Health Pact Report

Rhode Islands HEALTHpact Plan
March2010
Small-Group Health Insurance Reform in the States:

Lessons from Rhode Islands HEALTHpact Plan
EdwardAlanMiller,Ph.D.,M.P.A.,*AmalTrivedi,M.D.,^SylviaKuo,Ph.D.,^Katherine
Swartz,Ph.D.,VincentMor,Ph.D.^
*DepartmentofGerontologyandGerontologyInstitute,JohnW.McCormackGraduateSchoolof
PolicyStudies,UniversityofMassachusettsBoston
^DepartmentofCommunityHealth,BrownUniversity
DepartmentofHealthPolicyandManagement,HarvardSchoolofPublicHealth
State Health Access Reform Evaluation, a national program of the Robert Wood Johnson Foundation
Brown University Providence, RI
CONTENTS
Contents ....................................................................................................................................... i
ExecutiveSummary ..................................................................................................................... ii
Introduction ............................................................................................................................... 1
RhodeIslandsHEALTHpactPlan ................................................................................................ 1
Methods ..................................................................................................................................... 2
Findings ..................................................................................................................................... 3
Discussion ................................................................................................................................ 10
Conclusion................................................................................................................................ 14
Table1.HEALTHpact:Advantagevs.Basic ................................................................................ 16
Figure1.InitialandOngoingRequirementsforAdvantageLevelBenefits .................................. 17
Table2:HEALTHpactParticipation&Enrollment,January2009 ................................................ 18
References................................................................................................................................ 19
AbouttheAuthors .................................................................................................................... 23
AbouttheSHAREInitiative ....................................................................................................... 23
ContactingSHARE..................................................................................................................... 23
EXECUTIVE SUMMARY
ThisstudyanalyzeswhyHEALTHpact(HP),acategoryofhealthplanmadeavailabletosmallRhodeIsland(RI)em
ployerssinceOctober2007,hasfailedtomeetexpectationsforexample,enrollinglessthan10percentofits10,000
memberenrollmentcapasofJanuary2009.
HEALTHpactprovideshighdeductiblehealthinsurancewithpremiumscappedat10%oftheaverageRIwage.To
createtheseplans,thestateconvenedastakeholderpaneltodevelopguidelinesforinsurers,who,inturn,werere
quiredtodevelopproductssatisfyingthoseguidelines.TheresultistwolevelsofHEALTHpactbenefitsadvantage"
and"basic.Thepremiumsforbothlevelsarethesame,but"basic"planmembersaresubjecttosubstantiallyhigher
costsharing.Allenrolleesbeginwith"advantagelevelbenefits;however,tomaintainthesebenefitlevels,enrollees
mustengageinprespecifiedwellnessbehaviorsinthewayofdiseasemanagement,smokingcessation,andweight
lossprograms,asapplicable.
Forthisstudy,twentythreesemistructuredinterviewswereconductedwithpersonswhohadexperiencewith
HEALTHpactandthesmallgrouphealthinsurancemarketofRhodeIsland.Intervieweeswerechosenthroughacom
binationofpurposiveandsnowballsampling.Transcriptswerecodedtoidentifyrecurringthemesandpatternsin
responses.Enrollmentdataandarchivaldocumentswereexaminedaswell.
InterviewsubjectsidentifiedseveralfactorsthatcontributedtolowHEALTHpactenrollment.First,although
HEALTHpactwaspricedsomewhatlowerthanotherplansforsmallbusinesses,itdidnotofferagoodvalueformost
firms.Additionally,thewellnessincentivesincorporatedintoHEALTHpactwerepoorlydesigned,beingtoonoveland
complextoappealtothesmallgroupmarket.Further,sincefewfundswereallocatedforgovernmentoutreachand
oversight,therewaslittleopportunitytostimulate"bottomup"demandfromemployersandtoensurefaithfulim
plementationonthepartofinsurersandbrokers.Finally,seeingthesuccessofHEALTHpactasworkingagainsttheir
interests,insurersadoptedstrategiesthatrestrainedenrollment,andbrokersgenerallychosenottorecommendthe
product,believingitdidnotsuittheirclients'needs.
Thefindingsofthisstudyindicatethatfutureiterationsofsmallgroupreformshouldconsider:(1)institutingasub
sidyorotherpremiumsupportprogram;(2)prioritizingbrokerandinsurancecompanybuyin;(3)providingthere
sourcesnecessaryforeffectivegovernmentoversightandoutreach;and(4)carefullydesigningwellnessincentives,
(althoughdoingsomaystillnotbesufficienttopromotetakeupgiventheimpedimentsposedbytheotherchallenges
enumerated).
Small-Group Health Insurance Reform in the States:

