Lydia Mitts, Villers Fellow

Families USA, January 19, 2012

Benefit Design with the Consumer in Mind:

How to make wellness programs work for consumers

Overview Wellness programs in today’s workplace

Concerns with certain wellness program designs

Changes to wellness programs in the ACA

Wellness programs and ACA affordability provisions

Consumer protections in wellness programs moving forward

What is a Wellness Program? Meant to be a positive benefit for

workers Aim: Support healthy behavior changes

and improve health of workers Added bonus: Lower health care costs,

increase productivity Common Targets: Weight loss, smoking

cessation, prevention of chronic disease Nutrition classes, gym membership,

health coaching, web-based health resource

Essential to wellness is access to affordable health coverage and care

Wellness Incentives How can you get the incentive?

Participation: Complete a smoking cessation course, web-based seminar

Meet a Health Outcome: Benchmark BMI, glucose, cholesterol or BP level; tobacco free

What is the incentive? Non health care based: Extra paid vacation time, gift

cards Health care based: Premium discount or surcharge,

variation in deductible or cost-sharing

Incentives tied to health care costs and outcomes can jeopardize access to affordable coverage and

care

Outcome-Based Health Care Incentives

HIPAA REQUIREMENTS: Incentives can vary health care costs up to 20% of

total cost of premium Program must have a “reasonable chance” of

improving health and not be “overly burdensome,” but no clear definitions are provided Threat of premium surcharge for not meeting a health

outcome qualifies as a program Right to an alternative standard or waiver from

outcome requirement if medically unsafe or inadvisable. Must be made more specific to ensure adequate

protection

Wellness Program Medical Underwriting

Enrollee completes health risk assessment, provides info about health status

Applicant completes underwriting form, provides info about health status

Submit biometrics (eg. blood and urine samples)

Submit biometrics (eg. blood and urine samples)

Premium increased if BP, cholesterol, glucose above normal (at wellness program deadline)

Premium increased if BP, cholesterol, glucose above normal

Outcome-Based Incentives: Back-Door Medical Underwriting?

Doesn’t matter if incentive is structured as reward or penalty (surcharge or discount)- still makes coverage comparatively more expensive for those with greater health risks.

Participation-Based Health Care Incentives

No limits on how much incentives can vary health care costs

Problematic for workers who face personal barriers to participation

Barriers disproportionately affect low-income workers

No explicit HIPAA right to an alternative standard or waiver from participation requirements

Still a potential barrier to affordable coverage

Changes to Wellness Programs in ACA

§ 2705(j) of PHSA Maximum outcome-based incentive will increase to

30% of total premium starting in 2014 HHS, Labor and Treasury have authority to

increase maximum incentive to 50% of premium

§ 2705(l) of PHSA 10 State Individual Market Demonstration Project –

July 2014 Wellness incentives allowed in individual

market/exchanges Max. outcome-based incentive applies Option to expand to other states starting July 2017

What This Could Mean for the Average Worker…

Employee Contributions to Coverage with 30% and 50% Wellness Plan Premium SurchargesType of Coverage

Average Annual Premium, 2011*

Average Annual Employee Contribution, 2011*

30% Surcharge 50% Surcharge

Size of Surcharge

Employee’s Total Premium Contribution

Size of Surcharge

Employee’s Total Premium Contribution

Individual

$5,429 $921 $1,629 $2,550 $2,715 $3,636

Family $15,073 $4,129 $4,522 $8,651 $7,537 $11,666

*Data from the Kaiser Family Foundation/HRET 2011 Employer Health Benefits Survey.

Wellness Programs and ACA Affordability Provisions

Wellness programs intersect with key affordability provisions:

1.Eligibility for premium tax credits/employer

“firewall”

2.Calculating premium tax credits

3.Calculating cost-sharing assistance

4.Eligibility for exemption from individual mandateWhether or not these affordability provisions adequately assist families hinges on properly

counting wellness incentives

Wellness Incentives and Premium Tax Credits

Eligibility for Premium Tax Credits/ Exchange Coverage Employer coverage firewall threshold = 9.5% of

household income What happens if the threshold is crossed due to a

wellness incentive?

Calculating Premium Tax Credits: ACA requires premium tax credits be calculated based on

cost of benchmark premium before wellness discount – Good, but not enough

Statute does not explicitly address surcharges but requires demonstration projects to:1. Not result in decrease in coverage2. Not result in an increase in cost to federal government

Priorities for Regulations on Affordability Priorities for Final Premium Tax Credit Regulations:

Explicitly include any wellness costs to employees in the value of their premium contribution for affordability tests

Explicitly prohibit premium surcharges in wellness demonstration projects

Priorities for Future Regulations Regulations on individual responsibility must clarify

that individuals receive an exemption if the cost of a wellness incentive makes coverage unaffordable (>8% of income threshold)

Cost-sharing assistance regulations must ensure that wellness incentives that vary cost-sharing in exchange plans do not violate cost-sharing assistance thresholds in statute.

Strengthening Consumer Protections in Wellness Programs

HIPAA requires that a wellness program has:“a reasonable chance of improving the health of participants and is not overly burdensome, is not 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”

This should mean that programs must include:Supports to help achieve measured outcome, free of charge- can’t be incentives aloneFirst-dollar coverage of health services necessary to achieve measured outcomeEvidence-based justification, including for using health care-based incentives

Strengthening Consumers’ Right to an Alternative Standard or Waiver

Current requirement: Alternative standard or waiver from wellness requirement for those who cannot safely meet a health outcome goal

Future regulations need to strengthen requirement: Better notification standards Protection of medical privacy Individualized Plan Expanded eligibility: Participation-based programs;

Non-medical barriers

Key Takeaway

Wellness programs that enable healthy behavior change and increase access to healthy living supports = GOOD!!

Medical underwriting and insurance discrimination disguised as wellness programs = BAD!!

Consumer-friendly wellness programs don’t affect workers’ access to affordable health coverage and care