Gaping hole in the Senate bill would allow insurers to charge thousands more if you're sick

By Jason Rosenbaum in Profits Before People HCAN

The Senate bill has a gaping loophole in it that could negate a central promise of health reform - that insurers can no longer charge more because you are sick.

The loophole comes in the form of an expansion to so-called "workplace wellness programs" that are supposed to reward employees for healthy habits. In practice, however, it could allow insurers to charge thousands of dollars more because, for example, a person is sick or overweight or has high cholesterol.

Here's how these programs are supposed to work: There is limited evidence that says when employers provide their employees with health programs like building a gym in the workplace and allowing employees to use it before, during, or after work, or hiring a company dietitian to help employees eat better, employee health, moral, and productivity increases. And, their insurance costs go down. So, programs can be devised that offer small monetary rewards for participating in programs like this.

The key here is that the programs should be designed to actually help employees with their health, and the goals set for financial incentives should be able to be accomplished by everyone.

Current law allows employers to vary insurance premiums and deductibles up to 20% based on the health of the employee or their family. That works out to a substantial $965 for individuals and $2,675 for families per year, based on the total cost of coverage. And current law allows employers to set whatever metrics they want - as long as they are "reasonably designed" - for that variation in premiums, and counts something as flimsy as lighting an aromatherapy candle in the office as a "workplace wellness program."

(In fact, aromatherapy is specifically mentioned in the text of the regulations as an example of how easy it is to set up a workplace wellness program.)

So, in practice, employers can purchase a cheaper insurance plan which passes on more costs to their employees, and then lower the price for only those employees who, for example, hit a certain weight target or have low cholesterol. These kinds of targets unfairly burden low-income workers, women, single parents, or people working two jobs, who have less time to work out or eat right. And this practice comes with a double-whammy: Those people, people who need health care the most - are stuck with higher premiums, meaning they avoid the health care they need.

The Senate bill would vastly expand this already large loophole, allowing employers to vary premiums up to 30% (and up to 50%, at the discretion of future secretaries) based on the health of an employee. In effect, employers could make everyone's health care up to 50% more expensive and only lower health care costs for those meeting the targets, however unreasonable they might be. Instead of being a reward for people with good health, they could become a penalty for everyone else, and a major way to force employees to shoulder more of the cost of health care and employers to carry less.

(For more on the Senate provisions, see this fact sheet from the American Heart Association [pdf] and this fact sheet from the National Partnership for Women & Families [pdf].)

This is not idle speculation. Chuck Stone, Director of North Carolinians for Affordable Health Care with the State Employees Association of North Carolina/SEIU Local 2008, told reporters today that he saw it happen in North Carolina this year.

To close a projected $1 billion budget gap, North Carolina legislators decided to make the state employee health care plan worse, moving it from a plan where employees pay 20% of the costs to a plan where they pay 30%. This was done under the guise of "workplace wellness." Those North Carolina employees who abstained from tobacco or met weight targets would be able to go back on their old 20% plan. Everyone else would have to use the new 30% plan.

The goal, as told to Stone by state legislators, was to cut costs, not help worker wellness.

And it gets worse. As Stone said:

The financial incentives aren't only for the employee abstains, they're for the entire family. So if one person in the family smokes or is overweight, the entire family has to use the more expensive health care plan.

I've had employees calling in telling me, "I already can't afford to pay for health care coverage. How can I pay for products to help me stop smoking or lose weight?"

The Senate bill vastly expands these provisions, allowing for as much as 50% variation in premiums, a staggering $2,412 per year for individuals and $6,688 per year for families. As Andrew Kurz, former chief financial officer of Wisconsin Blue Cross-Blue Shield, said:

Wall Street demands profits, and insurance companies provide them. This is a loophole they will drive a truck through. We got into this mess because insurers charged higher premiums to sick people. If you now charge lower premiums to healthy people, you get the same result.

By contrast, the House bill allows for research into these programs to find out what works - something that doesn't really exist now - and allows them to be incorporated into health plans in the Exchange only after scientific evidence has proved they can help people stay healthier without adversely impacting them.

The American Heart Association and hundreds of other patient advocates have sent a letter [pdf] to Congress urging them to close this loophole in the Senate bill and adopt the House language, and the issue is starting to get notice on the Hill.

As well it should. Stopping insurers from charging more based on health is one of the central promises of health reform. The Senate bill, as written, allows insurers a huge loophole to continue doing just that. We must hold them accountable, and this loophole must be fixed in conference as we finish reform right.