Senior Policy Analyst
The Trump Administration has invited states to set up so-called wellness programs, with individual-market insurers creating plans with higher premiums and out-of-pocket costs for people who don’t meet certain health targets. Such programs would gut protections for people with pre-existing health conditions.
The Affordable Care Act (ACA) barred individual-market insurers from charging higher premiums to people based on their health status, but the Administration is inviting states to undo that protection. Under its recent bulletin, up to ten states can establish a wellness program under which insurers, for example, charge premiums up to 30 percent higher to people who don’t hit a weight-loss target or to reduce their cholesterol by a certain amount. (If the wellness program varies premiums based on tobacco use, insurers could raise premiums by up to 50 percent overall.)
A 30 percent premium differential could mean a significant financial hit of hundreds or thousands of dollars a year for those who don't achieve the targets. And such treatment would begin to look a lot like the discrimination that people with health conditions faced before the ACA.
States that want to establish a “health-contingent” wellness program would have to submit an application to the federal government, including an analysis showing that the state doesn’t expect the wellness program to increase federal costs or reduce overall health coverage levels. But the federal government apparently wouldn’t reject programs that are expected to drive sicker people out of the insurance market as long as more healthy people enroll to make up the difference.
Seema Verma, Administrator of the Centers for Medicare & Medicaid Services, which would decide whether to approve a state wellness program, said that this initiative would give states “the opportunity to not only improve the health of their residents but also to help reduce healthcare spending.” But extensive research on wellness programs that employers have set up has failed to show that they do either. For example, a large randomized trial of an employer wellness program found that it had no effect on health outcomes or health behaviors, but it did reduce costs for people who were already healthier. That makes wellness programs a potential tool for employers looking to recruit or retain healthy over sick employees, the authors of that study note.
Individual-market wellness programs would have to meet the standards that apply to similar programs that employers offer, such as being made available to all individuals and providing a “reasonable alternative standard” for individuals to meet if they don’t meet the initial health target. But as the research on employer programs shows, these standards don’t prevent cost shifts from healthy to sick people.
And the consequences of such cost shifts would likely be worse in the individual market, where consumers may be paying all or most of their premium amount, and those who don’t get the wellness discounts are more likely to find their premiums unaffordable and end up uninsured. Plus, if one individual-market insurer launches a wellness program that affects people’s costs, the state’s other insurers would have to follow suit or risk losing out to competitors that use the new program to attract healthier enrollees or discourage sicker customers from picking their plan. This sort of race to the bottom, where insurers compete on the health status of their customers instead of the price and quality of their plans, could leave people who have health issues with fewer affordable options in the individual market.
The wellness bulletin is just the latest example of how the Trump Administration is encouraging states to take steps that undermine the ACA. But, so far, no state has responded to the Administration’s guidance encouraging states to use 1332 waivers to gut pre-existing condition protections, nor has any state weakened essential health benefits in response to the federal loosening of those rules. And more than a dozen states have stepped in to protect consumers against the spread of short-term health plans that don’t cover pre-existing conditions, rather than letting federal rule changes expanding the availability of these plans carry the day.
The ACA’s pre-existing condition protections are among the law’s more popular and important elements. They help make the individual market accessible for people who had health issues in the past or may have them in the future. As they’ve previously done when the federal government has offered them the chance to undermine protections for people with pre-existing conditions, states should reject the invitation to set up discriminatory wellness programs.