lesson learned from a failed wellness program

Insurance companies consider obvious health indicator factors like smoking, obesity, and cholesterol when setting health insurance premiums. There is little question that these factors are closely linked with long term health costs so this is a sound actuarial practice when utilized in the right context balancing individual privacy and behavioral management skills. Estimated costs for these risk factors are built into our individual health insurance premiums whether we know it or not. Federal law now allows employers to build behavioral health factors into group health plans as part of a wellness program.

When one company tried to incorporate these cost factors to an employee wellness program, they went about it the wrong way. A news article describes the story of one employer, a heath care company, that proposed charging higher premiums for those with higher behavior risk factors. Employees strongly objected and the plan was dropped. Instead the employer now offers discounts for those who meet behavioral health goals like quitting smoking or lowering cholesterol.It is interesting that the net financial result is the same, yet one approach is palatable and the other clearly is not. Consider this example as a lesson for employee benefits planners.

By charging the same price for all similar state/age/sex applicants regardless of behavioral health factors, short term medical insurance premiums actually favor those with health risks. Yet the system is simple and draws little objection, partly because the premium rates are so low that cost pressures are not as significant as in other health plans.