Should Healthy People Pay Less for Health Insurance?

September 19, 2007

Why did you sign up for health insurance? Was it to help share the risk and cost of potential health issues across a large group of people?  What if some of the people in your group are voluntarily behaving in ways that raise their risk and the cost to you and everyone else?  Should you be offered a discount on your deductible for abstaining from those behaviors?

Getting “Credit” for Being Healthy
One of the largest health insurance companies in the US, United
Healthcare, has launched a pilot program called Vital Measures that is intended to “reduce out-of-pocket health care expenses for individuals and families with healthful lifestyles”.

The program creates incentives for its members to adopt healthy behaviors. According to the Kansas City Business Journal, participants in the United Healthcare pilot program take tests to measure their health against body mass, cholesterol, blood-pressure, and nicotine usage benchmarks similar to those set by the National Institutes of Health. Any member that is in line with or better than the benchmarks earns credits towards their deductible.

Is a Health Credit Legal?
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) does contain guidelines about imposing different premiums or deductibles based on health factors. However United Healthcare has implemented the Vital Measures program to use a high-deductible health care plan along with a fully insured supplemental plan from Benicomp Group that can reimburse deductibles or co-payments, which is thought to be exempt from HIPAA.

The press release announcing the pilot program offers the following description:

“A typical Vital Measures program design might combine a $2,500 deductible medical plan with a supplemental plan that allows the employee to earn up to $2,000 in deductible credits if each of the four health benchmarks are met or exceeded. “

Employer Health Costs
The driving force behind Vital Measures is likely the increasing cost of health care that employers are having to shoulder.  Companies are looking for ways to lower these costs and United Healthcare responded with a program that encourages plan members to take action to control their health care costs.

The chief medical officer for United Healthcare, Sam Ho, offers an interesting statistic:

“More than 70 percent of health care expenditures in the United States are spent on treating conditions that are lifestyle-related and can be potentially reduced by more healthful lifestyle changes.”

Of course “lifestyle-related” is a pretty broad term which could cover many different things but I can see how some purely optional behaviors could really increase the cost of health care for some people.

Good Idea, Bad Idea?
What do you think?  Is this kind of plan a smart move?  Do you think its fair to shift more of the cost to the people that choose to engage in higher health risk behaviors?

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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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22 Responses to Should Healthy People Pay Less for Health Insurance?

  • Betsy

    No! health Insurance does not just cover simple things. It also covers you if you are to lose a limb or stroke and heart attack. And please don’t tell me no one that is healthy has those things!!!! I think we all need some form of health insurance. It is so very important.I was healthy but lost a limb after being ran over by 2 cars. I didn’t have insurance and was put back together then kicked out of the hospital. Guess what I am now going through all the Physical Therapy and it’s costing medicare twice as much as it would have cost in the first place if they would have done a better job right after my accident!!! So they need to figure out which would be better treat people now when they need it and it cost less or wait and it cost 2x or even 5x what it would have cost.

    • Ben

      Betsy, I’m sorry to hear about your ordeal. Thanks for sharing, good to get perspective from someone who’s been through an event like that.

  • D.E. Russell

    60 years of observation and evaluation has shown me that the folks who eat heathy, exercise regularly, (in the gym or in the garden, or down the highway) don’t use tobacco or drugs, drink moderatly,(if at all) maintain a healthy body weight and get enough rest and sleep, live long healthy lives with VERY FEW exceptions. Some of the FEW exceptions are people who go on drugs for a “condition” which in many cases should have been addressed by adjustments in life style and diet.
    I expect soon now for HEALTHY FOLKS to form LOW RISK groups of investors to pool their money for accidents and “genetic” flukes that occur on rare occasions to in the HEALTHY FOLKS group. The outcome can be “all costs covered, and money made by all investors” when all the HEALTHY FOLKS step up and do it.

  • Diane

    Genetics say that I am at risk for cancer & heart attack, YET I have chosen a different lifestyle & eating pattern than my family; therefore, I am NOT at risk. I have addressed the problem before it exists.

    I spend more money on organic food, expensive supplements, and exercise self control. PLUS I spend much time researching how to beat diseases. The best way is to stay alkaline (not acidic). Cancer feeds on acid & meat is very acidic.

