By Ron Bachman, President & CEO, Healthcare Vision, Inc.
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 stem from 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% to 30%. The act allows the Secretary of Health & Human Services to potentially increase the health status rewards to 50% of coverage costs.
Financial rewards are critical to changing behaviors. If just being healthy was good enough, we would not have growing diabetes and obesity epidemics 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:
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Types of consumer financial incentives |
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|
Goal of incentive |
Decision timing |
Health Status |
Examples |
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Selection of a optional health plans or provider networks that meet the cost and coverage needs of the member. |
During open enrollment |
Distribution between the healthy and ill reflecting underlying enrollee population. (ObamaCare limits the use of health status in underwriting and restricts actuarial pricing by age and sex.) |
1. Premium tiered health plans |
|
Select a low cost, high quality provider |
Varies, usually at the point of care |
Patient is usually ill or needing service. (ObamaCare may restrict the full use of current HSA legislation.) |
1. Point of care tiered health plans 2. High deductible health plans with savings account options |
|
Select a low cost, high quality treatment option |
At the point of care |
Usually when the patient becomes ill, sometimes before (ObamaCare may restrict the full use of current HSA legislation.) |
1. Tiered drug benefits 2. High deductible health plans with savings account options 3. Consumer incentives for disease management 4. Consumer incentives for preventive care. |
|
Reduce health risks by engaging plan members to seek care. |
Ongoing |
Varies—the patient has a high risk condition |
1. Consumer incentives to comply with recommended care (e.g., prenatal care) |
|
Reduce health risk by engaging plan members to change lifestyle |
Ongoing |
Varies—the patient has a lifestyle factor that increases health risks |
1. Consumer incentives to encourage certain health behaviors smoking cessation, weight loss) |
Source: Consumer Financial Incentives: A Decision Guide for Purchasers, Prepared for: Agency for Healthcare Research and Quality U.S. Department of Health and Human Services, 540 Gaither Road, Rockville, MD 20850 (ObamaCare comments added to original table by Bachman)
Within these general areas, there are at least five ways to implement financial incentives:
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% of employers provide financial incentives using bio-metric screenings (e.g. blood pressure, cholesterol, body mass index) and wellness appraisals. An additional 19% of large employers are moving in that direction. While only 3-4% 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 bio-metrics 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% 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:
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% and reduces future trend increases by 3-5%.