Lessons from Rhode Islands HEALTHpact Plan
INTRODUCTION
EmployerbasedhealthinsurancecoverageintheU.S.
haserodedsubstantiallyinrecentyears,particularlyin
thesmallgroupmarket.Smallbusinessesandtheirem
ployeeshavebeenhithardbecausesmallgrouppur
chasersareespeciallyvulnerabletorisinghealthinsur
ancecosts:First,smallgroupsdonotoffertheadvantage
ofpoolingriskoveralargepopulation.Second,they
havelesspurchasingpowertonegotiatefavorablerates
withhealthinsurers.Finally,smallfirmsexperience
proportionatelyhighercostsinsettingupandadminis
teringahealthinsuranceplanthandolargerfirms(Ab
raham,DeLeire,andRoyalty2009).Thesemarketim
perfectionshaveledsomestategovernmentstotakean
activeroleinthesmallgroupmarket,wheretheyhave,
forexample,adoptedratesettingrestrictions,estab
lishedguaranteedissue,initiatedpremiumassistance
programs,andcreatedstatesponsoredinsurancepools
(Napel,etal.2009;NationalConferenceofStateLegisla
tures2009).
Between1999and2009,premiumspaidbysmallto
mediumsizedemployers(3to199workers)increased
by123%;atthesametime,theproportionofferingcov
eragedeclinedfrom65%to59%(KaiserFamilyFoun
dation/HealthResearchandEducationalTrust2009).
Amongverysmallfirms(3to9employees),just46%
nowoffercoverage,comparedto56%tenyearsearlier.
Furthermore,ithasbeenestimatedthatmorethanhalf
ofworkersinfirmswith50orfeweremployeeswere
uninsuredorunderinsuredin2007ascomparedtojust
overonequarterinlargerfirms(Dotyetal.2009).
Clearly,thereisaneedtodevelopfurtherinnovative
solutionstomakingaffordablecoverageavailableto
smallemployers.Thisstudyevaluatesonesuchinnova
tionRhodeIslandsHEALTHpactplan.
RHODE ISLANDS HEALTHpact PLAN
Erosioninsmallgroupcoveragehasbeenespecially
acuteinRhodeIsland,where94.0%ofemployersare
firmswith50orfeweremployees,employing35.0%of
thestatesworkforce(OfficeoftheGovernor2005).
Overall,theaveragecommercialpremiuminthestate
morethandoubledbetween1997and2008,to$4,930
and$13,363,respectively,forsingleandfamilycoverage
(KaiserFamilyFoundation2009b;OfficeoftheHealth
InsuranceCommissioner2007).Althoughtheofferrate
amonglargeRhodeIslandemployers(>50workers)has
remainedsteadyat98%,itdeclinedfrom70%to53%
amongsmalleremployersbetween1997and2008.
Largelydrivenbydeteriorationinemployerbasedcov
erage,thepercentageofuninsuredRhodeIslandershas
increased,doublingfrom6.9%in2000to12.8%in
2008.
LossofhealthcoverageinRhodeIslandmayhavebeen
exacerbatedbyalackofinsurercompetition(Allenand
Laliberte2006;DepartmentofHumanServices2007).
Priorto2009,onlytwohealthinsurancecarriers
UnitedHealthcareofNewEnglandandBlueCrossBlue
ShieldofRhodeIslandservedtheRhodeIslandmar
ket.However,TuftsHealthPlanreenteredthemarketin
2009afteratenyearabsence.
Inresponsetohighannualpremiumincreases,com
binedwithdecliningcoverageoffersandgrowingnum
bersofuninsured,thestateauthorizedHEALTHpact,a
uniquetypeofwellnessbenefitplanmadeavailableto
firmswith50orfeweremployees.Thegoalinestablish
ingHEALTHpactwastodesignanaffordablealternative
forsmallbusinessesthatwerenotofferingcoverageor
thatwereconsideringdroppingcoverage.
HEALTHpactgrewoutoftheagendaofRhodeIsland
GovernorDonaldL.Carcieri,whowantedtoincreasethe
affordabilityofhealthinsurancetosmallbusinessesand
whowantedtodothis,inpart,throughthedevelopment
ofinsuranceplansthatincorporateincentivesforwell
nessandprevention.DevelopedwiththeaidofaHealth
ResourcesandServicesAdministration(HRSA)planning
grant(DepartmentofHumanServices2007),legislation
authorizingHEALTHpactwaspassedbytheRhodeIsl
andGeneralAssemblyduringthesummerof2006.This
legislationcappedthepriceofthepremiumat10.0%of
theaverageannualRhodeIslandwage.Italsolaidout
severalaffordabilityprinciplesthatemphasizedthe
useofprimarycarepreventionandwellness;thelowest
cost,mosteffectiveprovidersettings;evidencebased
medicine;andchronicdiseasemanagement.Thelegisla
tionauthorizedtheOfficeoftheHealthInsuranceCom
missioner(OHIC)toconveneanadvisorypaneltodevel
opguidelinesforinsurers,who,inturn,wererequiredto
developproductssatisfyingthoseguidelines.TheOHIC
wasalsograntedtheauthoritytoapprove,disapprove,
ormodifytherates,administrativepractices,andother
planfeaturesproposedbythecarriers.Thepurposein
vestingthisuniqueauthoritywiththeOHICwastogrant
thesmallgroupmarketthesamenegotiatingleverage
availabletolargeemployers.
Duringthefallof2006,theOHICconvenedtheadvisory
panelmandatedinstatute.Thispanel,calledtheWell
nessAdvisoryCommittee(WAC),included16members
representativeofsmallemployers,localchambersof
commerce,insurancebrokers,anddirectpayconsum
ers.RhodeIslandstwomajorinsurerswerealsopresent
fortheWACsdeliberationsbutdidnothavevotingpri
vileges.
CommitteemeetingswerefacilitatedbytheOHICanda
Bostonbasedconsultingfirm.Consistentwiththelegis
lation,thegoaloftheWACwastodevelopgeneralre
quirementsforaplandesignwithamaximumyearly
costof10%oftheaverageannualRhodeIslandwage
andwithappropriateincentivesforwellness.Resulting
recommendationswereincludedinarequestforpro
posal(RFP)issuedtoinsurers.Specificratesandbenefit
components,whichwerenegotiatedwitheachcarrier,
wereapprovedbytheInsuranceCommissioner.
HEALTHpactwasdesigned,negotiated,andopenfor
enrollmentbyOctober2007.AtUnited,theHEALTHpact
optionisknownasthePledgePlan;atBlueCross,Blue
CHiPforHealthyOptions.Uponenteringthemarketin
2009,TuftsHealthPlanwasalsorequiredtodevelopa
planforHEALTHpact,butitsproducthasyettobemar
keted.
HEALTHpactcreatesincentivesforhealthybehaviorsby
offeringtwoproductswithdifferentlevelsofcoverage:
advantageandbasic(Table1).Thepremiumsfor
advantageandbasicarethesame,asarecovered
services.However,basicplanmembersaresubjecttoa
deductibleof$5,000foranindividualand$10,000fora
family,whileadvantagelevelbeneficiariesfacededuc
tiblesofonly$750foranindividualand$1,500fora
family.EachenrolleeinHEALTHpactbeginsatthead
vantagelevel,withenrollmentbeingcontingentupon
threewellnesstasks:(1)selectingaprimarycarephysi
cian,(2)completingahealthriskappraisal,and(3)
pledgingtoparticipateindiseasemanagement,smoking
cessation,and/orweightlossprogramsiftheenrollee
hasachronicdisease,usestobacco,and/orisover
weight(Figure1).Subsequently,enrolleeswhodonot
visittheirdoctororaffirmparticipationinappropriate
wellnessanddiseasemanagementprogramsmayre
maininHEALTHpact,buttheyareeligibleonlyforba
siclevelbenefits.Thus,HEALTHpacttradesmorege
nerouscoverageforadoptingprespecifiedbehaviors
believedtopromotewellness.
AsofOctober2008,averagemonthlyindividualpre
miumsforHEALTHpactwere$362and$372forUnited
andBlueCross,respectively(Koller2008).Theserates
are15%to20%lowerthanthepremiumschargedfor
otherproductswithcomparableadvantagelevelbene
fits.RhodeIslandappliesmodifiedcommunityratingto
thesmallgroupmarket.Consequently,actualpremiums
paidbyemployersdependontheage,gender,family
size,andhealthstatusdistributionofeachgroup,though
thehighestrateschargedcanbenomorethanfour
timesthelowest.
Asaconditionofdoingbusiness,insurersarerequired
toprovidesmallemployerswith50orfewerworkers
theoptionofofferingHEALTHpact.Furthermore,ifan
employerchooses,HEALTHpact,whichisdistributed
throughthestateshealthinsurancebrokers,maybe
offeredalongsideotherplans.Attheinsistenceofinsur
ers,overallenrollmentinHEALTHpactwascappedat
10,0005,000forUnitedand5,000forBlueCross.So
far,however,takeuphasbeenextremelylow,withonly
268employergroupsand538subscribersparticipating,
foratotalof921enrolleesasofJanuary2009(Table2).
Mostenrollment(81.0%)hastakenplaceintheBlue
Crossplan,withrelativelylittle(19.0%)occurringinthe
Unitedoption.Moreover,therearenoUnitedenrollees
participatinginbasiccoverage,andjust8.3%ofBlue
Crossenrolleesareatthebasiclevel.
GivensuchlimitedtakeupinHEALTHpact,theprincipal
objectiveofthisreportistoexplainwhyenrollmentin
HEALTHpacthasfailedtomeetexpectations,withthe
aimofdrawingonthisexperiencetoformulatelessons
forfutureinterventioninthesmallgroupmarket,both
inRhodeIslandandinotherstates.Aqualitative,case
studymethodologydrawingonmultipledatasources
wasusedtocreateacohesivepicturedocumentingwhat
factorsinHEALTHpactsdevelopmentandadministra
tioninhibitedgreaterenrollmentintheplan.
METHODS
Thiscasestudyanalyzedthedesignandimplementation
ofHEALTHpactusingenrollmentdata,archivaldocu
ments,andindepthopenendedinterviewswithkey
stakeholders.
DataonHEALTHpactenrollmentwereprovidedby
OHIC.Archivalresourceswerederivedfrommaterial
generatedbyOHIC,aswellasbytheGovernorsOffice,
theGeneralAssembly,United,BlueCross,theWAC,and
variousbrokers.Thesedocumentsincludedpressre
leases,policystatements,benefitsdescriptions,statuto
ryprovisions,andregulatorydirectives.
Semistructuredinterviewswereundertakenwith
peoplechosenthroughacombinationofpurposiveand
snowballsampling(Patton2002).Withpurposivesam
pling,prospectiverespondentsarechosenforspecific
purposesandforspecificrepresentation.Snowballsam
plingfirstidentifiesrespondentswhomeetthecriteria
forinclusionandthenasksthemtorecommendothers
theyknowwhoalsomeetthecriteria;theseinturnrec
ommendothers,andsoon.Thus,usingacombinedpur
posivesnowballapproach,selectionofrespondentswas
initiallybasedonourownknowledgeregardingthein
dividualswhocouldbestinformourstudy.Later,how
ever,webasedmoreofourchoicesoninformationpro
videdbyourrespondentsintermsofthoseadditional
individualswhomightproveappropriateforinclusion.
Ingeneral,wesoughttoconductinterviewswithindi
vidualswithknownordemonstrableexperiencewith
HEALTHpactandthesmallgrouphealthinsurancemar
ketofRhodeIsland.Fiveopenendedinterviewproto
colsweredevelopedoneeachforemployers,health
insurancebrokers,insurancecompanyrepresentatives,
stateofficials,andWACparticipants.Thisensuredthat
allsubjectswereaskedthesamequestionsandgiventhe
opportunitytocommentonthesameareaswhile,atthe
sametime,theinterviewswereorientedtowardeach
subjectsrespectivestrengthasaninformant.Allsub
jectswereaskedaboutthepassage,design,andimple
mentationofHEALTHpact;otherstatemandatedplan
designs;andtheroleofgovernmentinthesmallgroup
healthinsurancemarketmoregenerally.
Twentythreeinterviews,lastingapproximatelyone
houreach,wereconductedfromNovember2008toMay
2009with25individuals.Subjectsincluded7stateoffi
cials,4insurancecompanyrepresentatives,7insurance
brokers,5smallemployers,and2directpaycustomers.
Allofthesmallemployerintervieweesanddirectpay
subscribers,aswellastwoofthebrokers,alsoservedon
theWAC.Allinterviewswererecordedandtranscribed.
Transcriptsweresubsequentlycodedtoidentifyrecur
ringthemesandpatternsinresponses(MilesandHu
berman1994).Thiswasanemergentprocesstotheex
tentthatweformulatednewcategoriesandrevisedold
onesaswereadthroughthetranscripts.Onceafullset
ofcodesweredeveloped,wewentbackandrecodedall
transcriptsusingthecommonsetofthemesthatwede
veloped.Quotesillustrativeofeachthemewereex
cerpted.
FINDINGS
Theinterviewshighlightedthreemajorexplanations
underlyingtheprevailinglackofenrollmentin
HEALTHpact:(1)HEALTHpactwaspoorlydesigned;(2)
neitherinsurersnorbrokersviewedHEALTHpactas
consistentwiththeirinterests;and(3)OHIClackedthe
resourcesnecessarytoeffectivelyconductprogramedu
cationandoversight.
HEALTHpact Was Poorly Designed
TherewasgeneralagreementthataspectsofHEALTH
pactsdesignposedimpedimentstoprogramsuccess.
Lackofasubsidy,poorvalue,andthecomplexityand
noveltyoftheplanstructurewereallfactorsbelievedto
contributetolackofenrollmentintheplan.
NoSubsidy
Anumberofrespondentsstatedthatinclusionofasub
sidywouldhaveincreasedthevalueofHEALTHpact.
Thewidelyheldviewamongintervieweeswasthata
subsidywouldhaveresultedinlowerpremiumsand/or
moregenerouscoverage,therebyfacilitatingtakeup.As
oneknowledgeableobserversaid:Thevalueforasub
sidyisaboutgettingafootholdinthemarketfora
productthatsnotpalatabletoastatethatsusedtoa
veryrichbenefit.
TheoriginallegislationauthorizingHEALTHpactdid
includeareinsurancebasedsubsidyprogram.Thesub
sidywouldhavebeenpaidfor,inpart,through$5to$7
millioninannualinterestpaymentsgeneratedbyatrust
fundconsistingof$100millioninsecuritizedtobacco
settlementpayments(DepartmentofHumanServices
2007).Itwasestimatedthatthistrustfund,together
withannualfeesonsurplushealthplanadministration
andprofits,wouldhaveresultedinadditionaldiscounts
of10%forupto23,000lowwageRhodeIslanders.
However,whilethesubsidyprogramwasauthorizedby
thefinallegislation,itwasleftunfunded,withthetobac
cosettlementmoneybeingdirectedtowardclosingthe
statesbudgetdeficitinstead.
Theabsenceofasubsidyhassubsequentlydefinedthe
focusofHEALTHpact.Onestateofficialnoted,This
productasitsdesignednowreallyendsupbeingfor
businessesthathavehealthinsurance,thatarealready
atthislowerpricepoint,meaningthatsallthattheycan
afford,andtheyrelookingattheoptionofeitherin
creasingtheirdeductiblesto$2,000/$2,500ortaking
thewellnessincentivesandlivingwithalowerdeducti
bleLowwagebusinessesthathavegivenupyoucould
conceivablybringbackinifyouhadasubsidywelost
thosepeople.Thus,ratherthanpromotingadditional
takeup,HEALTHpactendedupbeingtargetedtoward
