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Various industry insiders were interviewed for this report. They examine the current healthcare debate taking place. You can read the raw interviews by visiting the Healthcare Reform section. Check out the online healthcare reform debate book as well.
- Making health insurance like auto insurance
- Saving billions?
- Avoid "big brother"
Very few people would deliberately smash their car into a tree. Not just to avoid mangling themselves, but also because of the way auto insurance is set up ... it's incentivized.
That means auto insurance rates go up or down according to drivers' behavior. If they run into a tree or otherwise are at fault in an accident, their rates will go up. If they behave well and don't have accidents, their rates either stay the same or go down. They have an economic incentive to drive safely.
Not so with health insurance. If you grab that donut or leave it on the plate, if you show up for a yearly checkup or don't, if you get a mammogram or prostrate exam or don't, it doesn't matter to your insurance company. Your rates won't change according to your behavior because health insurance ... for almost all of America ... isn't incentivized, although that's starting to change ... and fast.
"The issue of personal responsibility ... and specifically if “healthier” individuals should receive discounts on health insurance ... is one of the hottest in healthcare," says Dr. Ron Geraty, a medical doctor who is CEO of health management company Alere.
In fact, it has become part of this nation's health care reform debate. Advocates urge widespread adoption of this method as a way to save massive amounts of money, get preventive health started as a way of life, and make people actively responsible for making their physical well-being as good as it can be.
"It is the only true way to control the consumption of health care while retaining choice in our system," says Matt Modleski, vice president of Stovall Grainger Modleski, Inc., health care consultants.
"Someone is going to control the consumption of health care in our country. It’s either going to be an educated population through meaningfully incented reforms of insurance, care delivery models and reimbursement models or it’s going to be done by the government. I hope we choose the first option."
Here's a look at how such a plan would work, and what its pluses and minuses would be.
How It Works
Frederic S. Goldstein is president of U.S. Preventive Medicine, Inc. One of his clients, Ed Voyles, a 340-person automotive group in the Atlanta area, is using an incentive model.
"The Ed Voyles employee enrolls in the program and completes an online health risk appraisal, answering questions about lifestyle and family history," Goldstein says.
"He or she then receives an on-site blood test and has biometric measurements, such as height, weight and blood pressure, taken. Results are posted in a personal health record, along with the Health Risk Appraisal results.
"The member receives a customized Personal Prevention Plan, which identifies top health and lifestyle risks and provides step-by-step recommendations for lowering those. A physician reviews all results and provides written recommendations, including suggested screenings and exams. The member also receives a lab result summary and a review of the preventive benefits covered by the company health plan. Additionally, the member receives a personalized, easy-to-understand Prevention Plan Report, along with a customized Health Dashboard on The Prevention Plan web site."
That's just the beginning. After that, "RN Advocates provide personalized coaching, health education and encouragement every step of the way, day or night. Action programs address key health areas such as nutrition, weight management, smoking cessation, depression and lowering cholesterol. Members can access a library of health news, how-to videos and medical animations."
Now for the payoff ... "If the member enrolls in the program, completes a health assessment and takes a blood test, he or she receives a $300 reduction on the health insurance co-payment. The member can earn an additional $300 reduction by being a nonsmoker or committing to a smoking cessation program. The program is structured as a reward, not a punishment. However, an employee who reverts to smoking is again required to pay the additional $300 co-payment, which may feel like a punishment. So far, the program is working, with a 68 percent participation rate and a reduction in smoking from 20 to 14 percent of employees."
Alere also is switching to this method.
"We believe so fully in this concept that as a company, we are putting our money where our mouth is and changing our own benefit design," Dr. Geraty says.
"We are adding a Consumer Driven Health Plan (CDHP) option that gives our employees $500 to spend on preventive healthcare benefits and that has a deductible of $2,000. The premium for this plan is 40 percent lower than the other plans we offer.
"The incentive for employees is that 'if I stay healthy, I can save considerable dollars.' We do have criteria for participating ... employees must have a BMI of 30 or less and be nonsmokers. However, those who do not meet one or both of the requirements can participate as long as they are enrolled in weight-loss and/or smoking cessation programs."
BMI means Body Mass Index, a measure of body fat based on height and weight.
The Advantages
1) It's human nature that we need a push to practice good health habits when so often it's easier not to.
"Studies show that many people don’t see their doctors when they should and don’t take their medications like they should ... some don’t even fill their prescriptions at all," says Michael Nadeau, president and chief executive officer of Viverae, a national provider of comprehensive health management solutions.
