BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 1636
AUTHOR: Monning
AMENDED: June 11, 2012
HEARING DATE: June 20, 2012
CONSULTANT: Trueworthy
SUBJECT : Health and wellness programs.
SUMMARY : Requires the Department of Managed Health Care (DMHC),
California Department of Insurance (CDI), California Health
Benefit Exchange (Exchange), and the California Department of
Public Health (DPH) to convene a special committee to review and
evaluate health and wellness incentive and rewards programs
offered by health care service plans, health insurers and
employers.
Existing law:
1.Provides for the regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene)
and health insurers by CDI under the Insurance Code.
2.Establishes DPH to protect and monitor public health and
regulate specified health care facilities.
3.Establishes under federal law, the Patient Protection
Affordability Care Act (ACA), which imposes various
requirements, some of which take effect on January 1, 2014, on
states, carriers, employers, and individuals regarding health
care coverage, including imposing new requirements on
individuals, employers, and health plans; restructuring the
private health insurance market; setting minimum standards for
health coverage; limiting the rating factors which can be used
to determine health insurance rates to age, geography, family
size, and tobacco-use; and providing financial assistance to
certain individuals and small employers.
4.Establishes the Exchange pursuant to the ACA to facilitate the
purchase of qualified health plans by qualified individuals
and qualified small employers by January 1, 2014.
5.Prohibits under the federal Health Insurance Portability and
Accountability Act of 1995 (HIPAA), issuers offering group
health insurance coverage from requiring any individual, as a
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condition of enrollment or continued enrollment under the
plan, to pay a premium or contribution which is greater than
such premium or contribution for a similarly situated
individual enrolled in the plan on the basis of any health
status-related factor; and prohibits this from being construed
to restrict the amount that an employer may be charged for
coverage under a group health plan, or to prevent an issuer
offering group health insurance coverage from establishing
premium discounts or rebates or modifying otherwise applicable
copayments or deductibles in return for adherence to programs
of health promotion and disease prevention.
6.Establishes, under the ACA, a program offered by an employer
designed to promote health or prevent disease that meets the
specified requirements. Wellness programs that do not
discount, rebate or reward for participation based on an
individual satisfying a standard related to health status are
permitted if all similarly situated individuals and specified
requirements are met. Wellness programs that do discount,
rebate or reward for participation based on an individual
satisfying a standard related to health status are permitted
if the reward does not exceed 30 percent of the cost of
employee-only coverage under the plan, if dependents can fully
participate, and if the wellness program is reasonably
designed to promote health or prevent disease, not overly
burdensome, not a subterfuge for discriminating based on a
health status factor, and not highly suspect in the method
chosen to promote health or prevent disease.
7.Requires, under the ACA, the Secretary of Health and Human
Services (HHS), in consultation with the Secretaries of the
Treasury and Labor, to establish a 10-state pilot program no
later than July 1, 2014. Participating states must apply the
wellness program provisions to health insurers in the
individual market.
This bill:
1.Requires DMHC, in collaboration with CDI, the Exchange, and
CDPH, to convene a special committee to review and evaluate
health and wellness incentive and rewards programs offered by
health care service plans, health insurers, and employers.
2.Requires the committee to focus on the study of programs that
provide incentives and rewards for enrollees, insureds, and
employees to become more engaged in their health care and to
make choices that support health promotion and wellness,
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including worksite wellness programs and programs that offer
or require health risk appraisals, screening services, smoking
cessation, health premium reductions, differential copayment
or coinsurance amounts, and cash payments related to health
promotion activities.
3.Requires the committee to evaluate these programs for
effectiveness based upon scientific evidence. Including to the
extent these programs result in discrimination based upon
income, age, gender, race, ethnicity, medical condition,
genetic information, claims experience, medical history,
evidence of insurability, or any other health status-related
factor.
4.Requires the committee to meet publicly and engage experts and
stakeholders in its deliberations.
5.Requires the committee members to include: a bioethicist, a
representative of the health insurance industry, a physician
expert in managing patients with chronic conditions, a
representative of consumers from low-income communities, a
representative of consumers from communities of color, a
health researcher with expertise in the impact of premium and
cost sharing on health care utilization, and an employer with
experience operating a nationally recognized workplace
wellness program.
6.Requires committee to meet no later than March 30, 2013.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, costs could range from $50,000 at the low end to over
$200,000 annually (Managed Care Fund) depending upon the makeup
of the committee, the depth and scientific rigor of the
evaluation performed, and the extent and type of stakeholder
engagement.