    I switched to a purely vegan (no animal product) eating regime, gave up sugar, and even have switched to a RAW FOOD diet and am experiencing even better results, with more energy. I do not put drugs (medicine they call it) into my system, do not eat fast food, and most always prepare my own meals rather than have the convenience of eating out. I study the Bible which teaches me how to think, & rely on God in all situations & practice obedience to Him so that I do not experience deadly stress. He blesses me with friends & support & gives me the strength & hope to walk through it all, without experiencing deadly stress.

    I work hard at staying healthy & keep up with the latest findings regarding dangerous vaccines, which I do not get for any reason. Therefore, I will not be using these services as someone who does what they want and when. I should not have to pay the same amount as others my age (58) because I have not been to the doctor for any reason; I am healthy. I pay for it through these ways listed above that others have saved money on.

  • anti

    What ‘kitty’ is saying is relevant for people in the gray area around the dividing line between healthy and non-healthy people, as well as to the effort needed to establish that dividing line. So it’s not unimportant. However, on a general level (or macroscopic way) it’s fairly easy to tell who are in each category. Perhaps a third category could be established for people in the gray area. Indeed, there are already HMOs/PPOs that offer many levels of premium/deductible that healthy people can take advantage of.

    But, implementing this on a national level will help to both alleviate cost concerns for healthy people and encourage unhealthy people to adopt better lifestyles. Of course, this is the U.S.A. though. So the problem will fester and the population will pay the price of degeneration because this country, despite it’s insistence on proclaiming itself “#1!”, acts like a retarded fool and a rabid dog at the same time. So I say do nothing! Or do something half-assed that looks good but doesn’t really solve the problem, like you people usually do. That way we that say “we told you so” can continue to at least enjoy the benefit of watching this insult to humanity of a country march along its road to collapse.

  • Scott

    I don’t need to be told how much to exercise and how to live.

    I already know what I need to do to be healthy and treat myself without professional medical assistance.

    There needs to be a fair way to reward those who never take prescription drugs and visit the medical scam facilities.

    The notion that genetics is a cause for health problems has become a good excuse our society has fallen for. It is a convenient way for doctors and drug companies to keep patients coming back and makes them dependent, not independent. Our medical care is out of control and has become socialized. The main reason we should all need health insurance is for emergency care.

    Statistics show that alternative medicine is much more effective than traditional medicine. Health insurance companies need recognize these facts and honor these methods of treatment. And those using alternative medicine usually have healthy lifestyles to begin with.

  • Damien

    This i what i think we will see more of – hopefully.

    Lifestyle is choice and it plays a very large role in your health. Why should I pay higher premiums to pay for fat lazy unfit smokers with poor diet that dont seem to give two hoots about their health? There are so many people like this out there.

    If to be elligible for a super cheap health insurance premium I was required under the conditions to work out twice a week, or run 2 miles three times week, stay fit and eat healthy (i’m not exactly sure how they’d monitor all this) then i would be all about it. Your premiums would probably be halved.

    Unfortunately under HIPAA it seems very difficult for insurers to offer these kinds of incentives.

  • Gmh

    It would be unconscionable to mandate that people who deliberately live a lifestyle designed to keep themselves healthy should be required to pay for the costs associated with other individual’s deliberate neglect of their health and then expect everyone else to pay for their neglect.

    Along with that principle, it would be charitable for those who do have better health to contribute something to the health costs of those who, through no fault or neglect of their own, are suffering with poor health and associated costs. Spreading that particular kind of health cost is good, but not the cost of those who deliberately neglect their health.

    That said, and to be fair, there should be a more concerted effort to educate people who must purchase health insurance on healthy lifestyle methods to keep themselves healthy. And once the most appropriate lifestyle education is promoted, then premium discounts are appropriate and should be obligatory for the benefit of all who choose to live a better healthy lifestyle.

    To promote and implement a plan that does not take all this into consideration and is fair to those who choose a better lifestyle and work to achieve it would be something like socialism, which is always degrading in a number of specific ways to society in the long run.

    There are several factors that make universal health care almost unworkable. The most important is that health care resources are inadequate to handle the grand scope of the whole job. And most health care modalities (due to commercial interest) do not use the most effective means to achieving individual health. Especially, the overuse of medical drugs when doing so is usually unnecessary, according to many doctors. Perhaps the most important reason is that healthy people choose lifestyle and healing modes that are not profitable for the health industry generally.

