BILL ANALYSIS �
AB 1636
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Date of Hearing: April 10, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1636 (Monning) - As Introduced: February 9, 2012
SUBJECT : Health and wellness programs.
SUMMARY : Requires the Department of Managed Health Care (DMHC),
in collaboration with the California Department of Insurance
(CDI), the California Health Benefit Exchange (Exchange), and
the California Department of Public Health (DPH) to convene a
special committee (committee) to review and evaluate health and
wellness incentive and rewards programs offered by health care
service plans (health plans), health insurers, and employers.
Requires the first meeting of the committee to be conducted by
March 30, 2013. Specifically, this bill :
1)Requires the DMHC, in collaboration with the CDI, the
Exchange, and DPH, to convene a committee to review and
evaluate health and wellness incentive and rewards programs
offered by health 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 make
choices that support health promotion and wellness, 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, and examine the
extent to which these programs may 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, with the first meeting to
be conducted no later than March 30, 2013.
EXISTING LAW :
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1)Establishes DMHC to regulate health plans; CDI to regulate
health insurers, DPH to protect and monitor public health and
regulate specified health care facilities; and the Exchange to
compare and make available through selective contracting
health coverage to individuals and small businesses as
authorized under the federal Patient Protection and Affordable
Care Act (ACA).
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 indicates that this shall not be
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.
3)Establishes the ACA, which among other provisions, imposes new
requirements on individuals, employers, and health plans;
restructures the private health insurance market; sets minimum
standards for health coverage; limits the rating factors which
can be used to determine health insurance rates to age,
geography, family size, and tobacco-use; and, provides
financial assistance to certain individuals and small
employers.
4)Establishes under the ACA a program of health promotion or
disease prevention to be a program offered by an employer that
is 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% of the cost of employee-only
coverage under the plan, if dependents can fully participate,
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the wellness program is reasonably designed to promote health
or prevent disease, is not overly burdensome, a subterfuge for
discriminating based on a health status factor, and is not
highly suspect in the method chosen to promote health or
prevent disease.
5)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.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, federal health
reform includes many provisions emphasizing health promotion
and wellness including requirements that health plans and
insurers (collectively issuers) cover certain preventive
services without cost sharing. 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
chronic diseases, such as heart disease, cancer, and diabetes
- which are responsible for seven of 10 deaths among Americans
each year and account for 75% 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. The ACA prohibits issuers
selling insurance products in the individual and small group
markets from rating premiums based on health status, but
permits premiums to vary for tobacco use (by no more than a
1.5 to 1 ratio) and specified wellness programs with rewards
capped at 30% of the cost of employee coverage if certain
health factor standards are met. While wellness incentive
programs can be instrumental in controlling the rise of
chronic health conditions and their associated costs, it is
important to ensure that these programs are not subterfuge for
discrimination based on health status. In administering such
programs, participants must not be held to unreasonable
standards and they must be given reasonable opportunities to
achieve their health care objectives. Wellness incentive
programs should not result in financial barriers that prevent
participants from accessing the health care needed to manage
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chronic conditions. The author believes this bill is
necessary to advance a public policy conversation in
California about the evidence basis for wellness incentive
programs tied to health insurance and to determine if the
wellness incentive provisions in the ACA should be implemented
in California.
2)BACKGROUND . 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. Regulations require the following standard-based
benchmarks: a) Rewards cannot exceed 20% of the cost of
employee-only coverage under the plan or 20% 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 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 that 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% of the cost for the
employee-only coverage under the plan (this can be increased
up to 50% at the discretion of the Secretaries of the federal
HHS, Labor, and Treasury Agencies.
