Incentive-based plan raises questions

A wellness program launched this month by Minnetonka, Minn.-based UnitedHealth Group Inc. has the benefits community in a quandary.

Many benefits experts agree with the objectives of the Vital Measures program, which combines a UnitedHealth-administered high-deductible plan with a supplemental plan administered by Fort Wayne, Ind.-based BeniComp Group that permits employees to "buy down" their deductibles if they meet specified standards for tobacco nonuse, body mass index, blood pressure and cholesterol. However, some experts question whether it complies with nondiscrimination rules governing wellness programs offered in conjunction with group health care coverage.

The rules, which were designed to ensure compliance with the Health Insurance Portability and Accountability Act that applies to insured and self-insured group health plans, limit total rewards for wellness programs to 20% of employee-only or 20% of family coverage--if all covered individuals are allowed to participate in the wellness program.

But incentives in one of UnitedHealth's Vital Measures plans provide credits totaling $2,000--$500 for each of the four biomarkers--to offset a $2,500 individual deductible, or $4,000 to buy down a $5,000 family deductible. Given that the national average health benefit cost is about $4,242 for individuals and $11,480 for families, according to a 2006 Kaiser Family Foundation survey, UnitedHealth's maximum credits far exceed the 20% threshold, points out Joe Lazzarotti, a partner in the White Plains, N.Y., office of Jackson Lewis L.L.P. who specializes in employee benefits legal issues.

"In order for them to comply with the regulations, the premium would have to be $20,000," Mr. Lazzarotti said.

But UnitedHealth asserts that incentive payments under its Vital Measures program meet the threshold, because if a plan member's penalties could exceed 20% of the cost of coverage, "they're given an alternative offering to earn credit, such as participating in certain activities, like telephonic health coaching," said John Micale, regional vp of UnitedHealth's southwest region in Houston.

Mr. Micale likened Vital Measures to automobile insurance, which offers discounts to those with good driving records.

But Ray Brusca, vp-benefits at Towson, Md.-based Black & Decker Corp., took exception to the analogy.

"This too heavily undermines the concept of group insurance. In essence, it takes group health plans down to the level of auto insurance, where the bad drivers (in this case ill health members) pay the most. Sort of like a death spiral--those who need it the most due to their health, and in most cases lower economic plight, will not take any action to address their problems since they now have this huge deductible. I actually see this backfiring on United. It will result in the ill getting worse faster than before," Mr. Brusca said in an e-mail. "This is one of the most ill-conceived benefit design ideas I have encountered in my 27 years in this business."

Barry Barnett, a principal with PricewaterhouseCoopers L.L.P. in New York, also questioned whether the program will ultimately lead to better health outcomes.

"Punishing people because of lifestyle has never proven effective," Mr. Barnett said. "It's only been around promotion and rewards, and even at the end of the day, you're not going to get everyone" to comply. "If we got everyone, there'd be no smokers in the United States."

Other critics of UnitedHealth's Vital Measures program suggested the way plan members are forced to comply may be too stringent.

For example, although HIPAA rules only require that the wellness program give eligible individuals the opportunity to qualify for the reward at least once per year, they also require employers that offer wellness programs to provide a "reasonable alternative" standard, or waiver of the initial standard, to any individual for whom it would be unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard.

Under the Vital Measures program, screenings are conducted annually, usually around open enrollment, and individuals are given one opportunity to appeal and be retested if they fail the first round.

So, for example, if a pregnant woman fails to meet the maximum body mass index, she may obtain a waiver with a doctor's note saying it would be medically inadvisable for her to diet until after the baby is born, said Doug Short, president of BeniComp Health Plans. However, if another individual's BMI initially exceeds the standard and they meet it later in the year, they still must wait until the following year to qualify for the credit, he said.

BeniComp developed the program, called BeniComp Advantage, three years ago. The BeniComp offering charges a separate premium, which was not disclosed, in conjunction with a high-deductible UnitedHealth plan that is 12% to 20% cheaper than a standard preferred provider organization plan with a $500 deductible. Today, 40 employers offer it across the country.

Andrew Webber, president of the Washington-based National Business Coalition on Health, said the program "fits with what we've been doing with providers through programs like Bridges to Excellence. We're rewarding doctors to achieve better outcomes and better health results. If their patients meet the numbers, they are economically rewarded. Alignment of incentives on both the supply and the demand side is what we need."

"It's a very attractive concept, particularly with the way employers have been talking lately about adopting wellness as a strategy" to lessen costs, said Paul Ginsberg, director of the Center for Studying Health System Change in Washington.

But J.D. Piro, an attorney at Hewitt Associates Inc. in Norwalk, Conn., said he would advise against employers implementing such a plan without first obtaining legal review.

"The question is, does the program comply with HIPAA, or is the program exempt from HIPAA" because the BeniComp policy is considered "supplemental"? he asked. "I've looked at their Web site and I can't figure out which it is."

"It will be interesting to see what the Department of Labor says once they find out about it," concurred Bruce Kelley, leader of evidence-based consulting with Watson Wyatt Worldwide in Minneapolis.

"I applaud conceptually what's happening here," said Seth Serxner, a Los Angeles-based principal at Mercer Human Resource Consulting. "They're doing a service. Whether right or wrong, it at least engages a full debate around the issue" of how wellness programs can operate within the confines of HIPAA. Still, he said he expects the program will be challenged.

UnitedHealth did not say whether the company sought DOL approval of the Vital Measures program. However, Mr. Short said BeniComp Advantage has been approved by insurance departments in 37 states.

The program is being marketed to employers with 100 to 1,000 employees on a pilot basis in Colorado, Ohio, Pennsylvania and Rhode Island as a fully insured and self-insured product, with individual deductibles from $1,200 to $2,500. The product can be combined with a health savings account. A national launch is slated for 2008.