firmsthatwerealreadyprovidingcoveragebutconsi
deringdroppingitoradoptingahighdeductibleplan
(thoughevenamongthesefirms,HEALTHpactsreach
maybelimitedwithoutasubsidy,particularlyforlow
wageworkerswhomaystillnotbeabletoaffordtheir
shareofthepremium).Indeed,itmayonlybethrough
thepotentialnewvolumegeneratedbyasubsidythat
theinterestofcarriersmaybesufficientlypiquedto
promoteandsellastatemandatedhealthinsurance
productsuchasHEALTHpact.Otherwise,theperception
amonginsurersisthattheprogramissiphoningenrol
leesfromtheirexistingcustomerbaseandnotgenerat
ingnewbusiness.
PoorValue
Therewasgeneralagreementamongthoseinterviewed
thatHEALTHpactwassuccessfulinpositioningitselfas
thecheapestproductinthesmallgroupmarket,aswas
intended.Consequently,somefirmsofferedHEALTH
pactsimplybecauseitrepresentedthelowestprice
pointinthemarket,notbecauseitalsowasdesignedto
promoteemployeewellness.Someoftheemployers
lookatitforthepriceonly,explainedonebroker.They
haventreallylookedatitas,Wow,thisisagreatplanto
keepmysubscribershealthy.
Despiteitspricetag,keystakeholdersgenerallybelieved
thatHEALTHpactdidnotrepresentagoodvaluefor
mostfirmsandthatthisiswhymostsmallbusinesses
neverofferedtheiremployeestheoptiontoenroll.Like
otherNewEnglandstates,thesmallgroupmarketinRI
hasalongtraditionofofferingcomprehensivecoverage,
sosmallbusinessesoftenfeelthattheymustofferplans
withcomparativelyrichbenefitsinordertoremain
competitiveinthemarketforemployees.Assuch,the
possibilitythatworkersmightendupwithinflatedba
sicdeductibleandcoinsurancelevelsprovedtobea
barriertotakeup.Eventheadvantagelevelcopay
andcoinsurancerequirementswereseenasadeter
rent,astheyexceededthoseavailableinothercompara
bleplans.Onebrokercommented,Thecustomersthat
weareexplaining[HEALTHpact]toaresaying,Okay,
foralittlebitmoreeachmonth[onadifferentplan],I
have100%coverageaftermydeductible;Ihavealesser
drugcopayment;IhavealesserER;Ihavealesserspe
cialist.Whatisthebenefit?
Oneknowledgeableobserverexplainedthatbecause
[thelegislation]dictatedaprice[10%oftheaverageRI
wage][it]reallyforcedabenefitdesignthatisleaner
thanwhatthemarketwants.Thismaybeparticularly
true,sincefewsmallemployersareactuallyatthepoint
ofchoosingbetweendroppingcoverageandofferinga
highdeductibleplan:Most,giventhesetwochoices,
takeathirdchoice,whichistopaymoreforricherprod
ucts,notedonerespondent.Furthermore,totheextent
thatemployerschangecoverage,theytendtodosoin
crementally.Toexpectthemtomovefromacompara
tivelyrichbenefittoahighdeductibleproductsuchas
HEALTHpactisunlikely.
Evenwhencomparedtoother,similarproducts,
HEALTHpactlacksappeal.Virtuallyallrespondentsbe
lievedthatHEALTHpactislessattractivethanotherhigh
deductibleplans.Whenyoureallyweighapplesand
apples,observedonestakeholder,ofthisplancom
paredtotheotherplansthatcarriersoffer,Idontthink
theratedifferentialisenoughtoreallyenticepeople.
Forexample,foraslightlyhigherpremium,employers
couldenrollemployeesintraditionalhighdeductible
planswithdeductiblesandbenefitlevelssimilarto
HEALTHpactadvantagebutwithouttheburdenofre
portingahealthassessment,participatingindisease
managementprograms,orfacingtheriskofa$10,000
deductible.Thisscenarioisreflectedinthecommentsof
onebroker,whoexplainedthatsometimes[therewill
bea]$100differenceinthefamilyratefortheHEALTH
pactplanversusa$1,000deductibleplan.Groupslook
ingatitsay,Youknowwhat?Iknowexactlywhatmy
deductibleisgoingtobe.Idonthavetodoallthataddi
tionalpaperwork[Theyare]willingtopayalittleextra
nottohavetodothework.
Theabilitytoofferacomparableplandiffersforthe
statestwoinsurancecarriers.Unitedofferssubstantial
lymoreplanswithhighdeductiblesthandoesBlue
Cross.Asaconsequence,Unitedhasconsiderablymore
planscompetinginthesameproductspace,making
HEALTHpactseemlessattractivebycomparison.That
HEALTHpactrepresentedabetterpricepointforBlue
CrossthanforUnitedmayexplain,inpart,whymore
HEALTHpactsubscriberswereenrolledwithBlueCross.
SomestakeholdersfeltthatHEALTHpactcouldhave
beenmadeevenmoreaffordable,independentofpre
vailingcostsharingrequirements,hadtheWellnessAd
visoryCommitteebeenallowedtoexcludeoneormore
ofthehealthinsurancemandatesrequiredbytheState.
Iftherewasanycriticismabout[HEALTHpactsautho
rizing]legislationitwouldhavebeenthedifferent
mandatesthatarerequiredbytheStateofRhodeIsl
and,oneCommitteememberexplained.Thelegislation
didnotallowustosay,Alright,youknowwhat?May
beweregoingtoexempt[infertilitytreatments]from
thisprogramDontconstrainuslikethat.Thus,to
reachthepricepointmandated,theCommitteedidnot
havetheabilitytoexcludeorchooseamongmandated
benefitssuchasinfertilitytreatments,maternitycare,
chiropracticservices,andmentalhealthcare.Itisun
clear,however,whethertheabilitytoworkwiththe
mandateswouldhavemademuchofadifferenceinplan
costs.Oneknowledgeableobserverreportedthathealth
insurancemandatesinRhodeIslandaccountforabout
9%oftheaveragepremium,withmentalhealthandfer
tilityservicesconstitutingthebulkofthosecosts.
Anotherreportedthatinsurerswerenotbringingany
lowercostproductstomarketfreeofmandatedbenefits
asauthorizedbyotherlegislation.Theinsurerswilltell
you,thisobserverexplained,Wecantsellaproduct
thatdoesnthaveallthosebenefitsinit,becausepeople
dontbuyit.InabenefitsrichstatelikeRhodeIsland,a
lotofbenefitsthatpeoplethinkarebasichealthcover
ageservicesareactuallymandates.Excludingthem,
thoughpotentiallybeneficialforthebottomline,may
furtherimpedetakeup.Ifthisisaboutgettingpeoplein
thegame,onerespondentpointedout,youwouldnt
wanttowalkinthereandsay,Weveleftoutwholecat
egoriesofcoveragethereinthemarketplaceIthadto
beassimilaraspossibletootherbenefitplansinterms
ofthetypesandbreadthofcoverageavailable.
TooComplexandNovel
StakeholdersgenerallyfeltthatHEALThpactwastoo
complexandtoounlikeotherinsuranceproductsfor
brokersandinsurerstoexplaintosmallbusinessown
erswithinsufficientexpertisetomakehealthinsurance
coveragedecisions.Thestakeholdersalsofeltthatitwas
toocomplexforsmallbusinessownerstoexplainto
theiremployees,especiallywithrespecttotherequire
mentsnecessaryformaintainingadvantageversus
basiccoverage.Smallemployerstypicallylackhuman
resourcepersonnel.Consequently,fewhavethetimeor
wherewithaltounderstand,letaloneadoptandimple
mentparadigmalteringhealthplanssuchasHEALTH
pact.TheproblemwithHEALTHpact,explainedone
employerisyouvegottounderstanditWhatamI
doing?Itscheaper?Why?WhatamIlosing?AndifI
dontreallygetinvolvedandunderstandallthosethings,
Imgoingtobealittleuncomfortablewiththechange,
andmostpeopledontliketochangeanything.Thisis
particularlytruesince,accordingtoonerespondent,
employerbasedpurchasingtendstobiasdecisionsto
wardthelowestcommondenominator.Employers
whoarelesswillingtoacceptthetradeoffsinHEALTH
pactmayselectplansthatresultintheleastamountof
hassleandpushbackfromemployeesaspossible.Incon
trast,someworkersmightindependentlybewillingto
acceptthetradeoffsinvolvedinHEALTHpact.Thecon
sequenceisinertia,wheremostbusinesseswouldrather
stickwithwhattheyknowiftheycanafforditrather
thanadoptsomethingperceivedasunusualordifferent.
Incorporatingwellnessintohealthbenefitplandesign
receivedgeneralsupportfromthekeystakeholdersin
terviewed.Thegoal,accordingtooneWACmember,is
toletpeopleseethattheyreputtingskininthegame
thattheirhealthbehaviorsmatterwhenitcomestocost
andthattheyhavearoleandaresponsibilityinthat
number.Moststakeholders,however,believedthatthe
particularincentivesincorporatedintoHEALTHpact
werepoorlyconceived.Theinitialhealthassessment
questionnaireprovedtoolonganddaunting,incorporat
ingquestionsthatseemedintrusivetoemployeesand
theiremployers.Employerswereworriedaboutnotbe
ingabletoassistworkersinkeepingupwiththeplans
requirements.Employeeswereworriedaboutwho
wouldseetheinformationcollected,describing,forex
ample,profoundsuspicioninprovidingtheirpersonal
healthinformationtoaninsurerthatisunderwriting
them.Theyalsowereworriedthattheymightnotbe
abletofindaprimarycareprovider,andeveniftheydid,
thattheymightbeunableobtainanappointmentinthe
timeframenecessarytoavoidbeingpenalized:Isthat
myfaultthatmydoctorcantfitmeinwithin8months?
WhyshouldIgetpenalizedfornotbeingabletomeet
thatcriteria?Ontopofthis,brokersraisedthespecter
oftheHealthInsurancePortabilityandAccountability
Act(HIPAA),whichprecludedthemfromreviewing
completedhealthassessmentforms,therebymakingit
difficulttoensurethatsubscribersdidnotendupinba
sicbecausetheirformswerefilledoutincorrectly.
Giventheseconcerns,stakeholderswereskepticalthat
thewellnessbehaviorsincentivizedbyHEALTHpact
wouldreducehealthcarecostsorimprovehealthout
comes.Theybelievedthatitwasnotonlytoomuch
workforpeopletofilloutthenecessaryforms,butthat
itwasachallengemakingsurethatworkerswereaware
oftheneedtofulfillthoserequirementsinthefirstplace.
StakeholdersalsotheorizedthatHEALTHpactsincen
tiveswouldbemorelikelytoappealtohealthierem
ployeeswhowouldnotviewahighdeductibleasasig
nificantriskorberequiredtoengageinsmokingcessa
tion,weightloss,anddiseasemanagement.Explained
onebroker:Thepeoplethatareunhealthydontbuy
itTheydontwantthatburden.Itsthehealthypeople
thatdontcare.Imhealthy.Idonthavetodoanyofthat
crap...Nothingtoreport,nothingtodo.Dontsmoke.
Dontdrink.Donthavehighbloodpressure.Donthave
diabetes.[The]healthiergroupsaremoreresponsiveto
it.Severalstakeholdersalsobelievedthatthedifference
indeductiblesbetweenadvantageandbasicwastoo
starktoattractthosewhowouldbenefitthemostfrom
wellness.Theresbeenalotofanecdotaldiscussion,
explainedonestateofficial,abouthow[if]youdontdo
everythingexactlyright,thepenaltytoyouasthesub
scriberisreallysignificanttherearelotsofstories
abouthowpeopledontwanttoparticipatebecausethey
wereafraid.
Despiteprevailingfears,only7.2%ofHEALTHpacts921
enrolleeswereinbasicduetofailuretomeettheplans
wellnessrequirements.Twomajorexplanationsforthe
lowtransferratefromadvantagetobasicwerepro
posedbythepeopleweinterviewed.First,enrolleescan
simplyselectanotheroptionifHEALTHpactisoffered
alongsideanotherplan.Intheexperienceofonebroker:
Ifyougetthatcard,andyouhavea$10,000deductible,
youregoingtogetoffthatplan,andyouregoingtogo
backtoafullyinsuredplan.Clientshavesaid,Well,well
dothisforayear,andthenwellseewhathappens.We
canalwaysgobacktotheotherthing.Theresnolon
gevityintheplan.Thereisforhealthypeople,butifthe
goalistochangebehavior,Idontthinkitshappening.
Second,bothregulatorsandcarriers/brokerssoughtto
preventtransfersfromadvantagetobasic,atleast
initially.Thiswasparticularlytrueduringthefirstyear
when,inlightofgrowingawarenessthatsomenon
compliancestemmedfromenrolleessimplynotknowing
whattheyhadtodo,insurerswereencouragedbystate
officialstomoreaggressivelycommunicateplanre
quirements.Indeed,bothUnitedandBlueCrossre
portedmakingextraeffortsatrenewaltimetoensure
thatthecorrectformshadbeenfilledout.Oneinsurance
companyrepresentativeexplainedthat,priortotransfer
tothebasicplan,Wemakethreeorfourphone
callsWecallthebroker.Wecallthegroup,theemploy
er.Weevenhavealetterthatwellsendoutcertified
mail:Thisisyourlastchance.Brokers,too,soughtto
preventlargenumbersoftransfers.Thiswasdrivenby
theneedtomaintainreasonablelevelsofgoodwillwith
theirclients,somethingwhichmightbedifficultto
achieveshouldhighproportionsoftheiremployeesend
upinbasic.
Inlightofperceivedchallengessuchasthese,some
stakeholderssuggestedreducingthegapbetweenthe
twobenefitlevelsoradoptinganalternative,lesspena
lizingapproachtopromotingwellness;forexample,em
ployeescouldberequiredtocontribute10%to15%
moretotheirpremiumsiftheydonotfollowtherules.
Stillotherssuggestedthatthecarrotwouldworkbetter
thanthestickinpromotingcompliance.Ratherthan
gettinghitwiththisotherplanifyoudontdocertain
things,enrolleescouldreceiveadeductiblecreditfor
completingthewellnesstasks.Forexample,reducinga
$2,000deductibleto$500mightmoreeffectivelymoti
vatewellnessbehaviors.Thatsmuchmoreofanincen
tiveforme,explainedonestakeholder,becauseits
moneyinmypocket,asopposedto,Imreallygoingto
getthecrapwhackedoutofmeifoneofusgoesinthe
hospital.Thedeductiblecreditapproachisalsomore
nimble,allowingtheaccrualofcreditsduringthecourse
oftheyear,ratherthanwaitinguntiltheendofthe
enrollmentperiodtodeterminewhetherrequirements
weremetandtheenrolleewillbetransferredtobasic
ornot.Insteadofofferingreductionsinplandeductibles,
otherssuggestedarefundonpremiumspaid.Thisap
proachisperhapsbestillustratedbythewellnessbene
fitplanBlueCrosswasrequiredtodevelopandimple
mentforitsdirectpaysubscribers,aprovisionthatdid
notapplytoUnitedsinceitdoesnotserviceRhodeIsl
andsindividualmarket.Ifanindividualisenrolledina
highdeductibleplanatBlueCross,heorshemayelect
toenrollinBlueCrosswellnessrewardsprogram.Ra
therthanprovidingsubstantiallyricherbenefitsto
memberswhoarecompliantwiththeplansrequire
ments,participantsreceiveacheckequalto10%oftheir
annualpremiumattheendoftheyeariftheycomply
withwellnessbehaviors.
Limited Insurer and Broker Enthusiasm