PRIOR VOTES :
Assembly Health: 13- 5
Assembly Appropriations:12- 5
Assembly Floor: 50- 27
COMMENTS :
1.Author's statement. Many people do not have access to
preventive health care. Often because of cost, people use
preventive services at about half the recommended rate. Yet
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chronic diseases, such as heart disease, cancer, and diabetes
- which are responsible for 7 of 10 deaths among Americans
each year and account for 75 percent of the nation's health
spending - often are preventable. Cost sharing (including
deductibles, coinsurance, or copayments) reduces the
likelihood that preventive services will be used.
California's rates of obesity, high blood pressure, diabetes,
and asthma in adults continue to increase. California's rates
of diabetes surpassed the national rates in 2009 with rates of
9.1 percent in California compared to 8.3 percent in the U.S.
California lags behind the nation on diabetes preventive care
measures.
Wellness incentive programs can be controversial. Prevention
advocates have differing perspectives. Many believe that
wellness incentive programs can be instrumental at controlling
the rise of chronic health conditions and their related costs.
Of particular concern is tying financial incentives for
behavior outcomes to health care premiums or deductibles.
Many fear that these programs are a subterfuge for
discrimination based on health status. There are also worries
among some that employers will hold employees and their
families accountable for unreasonable health metrics without
meaningful support. Additionally, a fairness concern exists
for some individuals who cannot make the lifestyle changes
necessary to achieve the necessary metrics because of genetics
or environmental factors. This bill has been introduced to
advance a public policy conversation in California about the
evidence basis for wellness incentive programs and to
determine if the wellness incentive provisions of the ACA
should be implemented in California at this time.
2.ACA and wellness. On March 23, 2010, President Obama signed
the ACA (Public Law
111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Public Law 111-152). Among other
provisions, the new law makes statutory changes affecting the
regulation of and payment for certain types of private health
insurance. The ACA codifies amended implementing regulations
of HIPAA related to wellness programs. These regulations
require the following standard-based benchmarks: (a) rewards
cannot exceed 20 percent of the cost of employee-only coverage
under the plan or 20 percent of the cost of family coverage if
applied to dependents; (b) a program must be "reasonably
designed" to promote health or disease; (c) employees must be
AB 1636 | Page
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given the opportunity to qualify for the reward at least once
per year; (d) all employees must have the opportunity to gain
the reward, or a "reasonable alternative standard" must be
available for an employee with a medical condition that would
make it unreasonably difficult to meet the standard; and (e)
the plan must disclose that a reasonable alternative standard
is available.
The ACA indicates that wellness programs do not require an
individual to satisfy a standard related to a health factor as
a condition for obtaining a reward, or those that do not offer
a reward are permitted as long as participation in the
programs is made available to all similarly situated
individuals. However, if any of the conditions for obtaining a
reward are based upon an individual meeting a certain standard
relating to a health factor, the program must meet additional
requirements, such as the reward must be capped at 30 percent
of the cost for the employee-only coverage under the plan
(this can be increased up to 50 percent at the discretion of
the Secretaries of the federal HHS, Labor, and Treasury
Departments.
3.Employer survey report. A 2011 Kaiser Family Foundation and
Health Research and Educational Trust annual survey of
employer health benefits found that 67 percent of companies
with 3 or more employees that offered health benefits also
offered at least one wellness program. Fifty-two percent also
offered wellness benefits to spouses or dependents of
employees. The larger the company, the more likely it was to
offer a wellness program; in fact, almost all companies with
1,000 or more employees offered one. Larger employers usually
run wellness programs themselves. For small companies,
wellness programs are typically run by the same firms that
administer the employer's health benefits plan or by another
entity referred to as a third-party administrator.
4.Wellness programs. Typical features of wellness programs
include health-risk assessments and screenings for high blood
pressure and cholesterol; behavior modification programs, such
as tobacco cessation, weight management, and exercise; health
education, including classes or referrals to online sites for
health advice; and changes in health policy brief workplace
wellness programs the work environment or provision of special
benefits to encourage exercise and healthy food choices, such
as subsidized health club memberships.
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According to the report Health Policy Brief: Workplace
Wellness Programs, a review of 36 peer-reviewed studies of
wellness programs in large firms found that average employer
medical costs fell $3.27 for every dollar spent on wellness
programs, and costs for days that employees were absent fell
an average of $2.73. Similarly, a 2005 meta-analysis of 56
published studies of health promotion programs at
organizations of all sizes resulted in an overall reduction of
about 25 percent in sick leave, health plan costs, and workers
compensation and disability costs.
5.Lack of evidence. A February 2012 Georgetown Health Policy
Institute report states that while most programs target
participation, a small but growing number of programs are
designed to target specific biometric outcomes and even more
plan to use standard-based programs in 2012. However, studies
suggest that financial rewards worth more than $450 have
little additional effect on rates of participation in wellness
programs, and according to surveys, the average employee
incentive is between $300 and $430 - nowhere near the 20
percent limit now allowed.
