Wellness Based Premiums, a Question of Fairness?

Friday, September 09, 2011

Historically, employees within the same covered health care group paid the same premiums as their cohorts for the same plan and same options. The risk of health care was shared equally among all cohorts regardless of their health, life style or the likelihood of them requiring medical care. Early forms for risk sharing, i.e., insurance, dates from the early Chinese, Babylonian, Phoenician, Greek, and Roman civilizations to cover trade and other unforeseen events. More modern concepts of “group” risk sharing dates from the Craft Guilds formed in the Middle Ages which often provided for the “mutual aid” of their members. Among the benefits of being a craft guild member were; care during periods of sickness, burials, and the care of orphaned children. Later, the concept of mutual aid morphed into friendly and benevolent societies, as well as fraternal organizations. These “societies” were often focused on common financial, social, religious or political affiliations; rather than a common skill, craft or profession.

The Group Concept is a rather straight forward proposition, each member within the group shares in the collective risk of the group by paying a small proportion of the expected loss. However, for the Group Concept to work, it requires groups with hundreds, if not thousands of members, i.e., in the case of health and welfare benefits, a large organization. Since the risk is spread over many individuals, the cost for each individual in the form of premiums is relatively small compared to the risk. Consider the risk illness associated with the common cold, the likelihood of having a cold is maybe 1-2 times per year and the risk of loss is less than $100 per occurrence. However, now consider a major medical procedure such as a Coronary Artery Bypass Graft Surgery. Costs can easy range from $75,000 to over $150,000; most individuals are unable to afford the risk of such a financial loss.

So, is it fair to have one group premium rates for members with healthy life styles vs. other rates for those who are smokers, obese, drink excessively, use illegal drugs, participant in hazardous hobbies or fail to exercise? As organizations and governments struggle with efforts to provide and maintain affordable health care, the concept of rewarding healthy life styles while punishing unhealthy life styles is emerging as a means to modify personal behavior. That reward, outlined in the 2010 Patient Protection and Affordable Care Act (P.L. 111-148) permits employers to offer employees premium discounts of up to 30% of the cost of coverage for participating in a wellness program and/or meeting certain health-related standards. The punishment is in the form of paying the full group premium rates for those members who are unwilling or unable to obtain and/or maintain healthy life styles.

Sounds extremely unfair! However, for those members who are physically unable to participate in a wellness program and/or meet certain health-related standards, there are alternatives available which would allow them to earn the same rewards. Thus, only one group is left, those members who are unwilling to take any action on their part to even modestly improve their own well being. They have elected by their inaction to continue to smoke, eat and drink excessively, use illegal drugs, participant in hazardous hobbies and/or maintain a sedentary life style.

As such, have they not accepted, by their unwillingness to take steps to improve their health, the fact that their lifestyles will incur a greater degree of health care now and possibly in the future?