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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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.
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.
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.
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.
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.
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!
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.
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.
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.
Well put Ron!
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[…] Money Smart Life presents Should Healthy People Pay Less for Health Insurance?. He wonders if people should be offered a discount on their deductible for abstaining from those behaviors, and talks about a pilot program that proposes exactly that. […]
“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.
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.