Insurersandbrokersdidnotviewthesuccessof
HEALTHpactasconsonantwiththeirinterests.Thisis
bothwithrespecttoproductdevelopment,whereinsur
erschaffedatlimitationsimposedbyOHICandtheorig
inallegislation,aswellasduringimplementation,where
bothinsurersandbrokerstookstepstodeterenroll
ment.
ProductDesignPhase
ThepurposeinconveningtheWAC,ratherthandefining
HEALTHpactinstatuteorregulation,wastoensurethat
whateverproductemergedwouldbesomethingthat
wouldactuallysellinthesmallgroupmarketandthat
businesseswouldactuallybuy.Anumberofstakehold
ersfeltthisprocessrepresentedanimprovementover
otherstatemandatedbenefitdesigneffortswhich,be
causetheytendtobemoreprescriptive,provideplan
designerswithfew,ifany,opportunitiestocatertothe
particularneedsofthemarketplaceinquestion.Indeed,
mostmembersbelievedthatthecommitteecameto
getherandworkedwell;theopennessoftheCommit
teesdeliberationandtheinclusionofmultiplestake
holdergroupsweretypicallyhighlighted.Therewasdis
agreement,however,regardingthequalityoftheprod
uctthatemerged.Somewerequitepleasedwiththere
sults,notingthatthe[Committeemembers]werereally
excitedaboutwhattheyhadthattheyhadsomething
genuinelyuniquethatgotatsomeoftheunderlyingis
sues.Othersweredisappointed,reporting,forexample,
thatpeopledidntlikethe[benefit]butitbecameasitu
ationofwereatthepoint[where]wehavetoturnit
overandhereswhatwehave.
Mostcommitteemembersreportedreceivingcostana
lysesandfeedbackfromthehealthinsurancecarriers,
obtainingtheirinputtosaywheretheythought[it]was
goingtobearealstickler,orwherethiscouldbesome
thingthattheycouldworkwithtogetasenseof
whatcouldgetthrough.Thisincludedusingindustry
actuariestoprovidefeedbackaboutwhatbenefitsand
deductiblelevelscouldbeobtainedforagivenpremium
price.Butwhileinsurersappreciatedbeingincludedin
theproductdesignphase,theycomplainedthattheyhad
limitedinfluencesincetheywerenotvotingmembers
ofthecommittee.Ofparticularconcernwashowacom
mitteewithoutmuchexperienceinbenefitdesigncould
developaplanthatmetthepricepointsetoutbythe
legislature.Asacompany,recalledoneindustryrepre
sentative,wewereconcernedabouttheprocess,con
cernedaboutacommitteethatfranklyhadlimited
knowledgeofdesigningbenefitplans,puttingtogethera
productthatfromthebenefitsidemaynotnecessari
lyplopdownandmeet10percentoftheaveragean
nualwage.Ifyouregoingtoputtherateinthesta
tute,saidanother,thenletusdesignthebenefitplan.
Justgiveustheabilitytodowhatwedoasacompany
andabusinessgiveusalittlebitmoreflexibilityin
doingthat.Whiletheinsurerswereconfidentthatpro
vidingthemwithgreaterflexibilitywouldbemorelikely
toresultinaplanthatmetthepricepointauthorizedin
statute,theydoubtedthathavingapremiumcappedat
10%oftheaveragewagewouldbesustainableoverthe
longtermabsentfuturebenefitdesignchanges.Since
wagegrowthhastraditionallylaggedfarbehindthe
growthinmedicalcosts,insurersspeculatedthepro
posedpremiumcapswouldnotbeeasilymaintainable.
TheauthorityoftheOHICtosetratesmadecarrierses
peciallyuncomfortablebecause,itcreatestheopportu
nitythattheCommissionercouldjustsay,Hey,therates
aretherates,likeitornot.
Intervieweeswhowerenotconnectedtoinsurersinter
pretedcommitteeactivitiesdifferently.Thefeelingwas
that,despitewhateverusefulinformationandanalysis
thecarriersprovided,theywerebroughtinkickingand
screamingandneverreallyembracedtheprocess.
Indeed,itwasfeltthatthetwocarriersdidntbringas
muchtothetableastheycouldhavetogettotheprice
pointmandatedbytheGeneralAssemblyortoattractas
muchenrollmentaspossible.
AkeycomponentoftheHEALTHpactlegislationwas
thattherewouldbeareductionincostinexchangefor
commitmentstohealthandwellness.Duringitsdelibe
rations,theWACconsideredhowbesttoengageem
ployeesinthisrespect.Reportedoneobserver:Itsnot
like[theCommitteemembers]satdownandcameup
withalltheideas,buttheydefinitelypushedtheOHICto
engagetheconsumerinadirectsortofwaytodesign
theincentivesfortheemployeeratherthantheemploy
er,becauseitwasemployeebehaviorthatyouretrying
togetat.However,theWAC,makingestimatesbasedon
insurancecarriersassumptionsabouttheimpactofthe
wellnessincentivesoncosts,wasnotabletodesigna
productthatofferedasignificantlygreaterdiscount.If
therewassomewaywecouldsqueezeouta30to40
percentdiscount[fromtheinsurers],reportedoneob
server,thenthetradeoff[betweenHEALTHpactand
otherplans]endsupbeingdifferent,buttheresnoway
wecoulddoitandbeabletowithstand[their]scrutiny.
Theydidntbringanythingtothepricing,explained
another.Whathappenedwasyouhadtocontinually
movethedeductiblehigherandhigherandhigher,and
thecopayshigherandhighertogettothepricepoint
when,infact,iftheycouldhaveputmorefaithinthe
diseasemanagementprograms,youwouldnthavehad
tohavehadthedeductiblesthere[i.e.,setsohigh].
Thus,ratherthanmeetingtheStatesmandatedprice
pointbygrantinggreaterpricingcredittotheplans
wellnessanddiseasemanagementrequirements,the
insurersinsistedonhigherdeductibleandcostsharing
thanmembersoftheWACwouldhavepreferred.
Severalfactorsunderlayinsurancecompanyreluctance
todiscountratesfurtherbasedonwellness.Itwaswide
lyrecognized,accordingtoCommitteemembers,that
prevailingresearchdemonstratesthatdiseasemanage
ment,obesityprevention,andtobaccocessationare
costeffective.Nonetheless,carriersresistedbecause
theydoubtedthattheywouldultimatelybenefitfinan
ciallyfrominvestinginthoseprograms.Thecostofthe
wellnessprogramisborneinyearone,explainedone
observer.Thebenefitsaredowntheroad.Thecarriers
dontkeepmembersforever,andsothevalueofinvest
inginanindividualmemberswellnessprogramjust
isntthere.Itwassuggestedthattheonlywaytoover
comethisfundamentalflawinthemarketistorequire
allinsurerstocoverwellness,sothateachcarrierwould
bejustaslikelytobenefitfromothercarriersinvest
mentsinthisarea.Barringthat,encouragingthecarri
erstodesignbenefitplansthatachievethe[wellness]
principleslaidoutinHEALTHpactinawaythattheyfelt
wouldhavemoremarkettractionandwouldbemore
administrativelysimpleforthemwasofferedasanop
tion.
InadditiontoraisingthepriceofHEALTHpactbygrant
ingminimalpricingcredittowellness,stepstakento
ameliorateinsurerconcernsaboutadverseselection
servedtolimitenrollment.Carrierswereworriedabout
theselectionofpeopleleavingtheircurrentproducts
andenrollinginHEALTHpactaparticularconcern
shouldHEALTHpactbeofferedalongsideotherplans.
Thefearwasthatmorefavorableriskswouldmigrate
towardHEALTHpact,withitslowercostsandwellness
requirements,andlessfavorableriskswouldmoveto
wardhighercostalternativeswithricherbenefitspack
ages.AtfirstinsurerswerereluctanttoofferHEALTH
pactbundledwithanyotheroption.Thiswasunaccept
abletotheCommittee,inpartbecausetheyfeltthat
employerswouldbemoreopentoexperimentingwith
[HEALTHpact]iftheydidnthavetoswapitoutandput
alltheireggsinonebasket.DespiteWACrecommenda
tions,however,insurerscontinuedtoexpressreluctance
toofferHEALTHpacttogetherwitharicherplan.The
Committeefinallyagreedtoallaycarriersconcernsby
cappingenrollmentinHEALTHpactat5,000livesper
insurer.However,somefeltthatinsurerconcernson
thispointwereoverblown,assubsequentenrollment
numberswould,inpart,demonstrate.
Ultimately,UnitedagreedtoallowHEALTHpactpairings
withanyotherplanwithinitssmallgroupportfolio.This
wasnotthecasewithBlueCross,however,whichre
strictedthetypesofplanswithwhichHEALTHpact
couldbepairedtootherhighdeductibleplanswithac
tuariallysimilarbenefitlevels.Thisposedadisincentive
toparticipatingforsomeemployers,asreflectedinthe
experienceofsomeofthestakeholdersinterviewed.
BecauseBlueCrossdecidedtobundle[HEALTHpact]
with[averyhigh,$1,000deductibleplan]thatwedonot
participatein,wewerenotabletoimplementit,re
portedoneemployer.Wehaveanagingworkforce
herewetendtomigratetoplansthatarefairlyrichin
benefitsTodisruptthatatthispointbyradically
switchingtoadifferentplandesignwouldnotbewell
receivedbyouremployees.Anotheremployerex
plained,I[wanted]tobeabletooffermyrichplanthat
IhadalongsideHEALTHpact,butthefirstthingtheysaid
was,Oh,no.YoucanallowotherplanswithHEALTH
pact,butnottheoneyoureonat[yourcompany].That
oneisnotacompatibleone.Youhavetohaveeitherthis
oneorthisone.Andsotheyweredictatingwhichones
couldmarryupwiththeHEALTHpactItwasntinthe
spiritofwhatwehad[agreedupon],butyouknow,
whenyoureinbusiness,youlearnyouhavetobevery,
veryspecificsometimes.
ImplementationPhase
Becauseinsurerswerenotinterestedinpromoting
HEALTHpact,theyadoptedstrategiestoinhibitenroll
ment.Explainedonerespondent:Wevegotthisprod
uctouttherewithhigherregulatoryauthoritythanany
thingelseinthemarketplace[ifIwereacarrier]the
lastthingIwantisaproductwithhighregulatoryau
thoritytobesuccessful.Theincentivesarentaligned.
ItslikePoliticalScience101,addedanother.Itsreally
difficulttomovebureaucraciesoreveninterestedpar
tiesiftheyrenotinfavorofthedirection.Iftheyrebe
ingpushed,theyregoingtobelessenthusiasticthanif
theyrewalkingalongside.Thisisparticularlytruein
lightofinsurancecompanydiscontentoverdevoting
moretimeandresourcestoadministeringHEALTHpact
thanotherproducts:Bothcarriersreportedadvertising
theprogramandparticipatinginseminarsexplaining
HEALTHpacttobrokersandemployers.Inaddition,Blue
Crossreportedthattheyhaddevotedsubstantialre
sourcestogettingtheproductupandrunning,and
Unitedreportedhowcumbersomeitwastoadminis
ter.Forexample,enrolleeinformationistypically
trackedbydifferentdepartmentsfordifferentpurposes,
butHEALTHpactrequiresthatinsurerspullthisinfor
mationtogetherforquarterlyreportssubmittedto
OHIC.Furthermore,asdiscussedearlier,bothinsurers
reporteddevotingextraefforttominimizethenumber
ofenrolleestransferredfromadvantagetobasic.
Therewasageneralsenseamongthoseinterviewedthat
theinsurancecarriersdevotedinsufficientresourcesto
theimplementationofHEALTHpact.Someperceiveda
completelackofmarketingonthepartoftheinsurers.
Othersbelievedthatalthoughsomecommunityoutreach
tookplace,itwasnotatthelevelthatwasneededorex
pected.Stillothersbelievedthatatleastonecarriers
communicationsactivelydiscouragedbrokersfrom
promotingtheplan.Severalofthebrokersinterviewed
reportedthatonecarriertoldthemthatnofeedback
wouldbeprovidedaboutwhichenrolleesdidordidnot
endupinbasicthroughfailuretomeettheplanswell
nessrequirements.Moreover,thecarrierwarnedthatit
wouldplacesomeoneinbasicfornotfillingouttheir
healthassessmentformscorrectly(forexample,ifallof
theiriswerentdottedandtswerentcrossed).
When[thecarrier]rolledoutthisplan,recalledone
broker,youcouldtelltheywerentsupportiveof
it[Theytoldusthatif]thepaperworkdidntgoinex
actlylikeitwassupposedtobe,asubscribercouldend
uponthehighdeductibleplan...Iremembersitting
aroundthetable[withtheotherbrokers]and[thecarri
er]isrollingthisthingoutThebrokerssaid,werenot
sellingthis.TheresnowayImputtingmyselfinthe
middleofmyclientandyouguys.Werenotdoingit.
Anotherbrokerreported,Thecarrierisnotgivingthe
brokertheinformationofwhensomeoneisnotmeeting
thecriteriaandifsomeonegetsbumpeduptothatde
ductibleThereisnochecksandbalancesfromthecar
riertotheclient,Ohyes,wereceivedit.Ohno,wedidnt
receiveit.Perceivingaheightenedriskofenrolleesend
ingupinbasicandlackingtheinformationnecessary
tointerveneprovedtobeasubstantialdisincentivefor
brokerstoofferHEALTHpact.Thefactthatthecarrier
ultimatelylimitedthenumberofenrolleesbeingtrans
ferredtobasicsuggeststhattheymayhaveoverstated
theirclaimsinordertotodiscouragebrokereffortson
theproductsbehalf.
Insurancebrokersessentiallyserveasthehumanre
sourcespersonnelforsmallcompaniesthatcannotaf
fordtohiretheirownpersonnel.Theytypicallyhave
longstandingrelationshipswiththeirclientsandconse
quentlyarereluctanttorecommendproductsthatdo
notsuittheirclientsneeds.Instead,theysiftthroughthe
variousoptionsavailableandrecommendthosedeemed
mostappropriate.Thus,althoughstatelawrequiresthat
brokersshowHEALTHpactandotherproductstotheir
clients,thisdoesnotnecessarilyhappeninpractice.
Thegoodbroker,explainedoneobserver,doesnt
wanttositthereandgothrough15differentproduct
options,whentheyknowdamnwellthatheresaguy
thatshadazerodeductibleplanforthelasttenyears.
Hesnotabouttogotoa$5,000deductible.Further
more,therearemanysubtlewaysbrokerscoulddiscou
rageparticipationinHEALTHpacteveniftheydo
presenttheplanasanoption.Forexample,abroker
mightsimplysay,Thestaterequiresmetoputthaton
there,butthesearetheonesyoushouldreallyconsider.
Or,thebrokermightcomparethebenefitssidebyside
butstate,Oh,bytheway,thereareadditionalre
quirementsthatyouhavetomeet.Alternatively,heor
shemightemphasizethenoveltyoftheproduct:Thisis
kindofnew.Thehealthplansarentreallyallthatsold
onit,soIdontknowhowtheyregoingtoadministerit.
Youmightwanttokindofwaitaroundtosortofsee
whatitlookslikeinayear,becausethebenefitsmight
change.
Thebrokersfeltthat,ultimately,itwastheirreputation
onthelinewhereHEALTHpactwasconcerned.One
stakeholderobserved,If[abrokergoes]toanemployer
andsays,Iwantyoutosignontothisthing,theyfeel
liketheyreonthehook,andIthinkthattherewerealot
ofquestionsaboutHEALTHpact,whetheritwasgoingto
bearoundformorethanacoupleofyears,whetherthe
ratewasgoingtospikeinyearortwo.Theywerecon
cernedabout[theirown]liabilitymovingforward,like
IfIgetpeopletosignontothesepledges,canIgo
throughthe[wellness]forms[toensureaccuracy]?Ifa
brokerdoesnotbelieveHEALTHpactisagoodproduct,
isuncertainabouttheimplicationsofenrolling,doesnot
fullyunderstandit,and/orbelievesthatlearningabout
andexplainingitaretootimeconsuming,thebrokeris
simplynotgoingtosellit.
Lack of Resources for Program Outreach and Monitoring

