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F I S C A L I M P A C T R E P O R T

SPONSOR Feldman

DATE TYPED 03/01/05 HB

SHORT TITLE Wellness Program Health Insurance Incentives

SB 745

ANALYST Geisler

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to: SJM 10

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

Department of Health (DOH)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Bill

SB 745 amends adjusted community rating to permit insurers to offer discounts or credits when

qualified wellness and disease management programs are provided as a part of coverage. This

applies to individual and small employer group health insurance.

The qualified program shall: 1) meet federal requirements under HIPPA, 2) provide financial

incentives to covered individuals and 3) provide reasonable alternatives to non-participants. The

rating factors may take into consideration: 1) anticipated participation, 2) anticipated incentives,

3) historical participation, 4) expected success rates, 5) clinical studies and 6) the insurer’s ex-

perience.

Significant Issues

Investment in wellness and disease management programs can reduce future health care costs. If

Senate Bill 745 -- Page 2

insurers could recognize these savings in determination of premiums, lower premiums could be

an incentive to involve more people in wellness and disease management programs. Without

amendment, insurers cannot anticipate these cost savings under adjusted community rating.

Such savings would be passed along to the consumer only as they are realized.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

SB 745 relates to SJM 10 (Study Health Insurance Discounts), which would require the Depart-

ment of Health, in conjunction with the insurance division of the Public Regulation Commission

(PRC), to conduct a study to explore the benefits and feasibility of requiring health insurance

companies to offer discounted premiums for enrollees who participate in approved health promo-

tion activities or wellness programs.

OTHER SUBSTANTIVE ISSUES

Carriers would develop and oversee the programs using “in-house” resources or contract for such

programs through an outside organization to offer wellness and disease management programs.

If insurers decide to use the rating factor allowed by SB 745, the result may be more insured in-

dividuals participating in covered wellness or disease management programs. Wellness programs

generally focus on the primary prevention of chronic diseases that result from tobacco use,

physical inactivity, suboptimal diet, or stress. Worksite wellness programs have been shown to

increase levels of fitness and reduce risk factors for coronary heart disease. They have also re-

sulted in lower health care costs, reduced absenteeism and lower turnover in companies with

comprehensive health promotion programs. (“Employee fitness and Wellness programs in the

Workplace”, Am Psychol Feb 1990)

Disease management programs provide secondary prevention to covered individuals who already

have chronic diseases, including asthma, congestive heart failure, and diabetes, amongst others.

Disease management programs show early results in decreasing hospitalizations and emergency

department visits. (“Measuring DM’s Net Effect is Harder Than You Might Think”, Managed

Care June 2003) Depending on the quality and intensity of such programs, varying degrees of

improved health outcomes and associated potential savings in health care expenditures may be

realized.

WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

If SB 745 is not enacted, insurers would not be able to develop rating factors that incorporate

wellness or disease management programs.

AMENDMENTS

HPC suggests that the key elements of the bill should be defined such as “qualified wellness pro-

gram” and “disease management program” since these terms may have different meanings for

different people. For example, the term “wellness program” is very broad in its meaning and

could be as exclusive of a gym membership or an educational program devoted to meditation.

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