BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 189
AUTHOR: Monning
AMMENDED: April 22, 2013
HEARING DATE: May 1, 2013
CONSULTANT: Valderrama
SUBJECT : Health Care Coverage: wellness programs.
SUMMARY : Prohibits a health care service plan or health insurer
(collectively referred to as carriers) from offering a wellness
program in connection with a group health plan contract or
insurance policy or offering an incentive or reward based on
adherence to a wellness program unless specified requirements
are satisfied.
Existing federal law:
1.Establishes, 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.
2.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
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.
Continued---
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3.Permits, 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.
4.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.
Existing state law:
1.Provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene) and health insurers by
the California Department of Insurance (CDI) under the
Insurance Code.
2.Requires carriers to file specified rate information for
individual and small group coverage at least 60 days prior to
implementing any rate change, as specified. Requires the
filings for large group contracts only in the case of
unreasonable rate increases, as defined by the ACA, prior to
implementing any such rate change.
3.Allows the CalPERS Board of Administration to adjust premiums
as part of as part of health promotion and disease management
programs.
This bill:
1.Prohibits a carrier from offering a wellness program in
connection with a group health plan contract or health
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insurance policy (collectively referred to as products) or
offering an incentive or reward based on adherence to a
wellness program unless all of the following requirements are
satisfied:
a. The program is reasonably designed to promote health or
prevent disease, is not subterfuge for discrimination based
on health status, does not lead to cost shifting, and is
not highly suspect in the method chosen to promote health
or prevent disease.
b. The incentive or reward is not in the form of a discount
on, or a rebate of, a premium, deductible, copayment or
coinsurance.
c. Participation in the program is voluntary and
offered to all similarly situated individuals.
d. Receipt of an incentive or reward is not conditioned on
an individual satisfying a standard that is related to a
health status factor. Deems the following wellness
programs to satisfy this requirement:
i. A program that reimburses membership in a fitness
center.
ii. A diagnostic testing program that provides a reward
based on participation and not on outcomes.
iii. A program that provides or rewards individuals for
attending a periodic health education seminar, so long as
it is not related to a particular health condition or
health status factor.
e. Reasonable accommodation is provided for individuals
with disabilities who seek to voluntarily participate in
the program.
f. A reasonably available alternative is provided to
individuals who seek to voluntarily participate in the
program but are unable to participate due to occupational
requirements, a medical condition, or other hardship.
g. All materials related to the program disclose the
availability of the accommodations set forth in "e." and
"f."
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h. The program assesses the cultural competency needs of
the health plan's population in its design and provides
language assistance for limited English-speaking
individuals.
i. The program does not result in an increase in premium
for the product as demonstrated through rate review.
j. The amount of the reward does not exceed the amounts
determined to be unreasonable as determined by regulation
and consultation between the director of DMHC and the
Insurance Commissioner.
aa. The incentive or reward does not exceed the percentage
of the cost of coverage under the product identified in the
federal Public Health Service Act or regulations adopted
thereunder.
2.Allows wellness programs established prior to January 1, 2014
to be continued beyond the effective date of this bill if the
program complied with applicable laws in effect immediately
prior to that date for as long as those laws remained in
effect.
3.Requires, by March 1, 2019, DMHC and CDI to submit a report to
the Legislature on the operations of wellness programs.
4.Defines "wellness programs" as a program designed to promote
health or prevent disease.
5. Establishes a sunset date of January 1, 2020, unless a later
enacted statute deletes or extends the date.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. The ACA includes provisions that emphasize
health promotion and wellness and authorize participation based
wellness incentive programs. Emphasis on prevention in the ACA,
along with efforts to keep premium costs down, will likely
accelerate the use of wellness programs provided through the group
health insurance market. While the ACA and federal regulations
provide guidelines on the use of wellness programs, many believe
they do not offer adequate consumer protection. There is growing
concern among consumer advocates that wellness programs could
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become a subterfuge for discrimination against those with
pre-existing conditions. SB 189 institutes protections to prevent
these unintended consequences and ensures wellness programs are
accessible, beneficial, and fair to all Californians.
2.Escalating costs of health care. For many years, health care
expenditures have outpaced inflation. The United States spends
a larger share of its gross domestic product (GDP) on health
care than any other major industrialized country. According to
CMS, expenditures for health care represent 18 percent of the
nation's GDP in 2010. In 1960, health care expenditures
accounted for about five percent of the GDP. By 2019, CMS
projects that health care expenditures will account for 19
percent of GDP. As costs have risen, health care coverage has
become more unaffordable. The 2010 California Employer Health
Benefits Survey (CEHBS) found health insurance premiums
increased 8.1 percent in California in 2010. Other key
findings from CEHBS include:
a. Since 2002, premiums have increased 134.4 percent, more
than 5 times the 25.4 percent rise in California's overall
inflation rate;
b. Twenty-eight percent of California firms either reduced
benefits or increased cost sharing for employees as a
result of the economic downturn in 2010, up considerably
from the fifteen percent who did so in 2009; and
c. Cost sharing may continue to increase for California
workers. Just under half of large firms (200 or more
workers) are "very" or "somewhat" likely to increase the
amount workers' pay for coinsurance or copayments in the
next year. Sixty-eight percent are "very" or "somewhat"
likely to raise the amount workers' pay toward premiums.
