Consumerism is about empowering individuals with information and a financial stake in their own health and health care. Unfortunately, ObamaCare moves away from this personal responsibility. ObamaCare is about limited choices, mandated coverages, regulated prices, and controlling individual decision-making. But, ObamaCare cannot shut out the forces of consumerism. Buried in the dark clouds of ObamaCare is the opening for consumerism to survive.
A key feature of health care consumerism is providing individuals with opportunities to be financially rewarded for doing the right activities that improve their health. Rewards can include activities such as, participation in a wellness assessment, attending a smoking cessation class, compliance with a condition management program (e.g. taking medications, diet, exercise, office visits), and maintenance of good health characteristics (e.g. blood pressure, cholesterol, nicotine use, body mass index).
ObamaCare allows both participation incentives and limited rewards based on specific health status outcomes. The new law increases the maximum for rewards based on health status from 20 percent to 30 percent. The act allows the Secretary of Health and Human Services to potentially increase the health status rewards to 50 percent of coverage costs.
Financial rewards are critical to changing behaviors. If just being healthy was good enough, we would not have growing diabetes and an epidemic of obesity in this country. We are typically American. We want to be paid to do the right things. We want financial incentives and rewards. ObamaCare allows some current market initiatives to continue to include financial incentives and rewards.
Rewards and incentives can take on many forms. The chart below describes several options employers can use to engage employees in healthy choices. Both positive and negative rewards and incentives are possible. Existing rules should allow a combination of rewards and penalties to exist within the same structure as long as the difference between the best and worst financial impact is within the ObamaCare allowances.
Under Obamacare the major areas of differentiation in employment compensation packages will be provisions for rewards, incentives, and information to support healthy productive employees. Employers will always be concerned about their “human capital.” High functioning employees lower the costs of unscheduled sick days, absenteeism, disabilities, workers compensation claims, and improve productivity.. Here are typical options that employers can still use under ObamaCare:
Within these general areas, there are at least five ways to implement financial incentives:
- Change the Premium: This allows both the employee and the employer to share any savings based upon the split in how each contributes to the overall cost of the plan.
- Change the Employee Contribution Rate: This allows greater flexibility to award employees more or less that would occur by using the “change in premium” approach.
- Change Deductible: Increase or decrease the plan deductible based upon compliance standards set in the plan.
- Change Cost-sharing: This would expand on the “change deductible” approach and impact any combination of deductible, coinsurance, maximum out of pocket costs, and copayments.
- Change Personal Care Accounts: This would allow direct increases to health savings accounts (HSAs) or health reimbursement arrangements (HRAs).
ObamaCare does limit some financial incentive options for individuals, small groups, and large group plans offered through the government exchanges if they directly impact premiums for employees. The law states:
“With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group market—
(A) such rate shall vary with respect to the particular plan or coverage involved only by—
(i) whether such plan or coverage covers an individual or family;
(ii) rating area,
(iii) age, except that such rate shall not vary by more than 3 to 1 for; and
(iv) tobacco use, except that such rate shall not vary by more than 1.5 to 1; and
(B) such rate shall not vary with respect to the particular plan or coverage involved by any other factor not (above).”
Small employers are defined as groups with 100 or fewer employees, or 50 or fewer at the discretion of the states.
For those plans that can use the full capabilities of rewards and incentives, these areas of emphasis are likely to grow and expand as employers continue to seek ways of controlling health costs and improving productivity. A healthy employee is a more productive employee.
A survey of employers by Towers Watson showed that 22 percent of employers provide financial incentives using biometric screenings (e.g. blood pressure, cholesterol, body mass index) and wellness appraisals. An additional 19 percent of large employers are moving in that direction. While only 3-4 percent of employers currently provide financial incentives based on meeting bio-metric standards, results oriented incentives are considered the next generation of consumerism to motivate broad plan membership engagement in healthy choices.
There are many companies developing the technology and compliance standards to assist employers. One such company offering the technology to monitor and administer reward programs based on biometrics is Bravo Wellness. Forbes magazine highlighted Towlift, Inc., which selected Bravo Wellness’ incentive-based integrated wellness program. After four years of this strategy, Towlift has experienced a reduction of 26 percent in per capita claims cost and steady improvement in employee heath measures.
Employers can experience immediate cost savings by linking employee incentives to participation and results. There are obviously some rules to follow. When an incentive or penalty is contingent upon the satisfaction of a health standard, it must:
- Be designed to promote health and wellness
- Not exceed 20 percent (30 percent under PPACA) of the total cost of coverage offered
- Be available to all “similarly situated individuals”
- Offer an appeals process
- Provide “reasonable alternatives” when appropriate
- Offer re-assessments at least once per year
Employers need to be cautious and flexible during these times of uncertainty. Do what is needed and what has been proven to work anyway. Consumerism with rewards and incentives has proven itself over the last eight years to lower costs and improve quality of care. The American Academy of Actuaries reports that health care consumerism lowers costs in the first year by 12-20 percent and reduces future trend increases by 3-5 percent.
Changes based on health care consumerism won’t have to be reversed even if ObamaCare is successfully challenged in court, a different Congress limits ObamaCare implementation, or a new Administration changes the regulatory rules. If it is consumerism versus ObamaCare, consumerism will win in the end. It’s an American health reform idea that will not be defeated.
Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich. Nothing written here is to be construed as necessarily reflecting the views of the Foundation or the Center for Health Transformation or as an attempt to aid or hinder regulations or the passage of any bill before the U.S. Congress.