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Corporate wellness programs: Not quite the cost savers

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoons for the latest edition — and read all previous columns here.

For most Americans, Safeway does not generally conjure up much by way of thrills or excitement — it is, after all, a grocery store.

Look to the health-policy world though, and some see the grocery chain as the key to bending the health-care cost curve — and not just by selling healthy foods.

Since 2005, the chain has kept its health costs flat by tethering premiums to how healthy employees are — or, alternatively, how healthy they try to be. The company was among the first to give employees a financial stake in their own care.

During the health-reform debate, President Obama held up Safeway as an example for the nation. The company left a footprint in the Affordable Care Act, too. Come 2014, employers will be able to tie as much as 30 percent of an employee's premium to wellness programs.

We're about to see what happens when companies invest heavily in wellness — and there's reason to believe that it may not be a replica of the Safeway story.

"We probably shouldn't think of wellness programs as cost-savers, at least not in the short-term," says Gautam Gowrisankaran, a professor of economics at the University of Arizona. He recently completed a study of a large wellness program at a major hospital in St. Louis, published Monday in the journal Health Affairs.

While the program did seem to change the way that employees accessed health care, it did not produce savings for the hospital system, BJC Healthcare.

BJC Healthcare launched its wellness program in 2005, the same year that Safeway's efforts got underway. Plan members could access nearly $1,700 in extra health insurance coverage if they completed a health assessment. Smokers would have to sign up for a smoking-cessation class as well.

Gowrisankaran looked at hospitalizations the year before and after the health plan changed. Overall, there wasn't much in the way of a difference. But for those with some of the conditions that BJC Healthcare was targeting, like heart disease and diabetes, there was a noticeable drop in hospital visits.

The reduced spending on hospitalizations was, however, offset by an increase in spending on pharmaceutical products and out-patient trips to the doctor. The wellness program, at least in its nascent stages, changed what care individuals received but not how much it ultimately cost.

Gowrisankaran thinks this might have had to do with the structure of the program. Take the smoking cessation classes, for example. "You had to sign up for it, but you didn't actually have to go," he says. "Nobody was checking attendance."

The problem could also arise from a misconception about the cost of chronic health-care conditions. We generally think that tobacco users have higher health-care costs, for example, given that smoking has been associated with a host of diseases.

The research to back up that notion, however, is surprisingly checkered. In a separate Health Affairs paper being published Monday, UCLA's Jill Horwitz takes a deep dive into some of the assumptions underlying wellness programs.

She's less skeptical than Gowrisankaran about the potential for savings, but perhaps more skeptical about how companies achieve the cost reductions.

"I have no doubt companies can save money with this," she told me in an interview Monday morning. "The question is whether charging those higher premiums leads to the slowing of spending, or is [it] a cost-shift onto less healthy employees."

Take the idea that workers who smoke or have high blood pressure spend more on health care. That's crucial to the concept of wellness programs, which are supposed to bring down health spending by targeting these costly patients.

Horwitz combed through the research on health-care costs associated with smokers. Seven studies found that these people had higher costs than non-smokers — but 11 found there was no difference at all.

"We're only talking about the working age population," Horwitz explains. "So smokers may spend more over their lifetime, but a lot of those higher costs may not show up right away."

Horwitz worries that the real way to save money under wellness programs is by charging a premium to unhealthy workers, who might not even have higher health-care costs to begin with.

"The win-win idea is that employers get savings and employees get health improvements," Horwitz says. "What our paper suggests is that cost control doesn't necessarily come from health improvement, that it comes out of the pocket of employees with health problems."

As to how Safeway achieved its savings, the company says it's due to its employers keeping healthier than the general population. Gowrisankaran, the University of Arizona economist, would welcome the chance to comb through the data and see what worked — whether those are true savings, or, as Horwitz suspects, a cost-shift.

"I would hope that, as a result of this study they might say, 'we want you to study our data'," he says. "Then we could get a sense of if their claims are outsized or not."

KLIFF NOTES: Monday's top health policy reads from around the Web.

Is Arkansas's unusual Medicaid expansion plan actually legal? "Top health law experts we communicated with are not certain Arkansas’s expansion plans are on sound legal footing. Insofar as we’ve wrapped our heads around this, there appear to be three possibilities." Adrianna McIntyre and Karan Chhabra in Project Millennial.

Thought the Affordable Care Act was hard in English? Try explaining it in Vietnamese. "Oregon's health insurance exchange will have staff who speak Spanish, Russian and Vietnamese to help explain and market the service that's expected to provide health coverage to thousands of Oregonians...the state faces cultural and linguistic challenges in trying to educate limited-English speakers and hard-to-reach populations." Jonathan J. Cooper in the Associated Press. 

How hospitals feel about the sequester. "Can we live with it? Yes. I think we’re able to live with it because we’ve anticipated it for some time.  What I’m concerned about is even this sequestration won’t be enough. So what is the next thing we’ll be living with to deal with this national debt situation?" Mary Agnes Carey in Kaiser Health News.