3)WELLNESS INCENTIVE PROGRAMS . A February 2012 Georgetown
Health Policy Institute report indicates that many employers
are looking to worksite wellness programs to control health
care costs and reduce employee absenteeism. Studies estimate
the return on investment for these programs is $3 to $6 in
savings for every $1 invested generally after two or more
years of implementation. There are many different kinds of
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programs such as those that offer on-site flu shots or
lunchtime walking programs or that offer reduced deductibles
for taking a Health Risk Assessment or increased premiums for
a high body mass index (BMI). While most programs target
participation activities, a small but growing number are
designed to target specific biometric outcomes and more plan
to use standard-based programs in 2012, such as premium
discounts when a weight goal has been attained. Some surveys
indicate that the average employee incentive is between $300
and $430. A position statement from the American Heart
Association (AHA) and the American Stroke Association says
that a recent survey showed that because of rising health care
costs and the new allowance under the federal law, 62% of
employers plan on switching from incentives for participation
to incentives for improvements in health metrics, shifting
costs from healthy employees to their less healthy
counterparts.
According to a 2009 Wall Street Journal article, Safeway's
per-capita health-care expenses have remained flat, compared
to the near 40% increase experienced by the rest of corporate
America. The article attributes this to giving employees a
financial stake in the system through health savings accounts
and a program called "Healthy Measures" which is a voluntary
worksite wellness program where employees are tested for
smoking, weight, blood pressure, and cholesterol. For every
measure an employee "passes," he or she gets a reduction in
premium of as much as $1,560 for a family, per year. The
article indicates that Safeway's smoking and obesity rates are
roughly 70% the national average. A 2011 article in
Consumer-Directed Health Care Solutions indicates that
Safeway's market-based health care plan all-inclusive health
care costs per capita (Safeway contribution + employee premium
+ employee out-of-pocket) has not changed from 2005.
4)EVIDENCE BASED PROGRAMS . According to the Georgetown
analysis, studies indicate that financial rewards worth more
than $450 have little additional effect on rates of
participation in wellness programs. Studies to evaluate the
use of financial incentives to change employees' behaviors are
inconclusive. Some studies have shown that some 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. None of the studies
involved premium or cost-sharing discounts or surcharges in
employer-sponsored health care programs, which would directly
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affect the cost of obtaining coverage or care for certain
workers. According to the analysis, there is no authoritative
research on whether or not these programs work, even the
Safeway program has only been in place since 2009 and there is
no published data about its effectiveness. The AHA supports
additional research to monitor the outcomes of an
incentive-based approach tied to health care premiums for
behavior outcomes on the quality of worksite wellness
programming, employee health, and access to care. According
to AHA, some of this will be done by the Rand Corporation
under the ACA provisions.
5)IMPLICATIONS FOR AFFORDABILITY . Provisions of the ACA are
intended to address affordability of healthcare coverage.
Subsidies for purchasing health insurance will be available in
the Exchange for some individuals whose coverage costs exceed
a certain percentage of their income, and other individuals
will be exempt from the individual mandate if costs exceed a
specified percentage of their income (8%). Surcharges
associated with tobacco use and standards-based incentive
programs could make coverage unaffordable for some populations
and take them out of the health insurance market altogether.
Alternatively, such programs could drive unhealthy individuals
into the Exchange where subsidies may be available. Taking
tobacco rating as an example, a non-smoker with family income
of $17,700 would be charged $5,200 premium for a tax-credit
benchmark plan in the Exchange. With federal subsidies
available through the Exchange, this individual would pay a
$708 premium. A similarly situated smoker would have to pay a
tobacco surcharge (50% of premium or $2,600) in addition to
the $708 for a total premium (minus the subsidies) of $3,308
which represents 18.7% of his or her income. In this example,
the individual could opt out of the mandate to purchase health
insurance because the product is no longer affordable.
6)OTHER STATES . States such as New Hampshire, Rhode Island, and
Michigan have passed legislation promoting health insurance
incentive-based wellness programs; while states such as New
York, Wisconsin, Alaska, and Georgia have adopted legislation
providing safe harbor protections from state discrimination or
unfair trade practices. Colorado allows premium incentives
based on attainment of standards, with protections and
provisions that go beyond the federal law. Wellness incentive
programs are required to be accredited by a nationally
recognized non-profit organization that accredits wellness
programs. Colorado prohibits penalties for non-participation
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or failure to satisfy a standard, and allows individuals to
request an independent external review if the carrier denies a
request for an alternative standard or waiver of a standard.
