initial demonstration project involving 10 states is to be started by July 2014.

The money at stake is substantial, according to an analysis by two Harvard researchers, Kristin Voigt and Harald Schmidt. A 30 percent discount translates to $1,447 a year on an average individual policy, or $4,013 for a family policy, they calculated; a 50 percent discount is worth $2,412 for an individual and $6,688 for a family. Dr. Schmidt and Dr. Voigt said they were concerned that workers with low incomes would be disproportionately affected by penalties, since they tend to suffer from more ill health; the policies might also have the effect of driving sicker people away from certain jobs.

Under the new law, employees who meet health benchmarks could also be rewarded with waivers of co-payments and deductibles, or the absence of surcharges that would presumably be charged to other workers.

Though those kinds of incentives are not currently widespread, a recent Hewitt Associates survey of 600 large employers found that almost half were in various stages of implementing them — exacting financial penalties like higher premiums from employees who smoke or refuse to undergo a health screening or participate in a disease management program. Some would penalize those who do not get their weight or blood pressure under control.

Studies have shown that when companies invest in well-designed comprehensive wellness programs, they can reduce workers’ compensation claims, increase productivity by reducing absenteeism and curb overall health care costs, said Dr. Clyde Yancy, president of the American Heart Association.

But he said that the programs would require long-term investment in comprehensive wellness care, not financial incentives tied to isolated risk factors. “It’s shortsighted,” Dr. Yancy said, “to take one particular domain and put a tariff on that.”

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