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Delivering Health
The ACA Empowers Nanny Bosses

Pretty soon your mom might not be the only one nagging you to quit smoking or lose weight—and it won’t stop at nagging. As the NYT reports, workplace penalties for non-participation in wellness programs are on the rise. The ACA gave employers more freedom to offer rewards or penalties in order to make their employee pools less of an insurance risk, and apparently they’re running with it:

Among the two-thirds of large companies using such incentives to encourage participation, almost a quarter are imposing financial penalties on those who opt-out, according to a survey by the National Business Group on Health and benefits consultant Towers Watson.

For some companies, however, just signing up for a wellness program isn’t enough. They’re linking financial incentives to specific goals such as losing weight, reducing cholesterol, or keeping blood glucose under control. The number of businesses imposing such outcomes-based wellness plans is expected to double this year to 46 percent, the survey found.

The problem here is not so much that insurance companies are trying to manage their risk pools better, but that they are doing it through employers. It makes sense for an insurer to charge someone who engages in risky behavior more than someone who doesn’t: pegging risk to cost is exactly how insurance works. But when it is done through the workplace, that adds an extra layer of coercion to the process.

In general, America should be moving toward a system where everything but wages is disconnected from employment, where, for example, individuals contract directly with insurance companies for their insurance. This would not only make benefits more portable—a must in an economy in which people frequently change employers—but it would also cut out any role employers might play in forcing behavioral changes on their employees. Instead the ACA continues the tight link between employment and insurance, exactly the opposite of what we need to be doing.

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  • Andrew Allison

    The problem here is that TAI is totally confused about health insurance. As you correctly point out, ACA “gave employers more freedom to offer rewards or penalties in order to make their employee pools less of an insurance risk, and thereby reduce the cost of providing them with health insurance.” To go from that to “insurance companies are trying to manage their risk pools better,. . . ” is a leap too far. The insurers set the cost of coverage based on the risk, and the employers are behaving rationally. There’s no coercion; the employee is free to decide to what lengths s/he will go to reduce the cost of insurance. In theory, the solution would be to do away with employer provided insurance and let the employee deal directly with the insurance company. Unfortunately, thanks to ACA, all of us, rather than the employer, would then pay for the risky behavior.

  • small mkt insurance guy

    Yes and no. It is an attempt to manage the risk pool. But it is solely by the employer and not the insurance company. The vast majority of employers with these programs are self funded with the insurance company providing contractual rate contract for providers and TPA services. The risk pool is solely that of the employer. They are paying the claims so they are requiring the participation in the program.

  • Boritz

    “pegging risk to cost is exactly how insurance works.” -TAI

    While telling us exactly how insurance works you might mention that insuring pre-existing conditions and insuring them without variable cost is not insurance at all.

    “Health insurance companies can’t refuse to cover you or charge you more just because you have a pre-existing
    condition.” –

    Love that “just because”.

  • qet

    It will take 3 generations, at least, to do away with the entitlement mentality that drives our health care politics. No one sees life insurance as an entitlement. No one objects when a 90 year old has to pay $99,000 per year for a $100,000 policy, or when a smoker or diabetic has to pay a higher premium than a non-, or when the life insurance company sends over a nurse practitioner to give you a physical exam prior to issuing you a policy. Yet ask that 90-year old to pay a $99,000 per year health insurance premium, or the diabetic to pay 3x more than the non-diabetic, and all hell breaks loose. The crimes against intelligence committed by the legion of policy wonks in attempting to technicalize what is at bottom a simple value choice–we feel that health care is something people ought to have as much as they can consume without requiring them to contribute more than nominal amounts, whereas we don’t feel that way about life insurance–are the worst aspect of all this. As Andrew Allison suggests, the real problem is the lack of alternatives to putting up with micromanagement of our lifestyles. But the trend in health insurance toward higher deductibles is a start, and I wouldn’t be surprised if a market developed to insure people against their deductibles.

  • FriendlyGoat

    You are at liberty to ask the Republican Congress to repeal this particular detail of the ACA. They will laugh at you, of course, because employers got exactly what they wanted with this provision.

    Nothing in this law requires employers to harass employees. But they are delighted to do so. They particularly enjoy collecting financial penalties from employees reluctant to sign up for their wellness plans. If you check around, you will find that the penalties per person are greater than any savings per person which employers have ever achieved from running wellness plans.

  • Josephbleau

    I, along with millions of others, have been a lifetime believer and enthusiast for industrial safety. this tremendously reduces cost of production, and although you often need to couch it that way to get support, the main reason is just basic humanity to your fellows. Companies who hire honest hardworking smart people are always going to get the healthier risk adverse folks and will have lower claims rates, this is why these companies often self insure to enjoy the lower costs themselves. Companies also know that excessive preventive care does not reduce costs. But a few individuals can make great increases in cost when they get sick, so I have no problem trying to incentivize not smoking, or being obese, as done well it will help individuals.

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