Small employers’ efforts to keep their workers healthy could get clipped when a minor provision of the new federal health reform law kicks in four years from now.
Federal health reform will trump a state law that allows health insurers to give as much as a 35-percent reduction in premiums to employers with healthy workers and make other changes the health insurers like, most particularly instituting aggressive wellness programs.
The state law, passed in 1992, applies to employers with no more than 50 workers who buy full insurance coverage. It also allows insurers to raise premiums 35 percent on employers with unhealthy workers who are doing nothing to change their health habits.
But health reform, known as the Patient Protection and Affordable Care Act, will not allow worker health status or employer wellness programs to be considered when insurers set premiums, beginning in 2014. The law says the only legitimate factors are age, tobacco use, whether a policy covers an individual or a family, and where in the country the workers live.
“If you were a very healthy account who’s been doing all of the right things in terms of wellness and productivity within your group, and you have benefited from state regulation which allowed us to give you a 35-percent discount because of that good work that you’ve done, that discount goes away,” Rob Hillman, president of Anthem Blue Cross and Blue Shield of Indiana, said during the Sept. 10 IBJ Health Care & Benefits panel discussion.
For small businesses, which already have faced enormous health insurance premium hikes, the change in law will only squeeze them more. But benefits experts said they think other incentives will keep employers chasing wellness as their key strategy to control health insurance costs.
“I still see an increase in interest in this area,” Chris Sears, a health benefits attorney at Ice Miller LLP, said about wellness plans. “Every year, as we talk to employers, we get more and more questions about, ‘What can I do? What can’t I do? I want to provide some incentives.’”
Wellness programs can be as simple as providing some health information on the Internet or in a newsletter. Or they can include weight loss programs, gym membership discounts, on-site exercise facilities, smoking cessation program, personal health coaching, classes in nutrition, or healthy living. They also can include various incentives to reward employees who participate and improve their health.
In many ways, the drive toward wellness has been born out of desperation. Health insurance premiums doubled for small businesses over the past decade, according to a survey by the California-based Kaiser Family Foundation. The average family plan now costs $13,250 per year for companies with 100 or fewer workers.
Employers and their workers are still splitting those costs in about the same proportions as before: Workers with family coverage pay 30 percent of premiums, compared with 26 percent a decade ago, according to Kaiser data.
Still, that means workers pay nearly $3,700 a year more for family health benefits now than a decade ago—in addition to shouldering more of the costs of their care through high deductibles and health savings accounts, or HSAs.
Frustration at the trend is palpable among small firms.
“Our small business has Anthem as the health insurance provider. Even with an HSA plan, we just learned that Anthem intends to raise our premiums 35 percent for next year—gee, thanks, WellPoint for sticking it to businesses who are already struggling to survive!” Mary Schmid, a lawyer at Stewart & Irwin PC, a 32-attorney law firm in Indianapolis, said last month in an online comment on an IBJ story about health care.
An Anthem spokesman declined to comment on whether the change in law will affect its small-employer customers who aggressively pursue wellness programs.
The recession of 2008 and 2009 has already caused some employers to back off their wellness efforts—although no company wants to trumpet that publicly, said Karl Ahlrichs, a benefits consultant at Gregory & Appel Insurance in Indianapolis who organizes a regular meeting of local chief financial officers.
“The CFOs are avoiding wellness because they don’t think it works,” Ahlrichs said. They’re waiting, he added, to be able to drive, not just entice, workers into wellness plans.
Sally Stephens, president of a local provider of wellness programs, Spectrum Health Systems, has seen the same thing—but only by companies that weren’t serious about wellness already.
Other companies that were giving employees serious incentives to get preventive care and improve their health habits have doubled down on wellness since the recession.
“It’s the employers who were not willing to really put their teeth into it” that are backing off, Stephens said. “Those pushing the envelope, those are the ones that are investing even more.”
Nationally, at least, more small firms joined the wellness bandwagon during the recession: The percentage of firms with 100 or fewer workers offering a wellness program jumped from 59 percent last year to 74 percent this year.
But most of those firms only have their toes dipped in the wellness water: Fewer than 10 percent of those small firms give workers any kind of financial incentive to participate in the wellness program.
The federal health reform law has many provisions designed to encourage even more wellness efforts. Beginning in 2011, employers must offer wellness and preventive services in their health plans, or else pay federal tax penalties. The preventive services of such a plan—things like annual physicals and childhood immunizations—must be made available at no extra cost to the worker.
Also, the law will allow employers to increase the financial incentives for employee participation to 30 percent of the total premium costs—and potentially as high as 50 percent. Currently, such incentives cannot exceed 20 percent of a health plan’s total premiums.
Last, health insurers can count spending on wellness programs as a medical cost, not as administration or profit, for the purpose of meeting the law’s 80-percent minimum requirement for the proportion of premium dollars spent on health care, known as medical loss ratios.
Those provisions of the bill will counterbalance the 35-percent premium reduction and keep employers pursuing wellness, according to Ice Miller’s Sears.
“The act is really trying to push preventive and wellness activities inside a [health] plan,” Sears said, adding, “I think insurance companies are still going to want to include these programs, because it helps reduce costs overall.”•