"Then, when they do need medical care, they need a lot more of it, and at a much higher cost. If people aren’t willing to help themselves stay as healthy as they can, it leaves the rest of us asking, 'Why should we have to pay so much more because others won’t take personal responsibility?' ”
Modleski: "Wellness and preventative care do have to be forced in the current environment because there are no consequences for poor behavior in today’s system. The data I’ve looked at show that most Americans are more incented by financial incentives than true 'health' incentives. Go back to the auto insurance model for a moment. Why don’t people drive their cars at 100 mph (OK, 85, just to take the safety issue off the table)? For the most part, they are afraid of the fines and subsequent insurance increases if they are caught. A poor lipid panel is 'being caught speeding,' we just don’t have meaningful consequences."
Incentives by themselves aren't enough; an organized system is needed to ensure compliance.
Goldstein: "Motivation is a critical issue in preventive health care. We all know we should take a healthy walk, but sometimes we choose to stay on the couch. This is why a combination of personalized health coaching and incentives plays a significant role in improving behavior."
Nadeau: "The more people who participate in workplace wellness programs, the harder it will be for the ones who don’t want to play to sit on the sidelines and turn their backs on their colleagues."
2) Instead of a reactive system ... waiting for a health problem to get painful enough to force us to get treatment ... incentivized plans would be proactive and seek through preventive care to take care of these problems early.
"The increase of people with co-morbid (multiple) conditions is on the rise because many do not adhere to standards of care and treatment for their primary disease," says Ernest Youngblood, president and CEO of NavigatorMD, which provides software for companies to create incentivized health care plans.
"For example, diabetics who do not control their glucose levels often develop heart and cardiovascular diseases. The number of people who have uncontrolled hypertension is very high. This lack of control ultimately leads to costly disease treatments as many organs are affected by chronic high blood pressure."
Goldstein: "Since group health insurance rates may be based on risk, it makes sense to encourage healthy behaviors. Members who follow a clinically based preventive health care program are less likely to develop chronic conditions and, therefore, less likely to trigger health insurance rate increases."
The key to this is dealing with major, chronic diseases such as cancer, diabetes and heart conditions.
"More than 63 percent of health care cost increases over the past five years are due to chronic illnesses," says Dr. Geraty.
"We can’t negate the influence that lifestyle choices and behavior have on health. There is some interesting data attributed to the Department of Health and Human Resources that we think help to really highlight the role of choice in the onset of chronic illnesses. For every 100 employees . . .
- 60 are sedentary
- 25 smoke
- 10 have diabetes
- 50 have high cholesterol
- 24 have high blood pressure
- 27 have active cardiac disease
"It’s estimated that a significant percentage of those employees have healthcare expenditures attributable to preventable illness and some 40 percent have healthcare expenditures attributable to modifiable risk. These are all costs that can be lowered or averted through an emphasis on wellness and prevention and the implementation of targeted healthcare programs."
3) The result could be billions and billions of dollars in cost savings.
"With a more incentive-based health insurance system, I feel we would absolutely see an overall reduction in costs for the U.S. health care system," Nadeau says.
"Depending on the studies, anywhere from half to three-quarters of all health care costs are avoidable if individuals took more responsibility for healthier living and took appropriate care of medical needs. Of course, no one can truly force someone to do something they don’t want to do. But we can set responsible, meaningful cost levels so that the system isn’t subsidizing those who have poor health behaviors."
Youngblood: "Yes, absolutely there will be overall costs savings for the U.S. health care system! Unfortunately, most CEO's, CFO's and HR people of health care plans do not know how many of their plan members practice good health habits and how many are responsible for undergoing prevention screenings. Most C-Suite personnel do not know how many of their plan members with acute or chronic conditions adhere to taking their prescribed prescriptions on a regular basis as directed by their physician(s). Most do not know what costs could have been prevented or reduced with each individual's taking greater responsibility for their health."
Goldstein: "Clinically based prevention programs can produce dramatic savings for a national health care system. The United States would save hundreds of billions annually in the next few years and up to a trillion annually by the 2020s if all 300 million Americans were covered in The Prevention Plan. That is not accounting for the increased productivity of a healthier workforce, which would make U.S. businesses more competitive in the global marketplace. More importantly, hundreds of thousands of lives would be saved and people would have a better quality of life.
"The United States can no longer afford a system where 70 percent of all U.S. deaths and 80 percent of U.S. health care costs stem from the same five preventable chronic conditions. Providing Americans with a program of prevention, early disease detection and chronic condition management could save billions by avoiding expensive medical treatment and improving worker productivity. The only way to truly fix our health care system is to deploy integrated clinical preventive medicine guidelines for primary, secondary and tertiary prevention. Our government must serve as the catalyst for a health care paradigm shift from reactive to proactive care."