  • m

    “I get a safe drivers discount for my car insurance. Why shouldn’t I get one for my health insurance?”

    Because you control your own driving, but you do not control many/most aspects of your physcial health. Out of the four factors measured, only one can be mostly considered under one’s control: nicotine usage. The rest, body mass, cholesterol, and blood-pressure all have components that for many are not simply related to lifestyle.

  • Ron E

    I agree that heallthy lifestyles as you mentioned ALONG WITH genetic predisposition make up one’s overall disease risk (the two are cumulative). You cant change who your parents were, but you CAN change you lifestyle to minimize you risk. MANY Americans just dont seem willing to change their habits and lifestyles in spite of publicity and health professionals counseling (people who are so heavy they have to ride a cart or have to turn off their oxygen to smoke a cigarette). Americans seem to respond to pocket book pressures. Putting the responsibility for health care where it belongs for the PERSONALLY CHANGEABLE variables (tobacco, alcohol, diet quantity and quality, exercise, etc) I think SHOULD be an element in health care cost distribution, while maintaining the saftey net for all.

  • Ben

    I tend to agree with plonkee, Blaine, lazy man, and Susy. It makes sense to me to offer incentives for people to maintain healthy behavior.

    I do see what you’re saying kitty about the role genetics plays and how the incentives could cause undesirable side effects in some people. Maybe they could adjust the benchmarks for people with documented genetic pre-dispositions such as high-cholesterol.

  • kitty

    My main problem with programs such as United is that its concentration on numbers is likely to push people into taking prescription drugs whether or not they are indicated.

    Consider cholesterol which is very much influenced by genes. Many of us are slim, active, eat right, yet have LDL above certain number. Whether or not we should take statins depends on our 10-year absolute risk of heart attack which is affected by many factors – age, sex, family history, blood pressure, HDL, weight, etc. Mine, by the way, is around 1%. “this will reduce your risk of X by 30%” sounds great, but this is relative risk reduction which is a totally meaningless number unless you consider what your absolute risk of X is. 30% of 1% is only .3 percentage points. Is this future benefit less or greater than the risk of side effects?

    Telling people to meet certain numbers in order to get money, may really cause harm. Besides, who is to decide whether we should take prescription drugs – we and our doctors or our insurance executive?

    Moreover, is this likely to save money? Consider how many people whose absolute risk of heart attack is low will need to be treated for many years to prevent one heart attack. When people say “it is cheaper to do X than to treat Y” they often forget to multiply X by the number of people and the number of years. There are also incidental costs – doctor’s visit, tests to check for liver damage, etc. These are small but they add up.

  • Susy

    I would be mad if I had to pay more for my car insurance to cover bad drivers, but I’m a good drive so I get a discount. Just like those of us who live in Ohio shouldn’t have to pay extra on our home insurance to help people who chose to live in a hurricane area.

    I think people should have to pay more if they choose to live unhealthfully. It’s just like everything else in life, you have to take responsibility for your actions. If you want to smoke, fine, but I should have to pay extra on my health insurance because you want to smoke. If you want to eat McDonald’s every day and slowly kill yourself, fine, but I shouldn’t have to help cover your hospital bills!

  • Lazy Man

    I get a safe drivers discount for my car insurance. Why shouldn’t I get one for my health insurance?

    I see no problem with having an annual fitness test to determine how much premium you should pay. And if you feel you can do better 4 months after the test, you should be able to a nominal rate for a re-test – (or possibly free if you improve enough).

    The tests can be normalized for sex, age, and other factors.

    I don’t know if we can every take out all genetic factors however. I’m sure that children of two track stars will be predisposed to better health. However, we are getting pretty good at what role genetics play.

  • kitty

    Genetics plays a major role in things like cholesterol and blood pressure. For example, I am slim, non-smoker, eat all the right foods, and exercise regularly. Yet there is no way I could reduce my LDL cholesterol to be below 130 without drugs. But given that my 10-year heart attack risk even with my high LDL is still under 1%, taking drugs to reduce this low risk by .3 percentage point doesn’t make much sense. Nor would it be cost-saving. Just think how many people in this low risk category would need to be treated for many years to prevent one heart attack!