The Georgetown report notes that studies to evaluate the use
of financial incentives to change employees' behaviors are
inconclusive. Some studies have shown that financial
incentives can help employees meet certain wellness goals.
However, these studies are often limited by small numbers of
participants and lack of long-term data, and none of the
studies involved premium or cost-sharing discounts or
surcharges in employer-sponsored health care programs, which
would directly affect the cost of obtaining coverage or care
for certain workers. The report notes a premium incentive
program that has received attention from politicians and the
media - the Safeway Healthy Measures initiative, which has
only been in place since 2009, and there is no published data
about its effectiveness as an example. The grocery store
chain also implemented a range of cost containment strategies
at around the same time, and it is difficult to ascertain
whether the program's reported cost savings and employee
health outcomes can be attributed to the financial incentives
or to these other cost containment strategies.
6.Concerns with wellness programs. According to the report
Health Policy Brief: Workplace Wellness Programs, there is
widespread support among both employers and employees for
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wellness initiatives in the workplace. At the same time, there
is conflict over programs that tie rewards or penalties to
individuals achieving standards related to health status-and
especially over those arrangements that affect employee health
insurance premiums or cost-sharing amounts. Business groups
want employers to have maximum flexibility to design programs
with rewards or penalties that will encourage employees to not
only participate but also to achieve and maintain measurable
health status goals, such as tobacco cessation or reducing
body mass index. The report states business groups argue
individuals should bear responsibility for their health
behavior and lifestyle choices and that it is unfair to
penalize an employer's entire workforce with the medical costs
associated with preventable health conditions as well as the
costs of reduced productivity. Unions, consumer advocates, and
voluntary organizations such as the American Heart Association
are generally wary of wellness initiatives that provide
rewards or penalties based on meeting health status goals. The
report states consumer groups are concerned that, rather than
improving health, these approaches may simply shift heath care
costs from the healthy to the sick, undermining health
insurance reforms that prohibit consideration of health status
factors in determining insurance premium rates.
7.Related legislation. AB 1083 (Monning) establishes reforms in
the small group health insurance market to implement the ACA.
AB 1083 is pending on the Senate Floor.
SB 961 (Hernandez) and AB 1461 (Monning) establish reforms in
the individual health insurance market to update California
laws and implement the ACA. SB 961 is pending in the Assembly
Health Committee and AB 1461 is pending in Senate Health
Committee.
8.Prior legislation. SB 900 (Alquist), Chapter 659, Statutes of
2010, and AB 1602 (John A. Pérez) Chapter 655, Statutes of
2010, established the California Health Benefit Exchange.
AB 1 X1 (Nunez) of 2007 would have enacted the Health Care
Security and Cost Reduction Act, a comprehensive health reform
proposal including provisions to require Health Action
Incentive Rewards programs in group health coverage and the
Medi-Cal program. AB 1 X1 failed passage in the Senate Health
Committee.
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9.Support. American Cancer Society writes that AB 1636 will
help facilitate an important conversation about the need to
identify responsible, effective and scientifically proven
wellness programs. Health Access California is deeply
concerned that most versions of wellness incentives are
backdoor underwriting based on health status - and the
eagerness of some insurers to have the opportunity to rate
based on so-called wellness incentives further deepens their
concerns. The American Diabetes Association writes that they
support evidence-based wellness program but strongly oppose
tying premium ratings to achieving health goals. Small
Business Majority writes that this bill will help provide data
that small employers and other stakeholders need to make
evidence-based decisions about workplace wellness programs and
incentives. Supporters contend that without this bill,
unevaluated programs could be integrated into health coverage
programs.
10.Opposition. Safeway writes in opposition to the bill that it
is unnecessary to divert scarce state funds away from direct
services to review and evaluate wellness programs that work
and are allowed under federal law. QUALCOMM writes in
opposition that the committee created under this bill will
take an advocacy role in recommending legislation that would
mandate what types of wellness incentive programs a business
could offer.
11.Author Amendments.
a. Committee makeup. The author proposes to add to the
make-up of the committee one additional employer with
experience in operating a nationally recognized worksite
wellness program and one chronic disease patient advocate.
b. Report deadline. The author proposes to require a
report on the committee's findings be submitted to the
Senate and Assembly Health Committees no later than March
30, 2014.
SUPPORT AND OPPOSITION :
Support: AARP
American Cancer Society, California Division
American Diabetes Association
American Federation of State, County and Municipal
Employees, AFL-CIO
American Heart Association
California Academy of Physician Assistants
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California Arthritis Foundation Council
California Black Health Network
California Chiropractic Association
California Pan-Ethnic Health Network
California Physical Therapy Association
Consumers Union
The Greenlining Institute
Health Access California
LifeLong Medical Care
Prevention Institute
Small Business Majority
Oppose: California Chamber of Commerce
QUALCOMM
Safeway
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