Do I Look Fat In This Insurance Plan?

If workers won't divulge information about indicators of poor future health related to personal behavior, can their employer charge them more for insurance coverage? Many firms already do this, through workplace "wellness" incentives. Expect government-administered health plans to be following in their footsteps soon.

Fuzzy political desires to treat everyone the same in health insurance collide with the real costs of doing so. Can we afford to ignore how different people pose different costs to pooled resources for expensive health care?

Last month, a data privacy group charged that the practices of CVS Caremark are forcing their workers to disclose personal health information and potentially risk their jobs, or else pay higher premiums for their employer-provided health coverage. The first wave of ensuing media coverage predictably oversimplified the issue as another case of employers callously shifting costs to their hapless employees.

The basic facts are that CVS is launching enhanced incentives in its own health plan to increase employee participation in the wellness program. The company will ask its insured employees to agree to some initial health screening tests - to collect information metrics about their height, weight, and body mass index, blood pressure, blood sugar, and cholesterol levels. If they choose not to do so, they will have to pay an additional $50 a month toward their employee share of the total premium for health coverage.

Nearly four out of five large employers currently offer some version of employee wellness plans. Unlike CVS, as many as one in five larger employers also set health-contingent "target measures" - such as weight loss, smoking cessation, or lower blood pressure -- that participating employees have to achieve to receive their rewards (or avoid premium penalties). But more sophisticated wellness plans tend to ask employees only to "try" to get healthier (such as by working with health coaches and participating in health-enhancing activities), rather than to absolutely fail or succeed in hitting any magic numbers. The health risk assessment information involves conditions that can be improved, if not prevented, by actions within the personal control of workers.

Employer wellness programs already are subject to extensive federal and state regulation, such as privacy rules on use of this health information and a ceiling on the size of incentives. In 2010, Obamacare itself endorsed expansion of employer wellness programs. The Affordable Care Act (ACA) increased the incentive limits to 30 percent of total premiums, and up to 50 percent for tobacco non-use incentives. Federal rules do require that wellness programs setting specific health improvement goals must provide exceptions for employees who cannot realistically attain them and offer an alternative, reasonable means of qualifying for the reward. (Thus far, obesity has NOT been declared a disability under federal law.)

Standard practice for employer programs is to ensure that the employee health information is collected and managed through third-party companies. Employers like CVS receive at most a de-identified, aggregated summary of their workforce's health and progress in improving health measure results.

Of course, clumsy and insensitive employers might overstep their bounds and try to use a wellness program to drive away workers who cost them more to insure. But they will be risking a lot in terms of business reputation, higher costs from increased labor turnover, and potential lawsuits. Smaller employers that face tighter profit margins and lack in-house capabilities to manage more sophisticated wellness programs are more likely to present such potential problems.

More employers are turning toward wellness incentives at the workplace, even as their broader discretion to tailor the benefits they offer will be more restricted under other rules of the ACA for fully insured, or even self-insured, coverage. The best wellness programs can target more effectively enhanced disease management, preventive care, and lifestyle counseling interventions to produce better health outcomes for their employees at earlier stages of high-risk health conditions.

The most extensive study of employer wellness programs several years ago concluded that for every dollar spent on a workplace wellness program, medical costs fell by $3.27 and absenteeism costs fell by another $2.73. However, not all programs are alike or executed well.

Incentives work better if they are more immediate (preferably cash) and large enough to be noticed. Workers respond more to potential losses (higher premiums) than to gains (discounts from higher initial premiums). Simply providing more information and options to improve one's health doesn't work very well. Linking employees to interactive, personal engagement with a health coach makes a big difference, too.

In the public sector, state governments also are joining the health wellness movement. A handful of states have set higher premiums for their employees that exceed limits for obesity or tobacco use. As many as ten states' Medicaid programs will be experimenting further with wellness incentives under the ACA.

Both private employer payers of expensive health coverage and taxpayers footing the bill for expanded health entitlement programs will continue to seek additional ways to limit health care spending. With only a small fraction of preventable mortality and its high costs due to the availability and quality of conventional health care services (roughly 10 percent), additional tools are needed to shape the more powerful behavioral factors that influence our present and future health outcomes.

Most economists insist that higher health benefits costs are ultimately paid by workers (through lower wages, offsets in other workplace benefits, or fewer jobs). Employers still think differently and view higher health costs as reducing their profits and operating revenue. So expect an expansion of wellness incentives at work, along with less gentle nudges to shape up. They will be followed by similar signals in taxpayer-subsidized health coverage programs. When someone else is paying more of the bill, they can become harsher health taskmasters.

Important distinctions and limits still will have to be redrawn periodically regarding which types of health behavior and its costs are reasonably within the control of individuals and which ones remain matters of collective, societal responsibility.

But don't worry too much. Given the body fat numbers for the average American and median voter, the less-healthy cohort of the workforce can still throw its weight around to prevent any excessive forms of workplace discrimination.