TheGeneralAssemblyandHRSAhelpedfundthedevel
opmentofHEALTHpact,includinghiringabenefitscon
sultantandrunningtheplandevelopmentprocess(e.g.,
theWellnessAdvisoryCommittee).However,fewaddi
tionalresourceswereprovidedtofundprogramimple
mentation,anespeciallysignificantdisadvantagefor
HEALTHpactgivenOHICsotherresponsibilitiesand
limitedstaffing(theofficehasonlytwoFTEsinaddition
totheCommissioneralawyerandadministrativeas
sistant).First,thelackofimplementationfundingli
mitedtheabilityofOHICtoconducteducationandout
reach.Consequently,therewaslittleopportunitytosti
mulatebottomupdemandfromemployersandpro
moteenrollment.Furthermore,sincetherewasnomon
eyallocatedtomonitoringandoversight,therewaslittle
opportunitytoensurebrokerandinsurancecompany
compliancewithHEALTHpactsrequirements.Yes,that
wasfundamental,observedoneWACmember.[The]
insurancecompaniesdidntreallylike[promoting
HEALTHpact],wouldntspendanymoneyonit.Andthe
statedidnthaveanymoneytospendonit.Another
memberadded,Youcantfixsomethingifyouhaveno
resourceswithwhichtofixit.
Interviewsubjectsgenerallyagreedthateducationand
outreachwerekeytopromotinggreatertakeup,both
amongemployersandtheiremployees.Althoughsome
believedtheplanwaswellpublicized,mostfeltthatad
ditionaleffortswereneeded,citingthelackofcommuni
cationandmarketingeffortonthepartofinsurersbut
especiallythelackofresourcesprovidedtoOHICforthis
purpose.Youcantcreateabrandnewprogramdiffer
entthananythingthatseverexistedbeforewithno
moneytoeducatethepeoplewhoneeditmost,argued
oneemployer.Whyistherelowenrollment?Howcould
therenotbelowenrollment?Itsalmostlikeyoudoomit
tofailureIts[liketeaching]kidstolearnpenmanship,
onlyyoucanthaveanypaper,andyoucanthaveany
pencils.Thisisnottosaythatnooutreachtookplace.
Indeed,OHICandtheinsurerstooktheshowonthe
road,introducingHEALTHpacttosmallemployers
throughaseriesofseminarsconductedaroundthestate.
Withtheaidofaconsultant,OHICalsodevelopedbro
churematerial,awebsite(www.healthpactplan.com),
andbrandstandardsfortheinsurerstoapplytotheir
ownwebsitesandcollateralmaterial.Sincethisbrief
flurryofactivityatstartup,however,thegovernment
hasreliedalmostentirelyoninsurersandbrokerstoget
thewordoutaboutHEALTHpact,and,asindicated
above,thesearetwopartieswhoarenotnecessarily
interestedinseeingHEALTHpactsucceed.
Stateofficialspointedoutthattheyweresuccessfulin
producingaproductforbusinessesthathadnotbeen
therebefore,butthey,too,emphasizedtheimportance
ofinvestingmoreinsystemchangetoensureproper
implementation.Theyexplained,werenowasking
piecestoworkinadifferentway,butwerenotmak
ingsurethattheyredoingit.Itwasobservedthatif
[OHIChadthe]resourcesforsomebodytositthereand
holdthecarriersfeettothefireandspendmoremoney
onmarketing,thatcouldprobablyhappen...But[OHIC]
doesnthavetheresourcestodothat[Thereisasignifi
cant]lackofregulatoryresources.Additionalresources
wouldalsohelpOHICensurethatHEALTHpactisalways
beingofferedasaproductoption;thatdecisionsmade
aboutbasicversusadvantagecoveragewerenotar
bitrarybutfairandequitable;thatnecessaryinforma
tionflowedbetweenOHIC,thecarriers,brokers,and
employers;andthattheproductwascontinuallyup
datedtoaccountforlessonslearnedandchangesinthe
marketplace.Itisimportant,oneobserverconcluded,for
thepublictoknowthatpeoplearewatching[thecarri
ers],thatthisisnotbeingdoneonawinganda
prayer.
DISCUSSION
WiththeadoptionofHEALTHpact,theStateofRhode
IslandsoughttousetheauthorityvestedintheHealth
InsuranceCommissionersOfficetocreateforsmall
businessesthenegotiatingleveragethatlargeemployers
possess.TheStatealsosoughttoincorporatewellness
principlesintotheplanthroughatwotieredbenefits
structurecontingentuponenrolleeadherencetopre
specifiedbehaviors.Theprimarypurposeofthisstudy
wastoidentifyfactorsthatimpededenrollmentin
HEALTHpact,withtheaimofgeneratinglessonsfor
smallgrouphealthinsurancereformbothinRhodeIsl
andinotherstates.Ourresultshighlightthedifficulties
ofexpandingsmallgroupcoveragewithoutallocating
additionalresourcesforsubsidiesorotherpremium
support.Theresultsalsohighlighttheimportanceof
enlistingthesupportofthehealthinsuranceandbroker
communitiesandensuringeffectivegovernmentout
reachandoversight.Additionally,whileourfindings
revealbroadsupportforincorporatingwellnessincen
tivesintohealthinsuranceplandesign,theysuggestthat
suchincentivesneedtobedesignedcarefullyand,even
so,theymaynotbesufficienttopromotetakeupgiven
impedimentsposedbyotherchallenges.
InstitutingaSubsidyProgramorOtherPremium
Support
Affordabilityisamongthemostfrequentlyidentified
reasonsthatsmallbusinessesdonotoffercoverageto
theiremployees(FronstinandHelman2003).Further
more,mostfirmsnotofferingcoveragereportthatthey
wouldbemorelikelytodosoifthegovernmentpro
videdfinancialassistance.Thenationssmallestfirms
pay18.0%more,onaverage,forthesamehealthinsur
ancebenefitsasthelargestfirms(Gabel,etal.2006).
Moreover,whileworkerswithinthesmallestfirmscon
tributesubstantiallymoretowardthecostofthosepre
miums(GabelandPickreign2004),workersinfirms
thatdonotoffercoveragetendtohavesubstantially
lowerincomesthanworkersinfirmsthatdooffercov
erage(FronstinandHelman2003).Thelackofenroll
mentinHEALTHpactillustratesjusthowdifficultitis
undertheseconditionstoincreasetakeupinthesmall
groupmarketwithoutsubsidizingcoverage,particularly
amongfirmswithdisproportionatelyhighnumbersof
lowwageworkers.
Previousexperienceindicatesthatsubsidiesneedtobe
largeinordertospursignificantnumbersofsmallem
ployerswhohadnotbeenofferingcoveragetobegin
doingso(HadleyandReschovsky2002;LongandMar
quis2001;SilowCarroll,WaldmanandMeyer2001).
Additionally,sincealargeproportionofuninsuredindi
vidualsareconnectedtosmallfirmswithlowwage
workforces,ithasbeensuggestedthatpublicsubsidies
bedirectedtowardthesefirms,inparticular,tobetter
maximizethebangforthesubsidybuck(Neuschler
andCurtis2003).Itappearsthatthiswastheoriginal
10
intentofRhodeIslandsHEALTHpactlegislation,which,
asinitiallyconceived,didincludeasubsidyprogram
targetedatlowwagefirms.SilowCarroll,Waldman,and
Meyer(2001)arguethatfinancialsupportforsubsidy
programssuchasthisshouldbeviewedasaninvest
mentthatwillpayoffinalowerburdenofuncompen
satedcareinthecommunityandreduceduseofother
publicprograms,aswellasbetterhealthoutcomesanda
moreproductiveworkforce.However,theoutcomeof
theHEALTHpactlegislationssubsidyprovisionillu
strateshowharditistosustainacommitmenttothese
typesofgoalswhenoverridingbudgetaryconcernspre
vail.
Severalstatesdocurrentlyprovidedirectsubsidies,tax
credits,orpremiumdiscountsinthesmallgroupmarket
(KaiserFamilyFoundation2009b;Napel,etal.2009).
Perhapsthepotentialofasubsidytodriveenrollmentis
bestseenintheexperienceofHealthyNewYork(Navi
gantConsulting2009),thesuccessstorymostfre
quentlyidentifiedbythoseinterviewedforthepresent
project.Establishedin2001,HealthyNewYorkrequires
allHMOsinthestatetoofferastatemandatedbenefits
package,thoughotherinsurersmayalsoelecttopartici
pate(Swartz2001;2005).Theprogramincludesastate
subsidizedreinsurancemechanismwherebytheState
reimburseshealthplansfor90%ofmembersclaims
between$5,000and$75,000.Itisavailabletosmallem
ployerswithfewerthan50employeesapproximately
onethirdofwhomearnlessthan$33,000annually
providedthattheyhavenotofferedhealthinsurance
duringtheprevious12months.Itisalsoavailableto
lowincomeselfemployedanduninsuredworkers.More
than150,000individualswereenrolledinHealthyNew
YorkduringNovember2008,andmorethanhalfamil
lionhaveparticipatedsince2001.Itislikelythat
enrollmenthasbeendrivenlargelybypremiumdis
countsofapproximately40.0%comparedtotheaverage
HMOpremiumavailableinthesmallgroupmarket
(Swartz2005)discountsfarhigherthanthe15%to
20%availableunderHEALTHpactRhodeIsland.
PrioritizingInsuranceCompanyBuyIn
Thisstudyhighlightstheimportanceofenlistingthe
supportofthehealthinsurerandbrokercommunities,
withoutwhichsmallgroupreformsbasedontheexist
ingprivatehealthinsurancesystemareunlikelytobe
successful.TheStateofRhodeIslanddidtrytoengage
bothbrokersandinsurersby,forexample,including
brokersontheWellnessAdvisoryCommitteeandrely
inginpartonanalysesgeneratedbyUnitedandBlue
Crosswhenevaluatingthefeasibilityofvariousproduct
options.Inaddition,aspectsofHEALTHpactsdesign
wereshapedbyinsurerconcerns.Thisincludesgranting
greaterpricingcredittobeneficiarycostsharingand
deductiblesthantowellnessandpermittingBlueCross
torestrictthetypesofplanswithwhichHEALTHpact
couldbepaired.However,theseconcessionsdidnot
provetobesufficienttoovercomeinsurancecompany
beliefsthattheywouldnotbenefitfromHEALTHpact
andthatthecarriersratherthanalaycommitteelike
theWACshouldbeinchargeoftheplandesign
process.Asaresult,insurersinhibitedenrollmentby
engaginginlimitedmarketingofHEALTHpactandby
discouragingbrokersfromsellingtheproduct.
InorderforplanssuchasHEALTHpacttosucceed,itis
criticalthatsufficiententhusiasmbegeneratedonthe
partofkeyimplementingagents,alessonconsistent
withotherstatesexperiencesinthisarea(Deprez,etal.
2009;LongandMarquis2001;Napel,etal.2009;Silow
Carroll,Waldman,andMeyer2001).Garneringsuch
supportfromcarriers,however,requiresconvincing
themthatthetangiblebenefitsfromparticipatingex
ceedoratleastequalthecosts.Thisisperhapsthe
primaryreasonwhysubsidyprogramsaresoimportant.
Itisdifficulttoadoptpremiumdiscountsinthe15to20
percentrangeifinsurersandbrokersstandtolosefi
nanciallyfromimplementation.Conversely,itbecomes
easiertodosoifasubsidyprogramisinplace,insofaras
suchprogramsincreaseplanattractivenesstosmallem
ployers.Whilesubsidiesmayservetodirectpotential
clientsawayfromotherproductsaparticularconcern
forinsurerstheymayalsoservetokeepsomeemploy
ersfromdroppingcoverageor,moreimportantly,entice
newemployersintothemarket,therebyenablingcarri
erstomaintainorexpandupontheirexistingbaseof
subscribers.Concernsaboutcrowdoutcouldfurtherbe
addressedbymakingemployereligibilityforsubsidies
contingentuponnothavingofferedcoverageduringthe
previous12months.Experiencesuggeststhatdoingso
couldbeparticularlyeffectiveinensuringtothesatis
factionofcarriersthatstatemandatedbenefitplans
suchasHEALTHpactserveemployerswhomightnot
haveotherwisepurchasedcoverage(SilowCarroll,
Waldman,andMeyer2001;Swartz2005).Aprimeex
ampleofasuccessfulprovisionlikethiscanbeseenin
HealthyNewYork,which,despiteimposingastate
mandatedplandesign,hasgarneredHMOsupport(orat
leastavoidedactiveopposition)byincludingagenerous
reinsurancebasedsubsidywitha12monthlookback
period(Swartz2006).
Allowinggreaterautonomyforinsurancecarriersis
11
anotherstrategythatwouldlikelyincreaseinsurerco
operation.Ratherthanimposingaspecificplandesign,
statescouldrequirecarrierstodeveloptheirownde
signssolongastheymetcertain,generalrequirements
laidoutinstatuteorregulation(i.e.,ahealthinsurance
planwithwellnessincentivesthatcostnomorethan
10%oftheaverageRIwage).Statescouldalsoencour
ageinsurerstoimplementcertainplandesignelements
withoutnecessarilyrequiringthattheybeputintoplace.
Somestateshaveutilizedthelatterapproachtoencour
agecarrierstoincorporatewellnessincentivesinplan
offeringsforsmallbusinesses.Aspartofcomprehensive
healthreform,forexample,Vermontnowpermitsinsur
erstodevelopproductsforthesmallgroupmarketthat
offerpremiumdiscountsofupto15%forsubscribers
engaginginhealthylifestyles(BesioandChen2009).
Additionally,Vermontpermitsthedevelopmentofsplit
benefitplanswithlifestyledifferentialsincostsharing
forthesamepremiumamount.
Asapointofcontrasttothelimitedautonomygrantedto
insurersunderHEALTHpact,wecanconsiderthecaseof
MichigansHealthyBlueLiving,asplitbenefitplanthat
hasbeenmarketedbyMichigansBlueCareNetwork,an
HMOaffiliatedwithBlueCrossBlueShieldofMichigan.
Thisplanwasenabledbyanamendmenttothestates
insurancecodewhichpermittedhealthplanstooffer
reducedcostsharingandpremiumrebatesofupto10%
ifworkerscommittohealthylifestylesbehaviors(The
CommonwealthFund2007).AswithHEALTHpact,all
subscribersinitiallyreceiveenhancedratherthan
standardbenefits,includingsubstantiallylowerdeduc
tiblesandcopayments.Toqualifyforcontinuedaccess
toenhancedcoverage,however,enrolleesandtheir
spousesmustchooseaprimarycarephysician(PCP);
completeandsubmitahealthriskappraisalform(as
sessingalcoholuse,bloodpressure,bloodsugar,choles
terol,smoking,andweight);and,iftheyscorebelow80
pointsontheappraisal,complywitharecommended
treatmentplan(Woll2008).Consistentwiththeafore
mentionedregulatorychanges,employersreceive10.0%
offthecostofpremiumsforworkersenrolledinen
hanced.HealthyBlueLivingbecameeffectiveOctober
2006andnowservesmorethan100,000membersand
800employers,bothsmallandlarge(BlueCrossBlue
ShieldofMichigan2009).Itappears,therefore,that
HealthyBluehasperformedsubstantiallybetterthan
HEALTHpactdespitemarkedsimilaritiesbetweenthe
twoplans.Thoughitisbeyondthescopeofthecurrent
studytoexplainprevailingdifferencesinenrollment,it
islikelythathavinganinsurerinitiate,develop,andim
plementsuchaplanvoluntarilyhasmadeasubstantial
differenceinthisregard.
PrioritizingInsuranceBrokerBuyIn
Besidesinsurers,theotherkeyimplementingagentsin
theHEALTHpactstoryarethebrokers.Todate,there
hasbeenlittleresearchregardingtheroleofbrokersin
