Lifestyle choice strategies for medical plans Featured

7:18am EDT July 27, 2005
A new trend in health care benefits is enacting tiered contribution plans based on lifestyle choices. The most common lifestyle choice that employers are using to determine different contributions is a person’s smoker/nonsmoker status. Although this is the most common lifestyle choice, the list of options is much longer and more dynamic.

As with any nonstandard or new concept, many employers are interested in the concept of tiered contributions but are reluctant to be the first to pull the trigger. The good news is that the starting gun was recently fired by the state of Georgia, which announced an increase in contributions for medical coverage if employees or family members smoke.

This bold move was met by tough opposition, mostly from the smoking population. With an increased contribution of $40 a month, the state of Georgia is hoping this will be enough to motivate employees to stop smoking — the ultimate goal of these increased contribution plans.

Sources suggest that up to 70 percent of illnesses are lifestyle-related. And the only way to truly reduce health care costs is to reduce claims. Employees who follow healthy lifestyles incur fewer claims, and fewer claims mean lower health care costs. So why not focus on the cause of the problem?

Some lifestyle plans are taking the smoker/nonsmoker concept and adding body mass index, blood pressure and cholesterol levels. Experts agree that these are the four lifestyle factors that impact health care expenses the most, and each factor can be controlled.

As seen with the sweeping move to high-deductible plans, the creation of the health savings accounts, health reimbursement accounts and other consumer-driven plans, the tiered contribution strategy is an attempt to subsidize health care costs and change decision-making regarding health care spending.

If the tiered contribution idea seems too radical, another option is to give lifestyle credits toward a plan deductible. Using a $2,500 deductible plan, employees can qualify for credits worth $500 for each lifestyle choice. Each category met would translate to a credit toward the deductible, bringing employees who meet all four categories down to a $500 deductible plan. In this situation, employers are not charging the employee more in contributions but hitting them where the rubber meets the road. If you make poor lifestyle choices, then you will have more claims, and you will pay more for those services. This option may also go over easier with employees, compared to charging a smoker more per month in contributions when that smoker may not have more claims than the next person.

The range for scoring each factor can be as forgiving or as narrow as desired, allowing employers to set the standards they feel are most important. The cost of the deductible credits is also set by the employer. The goal should be moving toward medical standards for each of the four criteria.

It’s also important to note that these plans do not punish the sick. If someone has cancer or another disease, they could still be a nonsmoker, have low blood pressure, have normal cholesterol (even with medication) and be at an acceptable weight. The key word here is choice. Lifestyle choices are voluntary or can be controlled.

Implementing these plans may meet with resistance, so they should be slowly phased in. Some employers announce the introduction of this new lifestyle plan six to 12 months before implementation. Giving employees adequate time to meet these new standards emphasizes that the primary goal of the pro gram is to get employees and their families to live healthier lives. If everyone wants to take a sip of the truth serum, we would all admit that lifestyle choices threaten controlled premiums for the rest of the population. An additional $40 a month may not force everyone to stop smoking, but it’s a step in the right direction.

BRUCE BISHOP (bruce@kybabenefits.com) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext_. 205.