Safeway is the most prominent national company to use an incentivized health insurance plan.
"A handful of employers have asked us about plans where the employee has to have a healthy body-mass index, blood pressure, cholesterol levels, etc., in order to receive the health insurance reward," Nadeau says.
"These kinds of plans have been around for several years, but the majority of employers we’ve talked to have been reluctant to begin this type of requirement as many feel it seems too much like 'big brother.' Now, as companies see more large, well-known employers like Safeway showing that these plans can work ... and work well ... Viverae expects to see more employers move in that direction."
Modleski provided this link to a Wall Street Journal op-ed article by Safeway CEO Steven A. Burd discussing his company's program.
In it, Burd used the auto insurance analogy ... "Safeway has done nothing more than borrow from it. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Stated somewhat differently, the auto insurance industry has long recognized the role of personal responsibility."
Safeway's plan, begun in 2005, is voluntary and covers 74 percent of the part of its workforce that's nonunion. The company tests employees on four health behaviors ... tobacco usage, weight, blood pressure and cholesterol. "If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families."
The result? "During this four-year period, we have kept our per capita health care costs flat while most American companies' costs have increased 38 percent."
He said obesity and smoking rates of the employees "are roughly 70 percent of the national average."
Disadvantages and Difficulties
1) There's an initial cost for companies.
"Obviously, removing economic barriers by lowering co-pays on prescriptions and for office visits, lab tests, and other generally low cost tests to monitor and treat chronic conditions and preventive screenings is a higher initial cost to the plan," Youngblood says.
"However, the added cost for these procedures is a fraction of the costs of catastrophic diseases. Moreover, Price WaterHouse estimates that the cost of the loss of productivity is two to four times the cost of the health care plan due to absenteeism, short and long term disability, and generally not being with it on the job because of the physical and physiological effects of poorly treated disease. Improved health increases productivity."
2) The genetic factor.
"There is the problem of how to determine true genetic disposition for certain conditions vs. poor behavior," Modleski says. "Many people would want to claim genetic disposition for certain ailments (and some rightfully so) and so there would be difficulty in establishing rates based purely on behaviors. It is not an insurmountable problem, but it would be a challenge to be solved."
3) The privacy factor.
Goldstein: "Strong employee participation is key to realizing the benefits of preventive health care. While proactive communication and creative incentives encourage participation, companies must also address a critical issue ... employee resistance to sharing sensitive health information. Employees resist revealing personal health information to their insurance carrier for fear that it will be used to raise rates or affect eligibility. They also feel uncomfortable sharing sensitive health information with another employee, particularly someone they may interact with during the workday. Because this information is required to assess the individual’s baseline health and, therefore, critical to developing an effective wellness program, ensuring privacy and independence from employers and insurance providers is essential."
4) Set the plan up right ... reward effort, not outcome.
Nadeau: "We have to be careful not to go too far ... there is always going to be medical care that people need. Some health care is going to be expensive, and it may not be avoidable just because you’re generally living a healthy lifestyle. After all, people break bones, get in car accidents and have genetic inclinations toward certain diseases, so the disadvantages would come up if we tried to make incentivized health policies do more than they really can."
Dr. Geraty: "The issue is not entirely black and white. Should people with illnesses or diseases caused by genetics or environmental factors be penalized for their conditions? What about the overweight individual making a conscious effort to change? We believe that if you reward people only for results, you may be penalizing people who don’t have the ability to achieve positive health results. Therefore we think a better approach is to reward effort ... specifically to provide incentives for those who participate in healthcare programs proven to improve outcomes."
Goldstein: "Incentives must be tied to participation and adherence to the prevention plan, not outcomes. No individual should be penalized for getting sick."
Acknowledgment
This chapter was inspired by a book by Jeff Margolis called "The Information Cure." Jeff is the founder, chairman and CEO of the TriZetto Group, a healthcare information technology company.
As such, and sitting on various medical boards, he knows the system from the top down. He also knows it from the bottom up as a sufferer of Crohn's disease who has endured seven surgical operations including the removal of his colon.
He notes that in the current system, "there is often little connection between the choices consumers make and how much they pay for healthcare. Your insurance premium amount is the same whether you follow evidence-based guidelines for weight and exercise or spend your days on the couch eating donuts."
He believes in incentivized, value-based benefits ... "benefits designed to encourage consumers to make choices that scientifically have been shown to lead to healthier outcomes.
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