How To Make Wellness Programs Work For Consumers

1. Benefit Design with the
Consumer in Mind:
How to make wellness programs work for
consumers
Lydia Mitts, Villers Fellow
Families USA, January 19, 2012

2. 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

3. 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

4. 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

5. 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

6. Outcome-Based Incentives: Back-Door
Medical Underwriting?
Wellness Program Medical Underwriting
Enrollee completes health risk Applicant completes underwriting
assessment, provides info about form, provides info about health
health status status
Submit biometrics (eg. blood and Submit biometrics (eg. blood and
urine samples) urine samples)
Premium increased if BP, cholesterol, Premium increased if BP, cholesterol,
glucose above normal (at wellness glucose above normal
program deadline)
 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.

7. 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

8. 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

9. What This Could Mean for the Average
Worker…
Employee Contributions to Coverage with 30% and 50% Wellness Plan
Premium Surcharges
Type of Average Average Annual 30% Surcharge 50% Surcharge
Coverage Annual Employee
Premium, Contribution,
2011* 2011* Size of Employee’s Size of Employee’s
Surcharge Total Surcharge Total
Premium Premium
Contribution 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.

10. Wellness Programs and ACA
Affordability Provisions
Wellness programs intersect with key affordability
provisions:
2.Eligibility for premium tax credits/employer “firewall”
3.Calculating premium tax credits
4.Calculating cost-sharing assistance
5.Eligibility
for exemption from individual mandate
Whether or not these affordability provisions adequately
assist families hinges on properly counting wellness
incentives

11. 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 coverage
2. Not result in an increase in cost to federal government

12. 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.

13. 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 alone
First-dollar coverage of health services necessary to achieve
measured outcome
Evidence-based justification, including for using health care-
based incentives

14. 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

15. 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