1.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
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designed" to promote health or disease; (c) employees must be
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.
2.Prevalence and usefulness of wellness programs. 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.
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
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compensation and disability costs.
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
3.Limited amount of quality data on wellness. According to a
2012 RAND corp. study entitled A Review of the U.S. Workplace
Wellness Market, wellness programs have achieved a high
penetration in the United States, and most observers expect
that uptake will continue to increase, especially as the ACA
will increase employment-based coverage and promotes workplace
wellness programs through numerous provisions. At this point
in time, there is insufficient objective evidence to
definitively assess the impact of workplace wellness on health
outcomes and cost. While employer sponsors are generally
satisfied with the results, more than half stated in a recent
survey that they did not know their program's return on
investment. The peer-reviewed literature, while mostly
positive, covers only a tiny proportion of the universe of
programs, raising questions about the generalizability of the
reported findings. The use of incentives to promote employee
engagement, while increasingly popular, remains poorly
understood, and it is not clear how the type (e.g., cash or
noncash), direction (reward versus penalty), and strength of
incentives are related to employee engagement and outcomes.
There are also no data on potential unintended effects, such
as discrimination against employees based on their health or
health behaviors.
4.CalPERS. Last year, CalPERS sponsored AB 2142 (Furutani),
Chapter 445, Statutes of 2012, that, among other things,
authorized the CalPERS Board to adjust premium as part of
health promotion and disease management programs. When arguing
the need for the bill CalPERS said, wellness promotion and
prevention initiatives are included as part of the ACA as a
means to constrain the continuing growth trend of
medical-treatment spending and costs. Wellness and disease
management incentives improve participants' health outcomes by
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increasing participation in wellness programs to prevent
disease, and in disease management programs to slow or halt
disease progression. While CalPERS does not currently have a
position on this bill, staff has indicated they believe the
bill to be in conflict with law established pursuant to AB
2142 (Furutani).
5. CHBRP. Pursuant to AB 1996 (Thomson), Chapter 795, Statutes
of 2002, and SB 1704 (Kuehl), Chapter 684, Statutes of 2006,
the University of California is requested to assess
legislation proposing a mandated benefit or service, or the
repeal of a mandated benefit or service, through CHBRP. CHBRP
prepares a written analysis of the public health, medical, and
economic impacts of such measures. In this instance, CHBRP was
unable to complete an analysis on the public health and
economic impacts of this measure. The following are
highlights from the CHBRP analysis of medical effectiveness
relative to this bill:
Medical Effectiveness
The medical effectiveness review presents findings from
randomized controlled trials (RCTs) of work-based wellness
programs that address two topics pertinent to SB 189:
a. Effects of work-based wellness programs on health
behaviors and health status
Health behaviors:
i. There is clear and convincing evidence from RCTs
that participating in work-based wellness programs that
address tobacco cessation increases the likelihood of
abstinence from smoking.
ii. The preponderance of evidence from RCTs suggests
that participating in work-based wellness programs that
address alcohol use reduces the frequency of alcohol use.
iii. The preponderance of evidence from RCTs suggests
that participation in work-based wellness programs is
associated with lower intake of fats, but findings for
other dietary outcomes, such as intake of fruit and
vegetables, are ambiguous.
iv. Findings from RCTs regarding the impact of
participating in work-based wellness programs on
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frequency or amount of physical activity are ambiguous.
Health status:
i. Findings from RCTs regarding the impact of
participating in work-based wellness programs on body
mass index and other indicators used to identify obesity
are ambiguous.
ii. The preponderance of evidence from RCTs suggests
that participating in work-based wellness programs does
not lower the following risk factors for disease: blood
pressure, blood sugar, or cholesterol.
iii. Findings from RCTs regarding the effect of
participating in work-based wellness programs on stress
level are ambiguous.
a. Effects of financial incentives on participants' health
behaviors and health status
i. CHBRP identified no RCTs that have assessed the
impact of financial incentives linked to premiums or cost
sharing for health insurance on participation in
work-based wellness programs or the health behaviors or
health status of persons who participate in work-based
wellness programs.
ii. The preponderance of evidence from two RCTs suggests
that financial incentives other than those linked to
premiums or cost sharing increase participation in
work-based wellness programs, but there is insufficient
evidence to assess the relative effectiveness of
different types of financial incentives.
iii. Most RCTs on the impact of financial incentives
other than those linked to premiums or cost sharing on
the health behaviors and health status of persons
participating in work-based wellness programs have
addressed tobacco cessation.
iv. The preponderance of evidence suggests that
work-based tobacco cessation programs that provide
financial incentives for abstaining from smoking are no
more effective than programs that do not provide
financial incentives.