thesmallgroupmarket.Thisisdespitethefactthat
morethanhalfofsmallfirmspurchasehealthinsurance
coveragethroughabrokeroranagent(Marquisand
Long2000),and90%ormoreofsmallbusinessreferrals
insomeinsurancemarketsderivefrombrokers(Con
well2002).Consistentwithotherinvestigations,the
presentstudyhighlightstheextenttowhichpolicymak
ersignorebrokersattheirperil(Conwell2002;Hall
2000;LongandMarquis2001).Brokersserveinanin
termediaryrolebetweenhealthinsurersandsmallbusi
nesses.Consequently,thereareanumberofstrategies
insurerscanadopttoinfluencebrokersandtherebyun
derminereform.Theseincludeadjustingthesizeand
structureofbrokerscommissionsanddiscouragingthe
recruitmentofhighriskclients(Hall2000).Although
neitherinsurancecarrierappearedtoadoptstrategies
suchastheseinthecaseofHEALTHpact,atleastoneis
reportedtohaveactivelydiscouragedbrokereffortson
theproductsbehalfbyreservingtherighttotransfer
enrolleesfromadvantagetobasicwithoutnotifica
tion.
Perhapsthemoreimportantissueregardingthebroker
roleishowtheyinterprethealthplanrequirementsto
clients.Garnick,Swartz,andSkwara(1998)observethat
publicperceptionsoftheaffordabilityofindividual
healthinsuranceoptionsareaffectedbythelimitedin
formationthattheyreceivefromagentsandbrokers.
Thisisespeciallytrueofthesmallgroupmarket,where
brokersserve,essentially,asthehealthbenefitsperson
nelforbusinessesthataretoosmalltohiretheirown.In
thisrespect,brokersprovideavaluableservice,helping
smallbusinessesnavigatethecomplextaskofchoosinga
healthinsuranceplanataskthatincludesnotonly
comparingandcontrastingdifferentratequotesand
benefitsstructuresbutalsohelpingtofacilitateand
maintainenrollmentintheplansthatareultimately
chosen.Clearly,thereareavarietyofwaysbrokers
couldsteeremployersawayfromproductsthatthey
dontlike.Thus,althoughstatelawrequiresbrokersto
informallprospectiveclientsaboutHEALTHpact,few
seemtohavedonesoenthusiastically,whileothershave
activelydiscouragedenrollment.Thisisadynamicthat
hasplayedoutelsewhere.Onenoteworthyexamplehas
beenhealthinsurancepurchasingcooperativeeffortsin
somestatesthatfloundered,inpart,becausebrokers
marketedagainstthem(LongandMarquis2001).Our
12
resultsprovidefurtherevidencethatsmallgroupmar
ketreformcannotsucceedwithoutsufficientbuyin
fromhealthinsurancebrokerswhoserveastheprimary
conduitthroughwhichsmallbusinessespurchasecov
erage.
ResourcingGovernmentOutreachandOversight
Itiscriticalthatfutureiterationsofsmallgroupreform
provideadequateresourcesforimplementation.While
thedevelopmentphaseofHEALTHpactwaswellfunded,
littleadditionalfundingwasdirectedtowardsupporting
subsequentOHICeffortsontheprogramsbehalf.Inthe
faceofOHICsalreadylimitedresources(intermsof
bothfundingandstaff),theadditionaltaskofensuring
faithfulimplementationofHEALTHpactprovedbeyond
OHICscapacities.
Providingsufficientresourcesforgovernmentoversight
isespeciallyimportantincaseswherekeyimplementa
tionactivitieshavebeendelegatedtonongovernmental
actorswhodonotnecessarilyviewaprogramfavorably
andwhomay,intheabsenceofmonitoring,undermine
itssuccess.Ourresultsstronglysuggestthatwhere
smallgroupreformreliesheavilyonbrokersandinsur
ers,sufficientoversightshouldbeputintoplacetoen
surecompliancewithstatemarketing,enrollment,and
otherrequirements.Thisisparticularlyimportantin
situationssuchasHEALTHpactwherefinancialincen
tivesforsteeringbrokerandinsurerbehaviorareab
sent.
Sufficientresourcesneedtobedevotednotonlytogov
ernmentoversightbutalsotogovernmentoutreachand
education.Thisincludeseffortsaimedatinformingnot
justemployersbutalsobrokers,insurers,localcham
bersofcommerce,andotherpotentiallyinfluentialac
tors,abouttheadvantagesandrequirementsofpartici
patinginsmallgroupinitiatives.Grassrootsefforts
aimedatworkersandtheirfamiliescouldspuremployer
interestinparticipatingaswell.WhileOHICconducted
someoutreachwhenHEALTHpactwasfirstimple
mented,itwasnotongoing,norwasitsufficienttoade
quatelypublicizetheprogram,particularlyinlightof
limitedbrokerandinsureroutreachefforts.The
HEALTHpactexperiencecontrastsmarkedlywithother
statesreformeffortswhereobserversattributepro
gramsuccess,inpart,toeducationandoutreachefforts
conductedonthepartofthegovernment,frequentlyin
collaborationwithotherinterestedparties.InVermont,
forexample,evaluatorslargelyascribethereductionin
thepercentageofuninsuredpeopleaftercomprehensive
healthreformtoanaggressiveoutreachcampaignthat
hasspreadknowledgeaboutbothnewandexisting
programsandfacilitatedenrollmentinthesepro
grams(Deprez,etal.2009).InMassachusetts,thestate
collaborateswithdozensofotherorganizationsto
promotecomprehensivehealthreformandalsocon
ductsanongoingcampaignthatincludesapublicinfor
mationoffice,hundredsofeducationalmeetings,and
broadbasedadvertising(Kingsdale2009).InNew
York,tenpercentoffundsearmarkedforHealthyNew
Yorkisdirectedtowardadvertisingaimedatincreasing
theprogramsvisibility,includingatollfreetelephone
lineandaggressiveradio,televisionandWebbased
marketing(StateCoverageInitiatives2009).Thesesuc
cessstorieshighlighttheimportanceofstateinvolve
mentinpromotinghealthreforms.Itishighlyunlikely
thatinnovativehealthreformeffortssuchasHEALTH
pactwillsucceedunlessactivelypromotedbythestate.
IncentivizingWellness
Consistentwithgrowinginterestinwellnessinitiatives
nationally,keystakeholdersinRhodeIslandreported
widespreadsupportforincorporatingwellnessincen
tivesintohealthinsuranceplandesign.Increasingna
tionalinterestisreflectedina2006WallStreetJour
nal/HarrisInteractivesurvey,whichfoundthat53%of
Americansbelievethatitisfairtoaskpeoplewithun
healthylifestylestopayhigherinsurancepremiums,co
payments,anddeductiblesthanthosewithhealthylife
styles(Bright2006).Itisalsoreflectedina2007Na
tionalBusinessGroup/WatsonWyattsurveyof587
largefirms(>1,000workers),28.0%ofwhomreported
offeringpremiumdifferentialsforparticipationinhealth
managementprograms,upfrom16.0%justayearearli
er(WatsonWyattandNationalBusinessGroupon
Health2007).Employersadoptwellnessprograms
basedonthebeliefthathealthieremployeelifestyleswill
reduceabsenteeism,improveworkerproductivityand
controlrisinghealthcarecosts.Thus,inadditionto
creatingsupportiveenvironmentsby,forexample,pro
vidinghealthierfoodchoicesandexerciseclassesatthe
workplace,employershaveestablishedfinancialincen
tivesforfillingouthealthriskappraisalforms,partici
patinginfitnessregimes,engaginginsmokingcessation
andweightlossprograms,andimprovingbloodpres
sure,glucoseandcholesterollevels(BusinessRoundta
ble2007;Okie2007).Theseincentivesmaybepromul
gatedbothwithintheconfinesofemployershealthplan
offerings(throughlowerpremiums,copayments,and
deductibles)andoutsidetheplan(throughrewardssuch
asgiftcards,bonuspayments,andservicediscounts).
Theuseofinsurancebasedwellnessincentiveswassti
mulatedatthenationallevelinDecember2006,when
13
theU.S.DepartmentsofLabor,TreasuryandHealthand
HumanServicesclarifiedHIPAArulesgoverningthis
area.Theserulespermitemployersandinsurerstooffer
discountsofupto20%onpremiums,copayments,or
deductiblestoworkerswhohavetakenstepstoimprove
wellness(MelloandRosenthal2008).Theyalsopermit
discountsforthosewhoachievespecifichealthgoals
(e.g.,quittingsmoking,attainingahealthierweight),al
thoughalternativestandardsmustbemadeavailableto
thosewhocannotreasonablybeexpectedtomeetthe
standardsthathavebeenlaidout.Aprovisioninthe
2009Senatehealthreformbillwouldincreasethelevel
ofdiscountspermittedunderHIPAAto30.0%while
companiescouldpetitiontheDepartmentofHealthand
HumanServicestoofferlargerdiscounts,perhapsas
highas50.0%(Kranish2009).InadditiontoHIPAA,a
numberofotherfederalandstatelawsgovernthelegali
tyofsuchplans,includingERISAandtheAmericanswith
DisabilitiesAct(ADA).Therearealsoprivacyprotec
tionsgoverningtheadministrationoftheseplans.Fed
eralrules,forexample,requirethatanorganizationsep
aratefromtheemployercollectandstorepersonal
healthdatacollectedthroughahealthriskappraisal
(Okie2007).
Althoughemployersofvarioustypesareincreasingly
turningtowellnessprograms,relativelyfewsmallbusi
nessesdoso.Thisisreflectedintheresultsofonena
tionallyrepresentativesurvey,whichfoundthatsmall
employers(3to199workers)areconsiderablylesslike
lytoofferhealthriskassessmentstoemployeesthanare
largeemployers(200+workers)14.0%v.55.0%,re
spectively.Moreover,smallemployersarealsolesslike
lytoofferfinancialincentivesforparticipatinginhealth
riskassessments,whenavailable(7.0%v.34.0%)(Kais
erFamilyFoundation/HealthResearchandEducational
Trust2009).Thereareavarietyoffactorsthatexplain
thelackofsmallemployerinvestmentinwellness.The
absenceofhealthbenefitsspecialistsorotherdedicated
personnelmakesitdifficulttonavigatethecomplexweb
offederalandstatelawsgoverningthisarea.Beingsmall
alsoincreasestheopportunitycostsofofferingthese
programs.Sincethereisonlysomuchtimeandexper
tisetogoaround,smallemployersmaybereluctantto
adoptsuchprogramsthemselvesormustrelyonoutside
expertstodevelopandadministerthemiftheydo
(McPeck,RyanandChapman2009).Thesefactors
served,inpart,tounderminethesuccessofHEALTH
pact.
Theprevailingchallengestoincorporatingwellnessin
itiativesinthesmallgroupmarketindicatethatthereis
acarefulbalancebetweenusinginnovationtoencourage
wellness,ontheonehand,anddesigningproductsthat
appealtothesmallgroupmarket,ontheother.Thus,
althoughstakeholdersgenerallyfavoredincorporating
wellnessincentivesintohealthinsuranceplandesign,
fewexpressedmorethantepidsupportfortheparticu
larincentivesfeaturedinHEALTHpact.(Thisshouldnot
besurprisinginlightofcomparativeresistanceonthe
partofsmallemployerstoincorporatingwellnessinitia
tivesmoregenerally,bothinrealmofhealthbenefits
andintheworkplaceitself.)Theperceivedcomplexityof
thetwotieredbenefitsstructure,theneedtocompletea
healthriskappraisalandpossiblyengageinpre
specifiedwellnessbehaviors,andsubstantialdifferences
incostsharingbetweenadvantageandbasiccover
ageprovedtobeespeciallysignificantbarrierstotake
up.
ItwouldseemthatsimplificationofHEALTHpactswell
nessincentiveswouldbeafirststeptowardincreasing
employeracceptanceoftheplans.Inaddition,relying
moreoncarrots(premiumsdiscounts,deductiblecre
dits)forcompliancethanonsticks(substantiallyhigher
copaymentsanddeductibles)fornoncompliancewould
likelybehelpful.Nomattertheapproach,however,most
smallemployerswouldstillneedtorelyonbrokerand
insurerinputtounderstandandimplementthesere
quirements,sothebuyinoftheseothergroupsmustbe
secured.Additionally,thestatehasacriticalroletoplay
inoutreachandoversight,andthisrolemustbeade
quatelyfunded.Furthermore,nomatterhowdesirableit
maybetopursuewellness,itisunlikelyanyhealthplan
targetedatincreasingtakeupamongsmallbusinesses
willbesuccessfulunlessitresultsinsubstantiallylower
costsformostfirms,andachievingsuchcostreductions
isdifficulttoachievewithoutalsoincludingagenerous
subsidyprogram.Inlightofthesebroaderobservations,
itisclearthatdesigningeffectivewellnessincentivesis
onlyanecessaryconditionforsuccess;widespread
adoptionwilllikelyonlytakeplaceoncetheotherchal
lengesidentifiedarealsoaddressed.
CONCLUSION
Disproportionatelyhighpremiumincreases,together
withmillionsofuninsuredAmericansconnectedtosmall
firms,haveplacedsmallbusinessesatthecenterof
healthreform(Abelson2009;Anonymous2009;Obama
2009).ThisisreflectedinprovisionsintheHouseand
Senatereformbillsthatwouldprovidesmallemployers
withtaxcreditsofupto50percentofpremiumsand
thatwouldexpediteaccesstosavingsavailablethrough
participationinnewlyestablishedhealthinsuranceex
changes(Doty,etal.2009).However,despitethisrecent
14
flurryofactivity,federalinterventionhasbeenlimitedto
date,consistingprimarilyofHIPAAreformsaffecting
preexistingconditionexclusions,issueandrenewal.In
themeantime,ithasbeenlefttostategovernmentsto
taketheleadinreformingthesmallgroupmarket(Na
pel,etal.2009;NationalConferenceofStateLegislatures
2009).
HEALTHpactrepresentsauniquestrategytotackling
smallgrouphealthinsurancereformatthestatelevel,
whichhasgenerallybeendominatedbyotherapproach
es,includingregulatorychanges(suchasmandatory
communityrating,guaranteedissue,andguaranteed
renewal)andtheestablishmentofsmallgrouppurchas
ingcooperatives.Identifyingprevailingimpedimentsto
HEALTHpactssuccess,therefore,shouldinformfuture
iterationsofsmallgroupreforminbothRhodeIsland
andotherstatesthatis,lessonslearnedregardingthe
roleofsubsidies,insurerandbrokerbuyin,government
outreachandoversight,andwellness.
15
TABLE 1. HEALTHpact: ADVANTAGE VS. BASIC
Advantage
Basic
AverageIndividualMonthlyPremium1
$362(United),$372(BlueCross)
$362(United),$372(BlueCross)
Deductible
$750/$1,500(individual/family)
$5,000/$10,000(individual/family)
Coinsurance
10%(United),None(BlueCross)
20%
PrimaryCareCopay
$10
$30
SpecialistCopay
$50
$60
$10/$40/$75
$10/$40/$75after$250/$500deductible
$2,000/$4,000
$5,000/$10,000
Unlimited
$1,000,000perparticipant
PrescriptionCopay(Retail)
AnnualOutofPocketMaximum
LifetimeBenefitMaximum
Sources:BlueCrossBlueShieldofRhodeIsland(2009);Koller(2008);UnitedHealthcare(2009
1
October2008
16
FIGURE 1. INITIAL AND ONGOING REQUIREMENTS FOR ADVANTAGE-LEVEL

