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Senate Bill Could Undermine the Ban on Pre-Existing Condition Discrimination, Progressives Say

January 7, 2010 - by Donny Shaw

If a provision in the Senate health care bill becomes law, insurers in the employment-based group market will actually have more leeway to discriminate based on pre-existing medical conditions, according to the progressive health care reform advocacy group Health Care for America Now.

Under current law (the 1996 Health Insurance Portability and Accountability Act), insurers in group markets are generally not allowed to vary premiums based on medical conditions. But there is one exception — they can provide for incentives in the form of premium discounts or rebates to people who meet “wellness” targets — like a particular body-mass index, cholesterol level or quitting smoking. The incentives cannot exceed 20 percent of the total cost of the premium under the law.

The Senate bill would keep this wellness incentives program in place and would actually increase how steep of a discount insurers can give to 30 percent. It would also allow the Secretaries of Labor, Health and Human Services, and the Treasury to increase the discount limit to 50 percent of the cost of the premium if they “determine that such an increase is appropriate.”

Health Care for America Now is arguing that this provision violates President Obama and Congress’s goal of banning discrimination based on pre-existing conditions because what actually happens with these wellness incentives is that base premiums go up for everyone in the plan and then discounts are given to the individuals who meet the wellness targets. The effect is that the people who are overweight, have high cholesterol or smoke would have to pay more for their insurance than healthier people. The Senate bill would only increase the level of inequality.

Read the legislative text of the provision in context of the bill here.

Harvard health policy expert Harald Smith argued in the New England Medical Journal last week and argued that the provision in being sold as a carrot approach, but, in reality, it often works as a stick. He describes some of the worst case scenarios that would be permissible under the Senate bill:

Alternatively, however, insurers might recoup some or all of the costs by increasing insurance contributions from insurance holders. In the extreme case, the incentive might then simply consist of being able to return to the previous level of contributions. Similar effects can be achieved by varying applicable copayments or deductibles. Direct and indirect increases would disproportionately hurt lower-paid workers, who are generally less healthy than their higher-paid counterparts and thus in greater need of health care, less likely to meet the targets, and least likely to be able to afford higher costs. Some employees might decide to opt out of employer-based health insurance — and indeed, one wellness consulting firm, Benicomp, implies in its prospectus that such a result might be desirable, pointing out that employees who do not comply might be “motivated to consider other coverage options” and highlighting the savings that would result for employers.

Health Care for America Now says they were able to discuss this with the House Democratic Caucus and that they have the House Dems’ full support in trying to get this provision stripped from the bill as they work on reconciling the differing Senate and House versions.

You can read the House’s version of the wellness provision, which you can read in context here. It would keep the current 20 percent limit on incentives in tact, stipulate that the programs are “consistent with evidence-based research and best practices,” and that financial incentives are “not tied to the premium or cost-sharing of the individual under the health benefits plan.”

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