¶ … Healthy Employee Pay Less for Insurance Premiums? Statement of the Issue

The objective of this work is to examine whether the healthy employee should contribute less towards their health insurance premium than employees who are less healthy. Employers are more often offering wellness and health promotion programs focused on promoting good health among their employees and employee's families. Driving this movement is the rising cost of health insurance, as well as disability leave and sick leave benefits. Added to these cots are those associated with lost productivity due to employees being off from work. The position of this writer prior to examining this issue is that employers would benefit from reducing health insurance costs for employees who are healthy and who follow a good health program.

Background of the Issue

The position taken and supported in this work in writing is that immediate actions should be taken by expanding public health and non-health policy for the purpose of creating an environment that serves to support and motivate positive changes in lifestyle. When regular physical activity is engaged and excess weight is lost along with cutting and eliminating the use of smoke and tobacco as well as problem drinking, there are subsequent results of more closely adhering to good health practices and healthy intake of foods such as fruits, vegetables and whole grains all which result in lower the risk associated with cancer, diabetes, heart disease and stroke. Factors that affect insurance trends are such as: (1) offer rate, or the percentage of employees who work where insurance is offered; (2) eligibility rate (percent of employees eligible to enroll where insurance offered); (3) enrollment rate or percentage of all who work where insurance is offered who enroll. Offer rates have risen while simultaneously eligibility and enrollment rates have fallen, whether measured in relation to all private-sector employee, private-sector full time employee, or private sector part time employee. The offer rate has experienced an increase from 86.5 to 88.3% and the eligibility rate decreased from 81.3 to 77.1%. The enrollment rate experienced a decline from 69.6 to 62.4%. The National Average for Employer-provided insurance is shown as follows:

Figure 1

National Average for Employer-provided Insurance

Single Coverage $4,024 per year

Family Coverage $10,880 per year

Note: Annual income at minimum wage = $10,300 & Annual income of average Wal-Mart worker = $17,114

Source: Kaiser Family Foundation/HRET Survey, 2005

The work of Dowd and Feldman (1987) entitled "Voluntary Reduction in Health Insurance Coverage A Theoretical Analysis" states that health insurance "lowers the price of health care faced by consumers who, as a consequence, demand more health services. This behavior may manifest itself in many ways: consumers may not take as active a role in maintaining their health; they may visit a doctor more often or at lower levels of discomfort; and they may not shop carefully for low-cost providers of care." (Dowd and Feldman, 1987) The reason for this type behavior according to Pauly (1968, 1983) "is that the insured consumer is behavior rationally, choosing consumption levels which equate marginal benefits to the personal marginal costs of services, but the presence of insurance results I a personal marginal cost which is less than the price charged by the provider." (Dowd and Feldman, 1987) Because of this disparity insured individuals "over-consume, resulting in efficiency losses in the market for health care." (Dowd and Feldman, 1987) Although increases consumption tends to increase insurance premiums, each individual ignores this effect, since the effect of his/her behavior is spread over all policymakers." (Dowd and Feldman, 1987) Dowd and Feldman states that the simple solution to this problem is "to reduce the level of health insurance coverage, possibly by legislative action." (1987 ) It is reported that most private health insurance is provided to employees by employers "as a fringe benefit" and the "favorable tax treatment of health insurance vs. wages, due to economies of group purchasing…approximately two-thirds of all non-elderly individuals in the U.S. obtain health insurance through the employment of a family member." (Dowd and Feldman, 1987) Health insurance benefits for these individuals "are part of a compensation package that includes other fringe benefits and wages." (Dowd and Feldman, 1987 ) Therefore, health insurance benefits, "cannot be viewed in isolation from other forms of compensation and proposals to reduce health insurance benefits must recognize that other forms of compensation will have to increase to maintain the viability of the total compensation package." (Dowd and Feldman, 1987)

The work of Casey (2009) states that trends show that 57% of individuals have due to the economic downturn "have altered health behavior by dropping gym memberships, eating fewer fruits...

It is related that the federal government is "finally catching on that the private sector is taking the initiative to attack health costs and that it needs to get out of the way." (Casey, 2009) It is reported that there is a limitation placed by federal law on the amount of financial incentives that companies can offer employees for stopping smoking or losing weight. Furthermore, subsidized gym memberships are treated as taxable income. (Casey, 2009, paraphrased)
Companies are stated to be making employees 'financially responsible for unhealthy behavior…" charging more for health insurance for individuals who do not take corrective action following having been counseled and advised of a specific course of action for their individual condition. In other words, employees who have high cholesterol ethically cannot be penalized for the condition because it may be genetically influenced. But they can be penalized for not taking cholesterol-lowering medicine or attending a pertinent class." (Casey, 2009) It is argued by some companies and many of the health co-workers that the workers who are not healthy due to their own fault are bringing negative consequences, and specifically influencing the rise of the costs of health insurance. The belief of such companies and healthy workers is that "there should be a price." (Casey, 2009) The National Institutes of Health (NIH) is reported to have established guidelines for ethically administering workplace wellness programs.

The work of Iskra and Foster (2009) entitled "Healthy Employees: Wellness in the Workplace" reports that employers are seeking to "combat the costs associated with their chronically ill employees by offering various programs that promote the mental and physical health and overall well-being of their employees." Wellness programs may be as simple as "offering smoking cessation programs to employees or sponsoring periodic classes/seminars for employees on health-related topics, and offering employees on site fitness facilities." (Iskra and Foster, 2009) These types of programs are focused on preventing chronic illnesses through the promotion of healthy and active lifestyles and are stated to often be inclusive of "promoting and encouraging employee involvement in fitness-related activities in the community and voluntary health screenings including cholesterol screenings, blood pressure and blood sugar screenings and breast cancer of skin cancer screenings." (Iskra and Foster, 2009) Financial incentives are used by many employers for encourage employee participation in their wellness programs. Included are "…rebates on health insurance premiums, modified insurance deductibles or copayments for employees adhereing to wellness programs and disease prevention programs. " (Iskra and Foster, 2009) These incentives are stated to even be inclusive of cash bonuses. Employers are required to design such programs for the purpose of rewarding positive health habits while simultaneously ensuring that they do not discriminate on the basis of health conditions. It is reported that HIPAA's nondiscrimination provisions "generally prohibit a group health plan or group health insurance provider from denying an individual eligibility for benefits based on a health factors and from charging an individual a higher premium that a 'similarly situated' individual based on a health factor." (Iskra and Foster, 2009)

Health factors under the Department of Labor regulations include such as "health status, medical condition (mental and physical), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) and disability." (Iskra and Foster, 2009) However, a critical exception makes the provision that plans may vary in their benefits and this includes in their cost-sharing mechanisms and premiums or contributions on the basis of whether the individual has "met the standards of a wellness program as defined by the DOL's regulations. In order to qualify for the exception, am employer's wellness program must fit the DOL's definition." (Iskra and Foster, 2009)

III. Identification and Evaluation of Alternatives (pros & Cons)

One alternative to health insurance premiums being charged equally for all employees regardless of their healthy living adherence is that known as 'Bravo Wellness'. The Bravo Wellness program enables individuals to bring about an immediate reduction in their healthcare costs by six…