    Making people pay for meeting numbers would force people to take drugs whether or not people really need it. What if you have side effects? What if your absolute risk of a condition is so low, that your risk of side effects is higher than any chance you’d benefit?

    In addition, the cost-saving potential of these measures are not as clear or obvious as policy-makers think.

    Often people who make these decisions don’t understand basic epidemiological concepts such as: absolute risk vs relative risk, number needed to treat (NNT)/number needed to screen (NNS), or the difference between cost-effectiveness that is generally measured in the cost of quality-adjusted life year gained and cost-savings. Sometimes even doctors don’t quite “get it”.

    1. relative risk vs absolute risk. Many a times we hear “this reduces your risk of X by 30%” and we think wow, this is a lot. But if your absolute risk of X is only 1%, 30% of 1% is only .03 percentage points. Is it worth it? One of us may decide -yes, another one of us may decide – no. This is the type of the decision we have to make for ourselves with our doctor, not because the insurance company wants our numbers to be low.

    2. Number Needed to Treat for drugs like statins and Number Needed to Screen for screening tests tells how many people need to be treated/screened to prevent one bad outcome. It is really the inverse of absolute risk reduction as in 1. Oftentimes someone says “it is cheaper to take this drug than to treat X”, but they forget or discount how many people need to be treated with drugs to prevent this one heart attack. This doesn’t say that people shouldn’t be treated – even if your risk of heart attack is low you may decide that it is worth it for you especially if you don’t have side effects, only that it wouldn’t save money and thus if you choose not to be treated – it is your own business. Obviously, the higher one’s risk is, the more likely the measure would save money. But one’s risk depends on a lot more than one number.
    There are also incidental costs – doctors visits, complaints of side effects, and in case of tests – false positives, overdiagnosis.

    3. Cost-effectiveness vs cost-saving. Generally a measure is considered cost-effective if the cost of quality-adjusted life year gained is under 50,000. Most of us would consider it worthwhile to pay 50,000 to extend a life for one year. But when you want to make a measure mandatory, you need to show that it would actually save money to insurance. Costing less than $50,000 is not the same as saving money overall. A lot of popular preventive measures (many screening tests, statins for heart desease prevention) are cost-effective, but not cost-saving. In order to justify making some measures mandatory, the insurer has to prove cost-savings not just cost-effectiveness. But they are far from clear. For some lifestyle measures – maybe, but in case of medical intervention – not on the average. Even for lifestyle measures – an overweight person who starts exercising may get a higher rate of injuries. Knee replacements cost money too.

    Incidentally, there are other behaviors that increase cost. Runners, for example, have a high rate of injuries. So do gymnasts. So if we start on this road, where are we going to stop?

    I have interesting links on cost-saving, cost-effectiveness and studies of cost of preventive measures. If I have time later on, I’ll try to find them. If you are interested you could probably google on cost-effectiveness+cost-saving and a preventive measure of your choice. You’d be surprised at what you find.

  • Miranda

    Interesting and thought-provoking post. I blogged it here: http://www.yieldingwealth.com/saving-money-on-health-insurance-by-living-healthier/.

    I think that it is kind of unfair that I am helping the health insurance company rake it in, but my premium keeps going up (and the CEO, of course, keeps getting his $10 million a year).

    Some life insurance and auto insurance companies offer partial premium refunds if you go a certain amount of time without making a claim. Perhaps health insurance companies can offer a similar program that offers a partial refund if you have limited visits (checkups should be allowed, and basic care for simple illnesses), or if the company pays less than a certain amount in claims for you.

  • Blaine Moore

    Hell yes your insurance premium should be based upon your lifestyle! I see nothing wrong with giving a break to somebody who is statistically going to be less likely to require the services.

  • plonkee

    For things that are truly voluntary (like smoking), sure why not. But, for things that have a partly genetic component, or you are measuring the lifestyle by the symptoms (like high blood pressure) I think is unethical.

    One of the things about this idea, that you pay more if your are unhealthy, is that people who need health insurance the most, are the ones for whom it will cost the most and so are the ones least likely to be able to pay for it.

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