Speaking of incentives the CEO of Safeway, based on the experience at his company, proposes incentives aimed at prevention as the solution to high healthcare costs:
Safeway’s plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
[…]
As with most employers, Safeway’s employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member’s behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.
Safeway’s Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a “base level” premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.
For the interested student, find three things wrong with his prescription.
The word “nonunion” pops out, but the larger issue is selection bias. The people encouraged/discouraged to be Safeway nonunion employees are not going to reflect a random sample of America.
I note that the bills being proposed in Congress would appear to preclude adjusting premiums on the basis “tobacco usage, healthy weight, blood pressure and cholesterol levels.”
Seems like it would be unfairly hard on people with diseases they can’t help. My father suffers from an extremely rare form of leukemia that has no known risk factors. And there are lots of lung cancer patients that never smoked- would they still be punished by the plan?