Washington Health Policy Week in Review

Washington Health Policy Week in Review is a weekly newsletter that offers selected stories from the daily newsletter CQ HealthBeat.

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OMB Reviewing Proposed Wellness Rule

By John Reichard, CQ HealthBeat Editor

November 16, 2012 -- A proposed regulation giving companies more power to vary premiums and other health care charges based on whether workers meet certain employee wellness program goals has reached the White House Office of Management and Budget—a signal that it might be published soon.

The proposal, which OMB has been reviewing since Nov. 9, has sparked a tug of war between the business community and consumer advocates over how much pressure employers should be able to put on overweight and other employees with unhealthy medical conditions to adopt healthier lifestyles.

In a rare victory for employers in the health care law (PL 111-148, PL 111-152), starting in 2014 companies are permitted to apply penalties or rewards of up to 30 percent of the total cost of their health coverage based on whether workers can achieve a specific wellness goal, such as a certain body mass index, or BMI, a particular blood glucose level, or a certain blood pressure.

In addition, the law empowers the Treasury and Health and Human Services secretaries to increase penalties or rewards to 50 percent.

Employers are hoping that the Obama administration won't try to restrict their flexibility to vary premiums in the proposed regulation.

"My hope is that the 30 percent break in premium will not be restricted," said Neil Trautwein, vice president of the National Retail Federation. "At the very least, I think it was a positive, and even a bipartisan, step forward to encourage greater participation in wellness activities," Trautwein said. "We don't want to see that turned back."

He added that "it's really an important goal toward keeping Americans healthier and spending less on health care and on health coverage."

Trautwein said the 30 percent standard could increase the number of wellness programs but added "they're already fairly widespread, and even in the retail world."

More employers are adopting workplace wellness programs, but most simply provide financial incentives to workers who participate in programs to quit smoking, manage their weight and exercise, according to a study earlier this year by JoAnn Volk and Sabrina Corlette of the Georgetown University Health Policy Institute.

However, wellness programs that require employees to meet certain standards might now become more attractive to employers seeking to cut costs, they said.

Employers who adopt such programs have the power not just to provide rewards if certain standards are met, but also to penalize workers if they fall short, they added.

"Employers can offer premium discounts, lower deductibles and waivers of cost-sharing requirements for employees who do well or, conversely, higher premiums, deductibles or other forms of higher cost-sharing for employees who don't meet the employer's goals," they said.

Volk said in an interview that she's watching the proposed rule to see if the premiums can go up as much as 30 percent or whether the increase will be up to 50 percent. The more premiums can rise, the greater the need for consumer protections, she said.

"If you're going to put a much higher percent of premium in play, that can be a bigger detriment for low- and moderate-income workers," she said. "Thirty percent of their premium could be cost prohibitive."

Volk and Corlette said it's important to establish safeguards to guard against programs that inappropriately punish workers in poor health or programs that are overly coercive.

Regulators should require programs to pay for services such as nutrition counseling, they said. Participants should have a reasonable time to meet program goals, and premiums should not be permitted to become unaffordable.

And safeguards should ensure that programs "do not serve as a subterfuge for health status discrimination or result in adverse selection against health insurance exchanges," they added.

In a consensus statement issued in July, organizations including patient advocacy groups urged that employers be barred from establishing financial incentives tied to whether or not an employee develops a certain illness.

"Instead, financial incentives should be tied only to health status factors that are modifiable for many individuals though changes in health behaviors," the statement said. As examples, it listed weight, cholesterol, blood pressure and tobacco use. The organizations included the American Cancer Society, the American Heart Association, and the American Diabetes Association.

The statement also noted that under current regulations governing financial incentives, an employer must offer a "reasonable alternative" to individuals for whom it would be unreasonably difficult to achieve a health standard because of a medical condition.

"We recommend that employers defer to the views of the individual's health care provider for setting and achieving a reasonable alternative standard," the groups advised federal officials.

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