7)SUPPORT . The American Diabetes Association (ADA) supports
this bill because a scientific evaluation of wellness programs
in California will be helpful in analyzing which types of
wellness programs do achieve the goal of encouraging a
healthier lifestyle without discriminating against individuals
based on race, age, or medical condition. The ADA supports
evidence-based wellness programs which encourage individuals
to adopt healthy lifestyles. However, the ADA strongly
opposes tying premium ratings to achieving health goals (i.e.,
lower blood pressure or cholesterol or weight loss).
According to ADA, there is no evidence that wellness programs
tied to premium variations are effective. The American
Federation of State, County and Municipal Employees believes
wellness incentive programs are discriminatory against those
over 50, and low-income communities where exercising is often
not safe and where cheap fast foods are more available than
fresh fruits and vegetables.
The California Pan-Ethnic Health Network (CPEHN) supports this
bill because the ACA expanded the practice of wellness
incentive and rewards programs, even though research on the
impact of the various types of programs on one's health is
inconclusive. CPEHN expresses concern that some incentives or
rewards programs may actually worsen health outcomes and
further contribute to inequities in the health care system.
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 California
Arthritis Foundation Council supports this bill because it
will help ensure that Californians have access to effective
evidence-based health and wellness programs without fear of
discrimination. Consumers Union supports this bill because
programs that are not properly structured result in a
disproportionate impact on low-income individuals, communities
of color, and older populations.
8)OPPOSITION . QUALCOMM writes in opposition that one of its
many programs enjoyed by employees is the company's wellness
and fitness program and it is concerned with the lack of
specificity about the composition of the committee that would
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be created under this bill. There is no detail explaining the
committee size, which key stakeholder groups would be
represented and how representatives will be selected.
QUALCOMM believes these details should be included in the
authorizing legislation and is further concerned about the
committee taking an advocacy role in recommending legislation
that would mandate what type of wellness incentive programs a
business could offer.
9)RELATED LEGISLATION . AB 1083 (Monning), pending on the Senate
Floor, establishes reforms in the small group health insurance
market to implement the ACA. AB 1083 does not permit the use
of tobacco rating and does not explicitly allow for the use of
wellness incentives. Earlier versions of AB 1083 allowed for
evidenced based wellness incentives. SB 961 (Ed Hernandez)
and AB 1461 (Monning) have been introduced to establish
standards in the individual health insurance market to update
California laws and implement the ACA. SB 961 and AB 1461 do
not address tobacco ratings or wellness incentives.
10)PREVIOUS LEGISLATION .
a) AB 1602 (John A. Perez), Chapter 655, Statutes of 2010,
establishes the Exchange as an independent public entity to
purchase health insurance on behalf of Californians,
including those with incomes of between 100% and 400% of
the federal poverty level, and small businesses. Clarifies
the powers and duties of the board governing the Exchange
relative to the administration of the Exchange, determining
eligibility and enrollment in the Exchange, and arranging
for coverage under qualified carriers.
b) SB 900 (Alquist), Chapter 659, Statues of 2010,
establishes the Exchange and requires the Exchange to be
governed by a five-member board, as specified.
c) 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.
11)POLICY COMMENT . The author may wish to amend this bill to
further define the membership of the special committee and the
selection process of the committee members.
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REGISTERED SUPPORT / OPPOSITION :
Support
AARP
American Cancer Society
American Diabetes Association
American Federation of State, County and Municipal Employees,
AFL-CIO
California Arthritis Foundation Council
California Black Health Network
California Pan-Ethnic Health Network
Consumers Union
Health Access California
Prevention Institute
Opposition
QUALCOMM
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097