BENEFITS1
InitialEnrollmentRequirements
1. PICKAPRIMARYCAREDOCTOR:Indicateonenrollmentapplicationaprimarycare
doctor(PCP)foreachfamilymember
2. COMPLETEAHEALTHRISKAPPRAISALFORM:Submitcompletedform(s)foreach
familymemberaged18yearsandoverwithenrollmentapplication
3. SIGNAPLEDGE:Commitallenrolleesaged18andovertomeetallwellnesspartic
ipationrequirementsthroughouttheyear,includingparticipationindiseaseman
agement,weightloss,andsmokingcessationprogramsifapplicable
OngoingParticipationRequirements
1. VISITPCP:HavePCPoutachecklist,identifyingappropriatewellnessparticipation
requirementsforsmokingcessationandweightmanagement,withinsixmonths
ofenrollment
2. FILLINPARTICIPATIONCOMMITMENTFORM:Allenrolleesage18andovermust
confirmparticipationinappropriatewellnessprogramsasidentifiedbytheirdoc
torwithin8monthsofenrollment
3. PARTICIPATEINDISEASEMANAGEMENTPROGRAMS:Ifsoidentifiedbytheinsur
er
AdaptedfrommaterialprovidedtosmallbusinessgroupsbytheOfficeoftheHealthInsurance
Commissioner,RhodeIsland
17
TABLE 2: HEALTHpact PARTICIPATION & ENROLLMENT, JANUARY 2009
UnitedHealthcare
BlueCross
Total
EmployerGroups
49
219
268
Subscribers
121
417
538
TotalMembers
175
746
921
175(100%)
684(91.7%)
859(93.3%)
0(0%)
62(9.1%)
62(7.2%)
Advantage
Basic
Sources:OfficeoftheHealthInsuranceCommissioner,StateofRhodeIsland
18
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22
ABOUT THE AUTHORS AND ACKNOWLEDGMENTS

