Before the Affordable Care Act (ACA) was enacted, one of the primary ways insurance companies deterred less healthy people from enrolling was to charge them into a higher premium based on their expected health risk. The ACA prohibited this practice beginning in 2014. Health insurers in the individual market can now adjust premium rates solely based on a person’s age, family size, geography, or tobacco use. However, on September 30, 2019, the Trump Administration announced a new initiative that would potentially restore insurers’ ability to use an individual’s health status to set rates in up to 10 states.
The U.S. Department of Health & Human Services (HHS) has invited states to apply to implement “health contingent” wellness programs as part of a 10-state demonstration project that could potentially be expanded nationwide. These programs would allow insurers to adjust premiums or cost-sharing by up to 30 percent for enrollees based on their ability to meet or maintain a certain health outcome. For example, a health plan could charge an enrollee who fails to lose weight up to 30 percent more in premiums than an enrollee who meets the weight loss threshold. Or, a diabetic who has trouble controlling his or her blood sugar level could face a higher deductible than one who controls it well. States would be required to design these programs so they do not result in a decrease in coverage or increase the cost to the federal government. However, it appears to be acceptable if the program results in sicker people losing coverage, so long as the state projects that those losses will be made up by coverage gains among healthy people.
Wellness Programs and the ACA
When the ACA was enacted in 2010, workplace wellness programs were a bit of a fad, in part because companies like Safeway were claiming big savings on their employee health costs. Employer groups pushed Congress to give them more flexibility to tie employees’ participation in wellness programs to the costs they would bear under their health plan. In other words, employers sought to be able to reduce premiums or cost-sharing for employees who successfully completed a wellness program or met specified health targets, such as maximum Body Mass Indices (BMI) or blood sugar levels for diabetics. Employees who were unable or unwilling to participate – or who couldn’t achieve the desired health outcome – would face higher costs. Congress complied, enacting along with the other ACA reforms the “Safeway Amendment” – a provision allowing employers to adjust premiums or cost-sharing as part of a group health plan wellness program. Congress also added a provision requiring HHS to implement a 10-state demonstration project for “wellness programs” in the individual market.
Fast forward 10 years and the efficacy of workplace wellness programs has been pretty thoroughly debunked. Not only do they not improve employee’ health outcomes, they haven’t really saved employers money. However, when premium or cost-sharing “incentives” are tied to an employee’s ability to meet a certain health target, these programs are pretty successful at shifting costs from the employer to the employee, which has led to significant pushback from workers in some cases.
Perhaps because of this mounting evidence, the Obama administration never implemented the 10-state individual market demonstration project, even though the ACA mandated they do so by 2014. This long-dormant provision has now been revived by the Trump administration.
Wellness Programs Could Place Vulnerable Populations, People with Pre-existing Conditions at Risk
Insurers can and should establish evidence-based, well-designed wellness programs, whether for employers or individual market enrollees. These could include free tobacco cessation programs, discounts for gym memberships, coupons for farmers’ markets, or nutrition counseling to make it easier for enrollees to get and stay healthy. Under the ACA, insurers are also permitted to implement “value-based” insurance designs, which reduce enrollee cost-sharing for high-value services such as primary care and generic drugs, but potentially increase cost-sharing for lower-value or overused services such as imaging or sleep studies.
Unfortunately, the proposed demonstration project gives insurers new license to use a wellness program as a device to avoid people with high cost medical conditions. The administration’s parameters for the program would allow insurers to charge individuals who cannot meet an established health target up to 30 percent more in premiums or cost-sharing than healthy people who can meet the target.
Further, by allowing insurers to link enrollees’ premiums and cost-sharing to health status, it potentially increases the cost of insurance for people who need health care services the most, reducing the ability to manage chronic conditions. Additionally, women, low-income, and minority individuals can be at a disadvantage when insurers tie their access to care to the ability to meet certain health targets. These individuals are more likely to have the health conditions that wellness programs target and face more barriers to healthy living. These barriers can include the need to work second or third jobs, caregiving responsibilities, unsafe neighborhoods, or lack of access to healthy foods. These are also the very people who will likely be the most sensitive to even small cost-sharing changes in their health benefits.
The Administration has invited states to submit applications for the demonstration program. It is not year clear how many states will pursue this opportunity, but those who do are likely to be those that have been resistant to the ACA and the reforms it brought to the insurance market. Unfortunately, HHS has not indicated there will be any opportunity for public input on the states’ applications or HHS’ review. HHS is only promising to make available a list of states after their applications have been accepted. In addition, the agency suggests that after the experience of the 10 states has been evaluated, the Administration could expand the opportunity for insurers to institute these so-called wellness programs nationwide. Although the fight to repeal and replace the ACA has faded from the headlines, this Administration is continuing to use its administrative powers to undermine the ACA and its protections for people with pre-existing conditions.