Employer Wellness Incentives Questionable Origin

January 30th, 2013 by MorganDowney Leave a reply »

The provision of the Affordable Care Act expanding the amount of the incentive/penalty in mandated health-contingent wellness plans was put forward by Senate Republicans at the urging of Safeway CEO Steve Burd during the 2009 debate over health care reform. Burd launched a whirlwind lobbying campaign claiming great improvements in employee health and lower costs for the company. President Obama embraced the proposal. The Safeway plan, called Healthy Measures, gives employees reduction in their insurance premiums if they are, and stay, within certain limits on four medical risk factors: smoking, obesity, blood pressure and cholesterol. Rebates for achieving the goals total nearly $800 for an employee or $1,600 for a family. People who test within the limits get lower health premiums at the outset of the year. An employee who fails the obesity test can get a retroactive payment if he or she loses 10% of his or her body weight by the end of the year. But if the person’s BMI is still over 30 at the beginning of the following year, the payment is withheld until the employee reaches the permanent goal of under a BMI of 30. (See, Bensinger Gail, Corporate Wellness, Safeway style,  accessed Jan. 29, 2013)

The lobbying campaign has been controversial. In a story titled, Misleading Claims About Safeway Wellness Incentives Shape health-care Bill,” David S. Hilzenrath of the Washington Post, wrote,

It’s a seductively simple solution to rising health care costs. Require workers to pay higher premiums if they flunk tests for measures such as weight, blood pressure and cholesterol. Then, bingo: You not only get a fitter workforce, you slash medical expenses.

Politicians of both parties have embraced that idea and expanded upon in the Senate reform bil, inspired largely by the claims of Steven A. Burd, Safeway’s chief executive. Burd says he as set an example for employers nationwide by rewarding employees for healthy behavior. “Safeway designed just such a plan in 2005 and has made continuous improvements each year,” Burd wrote in the Wall Street Journal. “The results have been remarkable,” he declared, adding that “our health care costs for four years have been constant.”

If only that were true.

In a legislative debate filled with misconceptions, few rival the myth about Safeway, which has become the poster company for a provision that big employers and insurers covet. The supermarket chain’s story show how the untested claims of interest groups can take on a life of their own and shape national policy.

As the House and Senate work to meld their bills, the Senate’s “Safeway Amendment,” which would more than double the potential rewards and penalties tied to wellness tests, has become a point of contention. Business groups have pushed for the increase, arguing that financial incentives encourage workers to take responsibility for their health. Opponents such as the American Heart Association and the American Cancer Society say the provision would undo a central element of reform – the promise that people’s premiums would no longer be influenced by their health status.

Rewarding or penalizing people based on wellness tests may save money over the long run, but Safeway hasn’t proved it. In the meantime, based on 2009 data, if the Safeway Amendment becomes law, American families with average health benefits could have $6,688 a year riding on blood tests and weigh-ins.

But a review of Safeway documents and interviews with company officials show that the company did not keep health-care cost flat for four years. The costs did drop in 2006 – by 12.5 percent. That was when the company overhauled its benefits, according to Safeway Senior Vice President Ken Shachmut. The decline did not have anything to do with tying employees to test results. That element of Safeway’s benefits plan was not implemented until 2009, Shachmut said.

After the 2006 drop, costs resumed their climb, he said…

Today costs are slightly higher than in 2005, Shachmut said.

So, when Safeway said it had flatlined costs since 2005, “we defined that, you might say, loosely,” he said. “Perhaps a more precise way to say it is that our costs today on a per capita basis are essentially the same as they were in 2005.”…

Burd’s assertions about the program’s success made him a rock star on Capitol Hill. He pressed his case in briefings for Senate Democrats and Republicans and in a May meeting with President Obama. Leading policymakers have cited Safeway as a model…

Obama has repeatedly invoked Safeway’s approach. “It’s a program that has helped Safeway cut health-care spending by 13% and workers save over 20% on their premiums,” he said in a June speech to the American Medical Association. “And we are open to doing more to help employers adopt and expand programs like this one.”

When Obama delivered those remarks, the program was less than six months old, and by Safeway’s own analysis the spending in question was on the upswing…

Safeway’s expanded incentives are rooted in a philosophy. “I have no problem with a smoker having a 10-pack-a-day habit an killing him or herself,” Shachmut said. “I mean, it’s a personal choice. It’s a free country. I just don’t want to have to pay the health-care costs of that personal choice.” (Editor’s note: This philosophy might be better grounded if the employer did not set the wages of the individual who is obese or smokes lower than peers in anticipation of extra health care costs. See these comments.)

In accessing the economic impact of incentives, it might be helpful to know who health-care expenses for employees in the voluntary Healthy Measures program with those for the rest of the Safeway workforce. Shachmut declined to provide such information. “We frankly haven’t been disclosing that,” he said. “And I would just prefer not to.” Pressed further, he said the data would not be available until April (2010) or later – long after Congress and the president aim to enact a health-care bill.” Hilzenrath D. Misleading Claims About Safeway Wellness Incentives Shape health-care Bill,” David S. Hilzenrath Washington Post, January  17,2010, accessed Jan. 30, 2013. (Hilzenrath is now editor in chief of the Project on Government Oversight, www.Pogo.org.)


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