Wellness Incentives Could Create Health-Care Loophole
Workers Who Fail Medical Tests Could Pay More

By David S. Hilzenrath
Washington Post Staff Writer
Friday, October 16, 2009

Get in shape or pay a price.

That's a message more Americans could hear if health-care reform provisions passed by the Senate finance and health committees become law. By more than doubling the maximum penalties that companies can apply to employees who flunk medical evaluations, the legislation could put workers under intense financial pressure to lose weight, stop smoking or even lower their cholesterol.

The bipartisan initiative, largely eclipsed in the health-care debate, builds on a trend that is in play among some corporations and that more workers will see in the benefits packages they bring home during this fall's open enrollment. Some employers offer lower premiums to workers who complete personal health assessments; others limit coverage for smokers.

The current legislative effort would take the trend a step further. It is backed by major employer groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers. It is opposed by labor unions and organizations devoted to combating serious illnesses, such as the American Heart Association, the American Cancer Society and the American Diabetes Association.

Critics say employers could use the rewards and penalties to drive some workers out of their health plans.

President Obama and members of Congress have said they are trying to create a system in which no one can be denied coverage or charged higher premiums based on their health status. The insurance lobby has said it shares that goal. However, so-called wellness incentives could introduce a colossal loophole. In effect, they would permit insurers and employers to make coverage less affordable for people exhibiting risk factors for problems such as diabetes, heart disease and stroke.

"Everybody said that we're going to be ending discrimination based on preexisting conditions. But this is, in effect, discrimination again based on preexisting conditions," said Ann Kempski of the Service Employees International Union.

The legislation would make exceptions for people who have medical reasons for not meeting targets.

Supporters say economic incentives can prompt workers to make healthier choices, thereby reducing medical expenses. The aim is to "focus on wellness and prevention rather than just disease and treatment," said John J. Castellani, president of the Business Roundtable.

BeniComp Group, an Indiana company that manages incentives for employers, says on its Web site that the programs can save employers money in a variety of ways. Medical screenings catch problems early. Employers shift costs to others. Some employees "choose other health care options."

Douglas J. Short, BeniComp's chief executive, said the incentives he uses focus on outcomes, not conditions.

"I can't give you an incentive based on being a diabetic or not being a diabetic, but whether you're managing your blood glucose level -- I can give you an incentive based on that," he said.

The incentives could attack a national epidemic of obesity. They also cut to a philosophical core of the health-care debate. Should health insurance be like auto insurance, in which good drivers earn discounts and reckless ones pay a price, thereby encouraging better habits? Or should it be a safety net in which the young and healthy support the old and sick with the understanding that youth and good health are transitory?

Increasing Incentives

Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the health and finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent.

A single employee whose annual premiums cost him and his employer the national average of $4,824 could have as much as $2,412 on the line. At least under the health panel's bill, the stakes could be higher for people with family coverage. Families with premiums of $13,375 -- the combined average for employer-sponsored coverage, according to a recent survey -- could have $6,688 at risk.

An amendment passed unanimously by the health committee would allow insurers to use the same rewards and penalties in the market for individual insurance, though legislative language subsequently drafted by the panel's Democratic staff does not reflect that vote, Sen. Mike Enzi (Wyo.), the committee's ranking Republican, has said. The Senate Finance Committee's bill would set up a trial program allowing insurers in 10 states to use wellness-based incentives for individuals.

America's Health Insurance Plans, an industry lobby, has argued that insurers should be allowed to consider participation in wellness programs when setting individual premiums.

Employers and other advocates of expanded incentives say taking steps to get healthier would be voluntary. Sen. John Ensign (R-Nev.), the lead sponsor of the Finance Committee's wellness provision, said his proposal "would guarantee that the incentive is strong enough for Americans to want to participate."

Corporate Programs

Wellness incentives have been spreading rapidly in the corporate world. Unlike the legislative proposals, which address incentives based on results, the corporate programs typically compensate employees based on effort alone-- for example, enrolling in smoking-cessation programs even if they are unable to kick the habit, or undergoing detailed medical assessments regardless of the findings. But there are exceptions: The Safeway supermarket company allows certain employees to reduce their premiums by meeting standards for body mass and other measures. Safeway chief executive Steve Burd has framed it as an issue of personal responsibility.

Valeo, an auto parts supplier, four years ago raised the deductible on an employee health plan to $2,200 from $200 for individual coverage and to $4,400 from $400 for family coverage. Then it gave employees the opportunity to reduce the deductible to its starting point by not smoking and by meeting goals for blood pressure, cholesterol and body mass index, said Robert Wade, Valeo's director of human resources for North America.

"If they don't comply, they end up being penalized, if you will, but we refer to it as a Healthy Rewards program," Wade said.

Workers who choose not to submit to yearly medical assessments have been offered a different health plan that carries higher premiums, Wade said.

The results are mixed. The number of employees meeting some targets in the Healthy Rewards program has risen while the number meeting others has fallen, Wade said. On average, employees have reduced their deductibles to about $600 in the case of individual coverage. Meanwhile, Valeo has managed to keep annual increases in the company's share of health-care costs per employee at about 1 percent, he said, which is far below average.

Some of the expense has been shifted to employees through higher deductibles, he said. The increased deductibles alone can also save money by making people more cost-conscious when deciding whether to see a doctor or obtain other medical services.

Benton County, Ark., implemented a similar BeniComp program in 2006. The average amount of money the county spent on medical care per health plan participant fell during the first two years, from $6,575 in 2005 to $4,011 in 2007. It rose to $5,921 in 2008 and was on track to reach $6,752 this year, extrapolating from an average for the first nine months of the year, according to data provided by the county.

County benefits administrator Thomas Dunlap said incentives on the scale the Senate is contemplating could prompt some workers to leave employers' health plans or quit their jobs.

Paychex, a payroll management company, offers incentives for participation in wellness programs but refrains from pegging them to biometric targets.

"Employees could be doing everything right and still not achieve the desired outcome. And so then you're holding them accountable for something that may not be achievable," said Jake Flaitz, the company's director of benefits.

Workers at a company called Bemis, which makes packaging, went on strike this year partly because the firm was insisting that they and their spouses submit to health risk assessments to remain eligible for their health insurance, the Workers United union said in an August news release. The union called the assessments "invasive."

North Carolina has angered some state employees by introducing a wellness program that would limit the most generous benefits package to those who meet body mass targets and do not smoke. The state would allow workers to satisfy the requirement by enrolling in weight management or smoking cessation programs.

When fully implemented, the program is projected to reduce the state health plan's medical expenses by 1.2 percent, spokeswoman Linda McCrudden said.

Jack W. Walker, the top executive at the health plan, predicted that over the long run, the federal government will pay for North Carolina's success. State workers who live longer will spend more time collecting benefits from Medicare, the federal insurance program for older Americans, he said.

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