EdwardAlanMillerisanassociateprofessorintheDepartmentofGerontologyandafellowattheGerontologyInsti
tuteattheJohnW.McCormackGraduateSchoolofPolicyStudiesattheUniversityofMassachusettsBoston.AmalTri
vediandSylviaKuoareassistantprofessorsintheDepartmentofCommunityHealthatBrownUniversity.Katherine
SwartzisaprofessorintheDepartmentofHealthPolicyandManagementatHarvardSchoolofPublicHealth.Vincent
MorisaprofessorandchairintheDepartmentofCommunityHealthatBrownUniversity.
ThisresearchwasfundedbytheRobertWoodJohnsonFoundationaspartoftheStateHealthAccessReformEvalua
tion(SHARE).
ABOUT THE SHARE INITIATIVE

SHAREisanationalprogramoftheRobertWoodJohnsonFoundationandislocatedattheUniversityofMinnesotas
StateHealthAccessDataAssistanceCenter(SHADAC).
TheSHAREprojecthasthefollowingkeygoals:
1. Coordinateevaluationsofstatereformeffortsinawaythatestablishesabodyofevidencetoinformstateand
nationalpolicymakersonthemechanismsrequiredforsuccessfulhealthreform.
2. Identifyandaddressgapsinresearchonstatehealthreformactivitiesfromastateandnationalpolicyperspective.
3. Disseminatefindingsinamannerthatismeaningfulanduserfriendlyforstateandnationalpolicymakers,state
agencies,andresearchersalike.
Toaccomplishthesegoals,SHAREhasfunded16projectscovering29states.
CONTACTING SHARE
TheStateHealthAccessReformEvaluation(SHARE)isaRobertWoodJohnsonFoundation(RWJF)programthataims
toprovideevidencetostatepolicymakersonspecificmechanismsthatcontributetosuccessfulstatehealthreform
efforts.TheprogramoperatesoutoftheStateHealthAccessDataAssistanceCenter(SHADAC),anRWJFfunded
researchcenterintheDivisionofHealthPolicyandManagement,SchoolofPublicHealth,UniversityofMinnesota.
Informationisavailableatwww.statereformevaluation.org.
StateHealthAccessDataAssistanceCenter
2221UniversityAvenueSE,Suite345
Minneapolis,MN55414
Phone(612)6244802
23

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Rhode Islands HEALTHpact Plan

Small-Group Health Insurance Reform in the States:

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Small-Group Health Insurance Reform in the States:

RHODE ISLANDS HEALTHpact PLAN

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

HEALTHpact Was Poorly Designed

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Limited Insurer and Broker Enthusiasm

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Lack of Resources for Program Outreach and Monitoring

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

TABLE 1. HEALTHpact: ADVANTAGE VS. BASIC

Rhode Islands HEALTHpact Plan

FIGURE 1. INITIAL AND ONGOING REQUIREMENTS FOR ADVANTAGE-LEVEL

Rhode Islands HEALTHpact Plan

TABLE 2: HEALTHpact PARTICIPATION & ENROLLMENT, JANUARY 2009

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

Rhode Islands HEALTHpact Plan

ABOUT THE AUTHORS AND ACKNOWLEDGMENTS

ABOUT THE SHARE INITIATIVE

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