1.Arguments in support. Consumers Union states that SB 189
establishes sound requirements that must be met before a
carrier can establish a wellness program. The requirements in
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the bill are important to ensure that wellness programs are
designed to promote health or prevent disease, and do not
result in discrimination. In arguing for the need for this
bill, Western Center on Law & Poverty maintains that it can be
difficult for working families to participate in wellness
programs due to costs, schedules, lack of child care,
transportation, and necessary equipment but this bill takes
into account hardships individuals might face trying to
improve their health. The American Cancer Society Cancer
Action Network says they are all too aware of the countless
cancer patients and survivors that have been discriminated
against due to pre-existing conditions and are pleased to see
SB 189 takes the necessary steps so that wellness programs are
available, beneficial, and fair to all Californians.
2.Arguments in opposition. The California Association of Health
Plans (CAHP) states that wellness incentives received a big
boost in the ACA, which expanded upon existing federal
regulations allowing employers to incentivize employees to
participate in wellness programs. These laws and regulations
expressly allow employers to use insurance based wellness
solutions. CAHP believes that California should allow the
incentives in the ACA to prevail in the effort to improve
health outcomes and control health cost. The California
Association of Physician Groups (CAPG) says that under SB 189
the safe harbor for rewards-style programs provides that the
health education seminar can't be tied to the employee's
specific health condition. Such a policy would unravel
current chronic disease management programs in place in our
CAPG member physician groups, where they are linked to
incentives. The Bay Area Council argues Companies around the
state are finding these programs - most often activities-based
incentives - are effective tools to spur employees' engagement
in their own health, create a more productive workforce and
ultimately drive down healthcare costs for employers through
better employee health. This bill would also impact small
businesses inequitably, allowing large self-insured companies
to continue reaping the benefits of wellness incentive
programs while outlawing these same programs for employers who
purchase coverage through insurance carriers.
10. Policy comments:
a) A central policy question posed in this bill is whether
the potential harm that may result from wellness programs
being misused by unscrupulous actors outweighs the
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potential benefit that these programs could generate for
workers and employers.
Rather than prohibit the use of a discount or rebate on a
premium, deductible, copayment or coinsurance, the author
may wish to consider whether it may be more appropriate to
put a limit on the size of the discount.
b) The bill prohibits wellness programs that lead to "cost
shifting", however, the term "cost shifting" is left
undefined. It's unclear whether the author means a cost
shift from employer to employee or from one employee to
another. The author may wish to define the term "cost
shifting" in the bill.
c) It seems reasonable to have a standard of proof that a
wellness program is effective in order to be able to
continue the program, but the rate review process may not
be the appropriate avenue to make that determination,
considering that the large group market is not currently
subjected to rate review.
d) The bill lists three examples of wellness programs that
are deemed to satisfy the requirement that an incentive or
reward for participation in the program not be conditioned
on health status factor. By listing only those three
programs it could be read to allow only those program
designs. The author has indicated that was not his intent
and may wish to clarify that section.
e) The bill allows for health education seminars, so long
as it is not related to a particular health condition or
health status factor. Given that chronic conditions drive
large portions of health care spending, the author may wish
to consider whether it might be beneficial to allow
seminars aimed at controlling the health conditions that
are disproportionately impacting cost increases.
f) The bill attempts to allow existing wellness programs to
operate after the effective date of this bill if the
program is operating within the confines of existing law.
However, the phrase "for as long as those laws remain in
effect" is confusing since existing law is subject to
change and in fact, this bill would alter existing law.
The author should consider striking that phrase.
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SUPPORT AND OPPOSITION :
Support: American Cancer Society Cancer Action Network
American Diabetes Association
American Federation of State, County and Municipal
Employees, AFL-CIO
California Black Health Network
California Chiropractic Association
California Chronic Care Coalition
California Immigrant Policy Center
California Pan-Ethnic Health Network
California Rural Legal Assistance Foundation
ConsumersUnion
Greenlining Institute
Prevention Institute
Western Center on Law and Poverty
Oppose: Association of California Life and Health Insurance
Companies
Bay Area Council
California Association of Health Plans
California Association of Health Underwriters
California Association of Physician Groups
California Chamber of Commerce
California Grocers Association
California Retailers Association
CSAC Excess Insurance Authority
Safeway Inc.
SeeChange Health Insurance
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