A Closer Look at Wisconsin’s Premium Proposal
By Cindy Mann, Partner | Michael Kolber, Partner
The State of Wisconsin recently proposed a Medicaid waiver that includes a number of precedent-setting features, including a 48-month time limit on enrollment (with the limit paused for periods of employment or job training), and mandatory drug screening, testing and treatment (as necessary), as conditions of Medicaid eligibility.1 It also would charge premiums and create a wellness initiative that would affect the amount of the premium charged to Medicaid enrollees.
While other states have been granted waiver authority to impose premiums, Wisconsin’s proposal is unique in that it would apply to adults with incomes below the federal poverty line (FPL) (about $1,000/month for an individual), as Wisconsin has not expanded Medicaid above the FPL, and nonpayment would result in the loss of coverage. In other states, premiums are either limited to those with incomes above the poverty line, or, if they apply to people in poverty, nonpayment does not lead to loss of coverage; rather, it results in a debt owed to the state or enrollment into a less generous (but still statutorily sufficient) benefit plan. Wisconsin’s proposal is also unique in how it structures premium amounts relative to the individual’s health and health behaviors. This issue of “Manatt on Medicaid” focuses on the wellness feature of the Wisconsin proposal and how it compares to what would be permitted in commercial insurance.
As proposed, the Wisconsin initiative could result in individuals with health problems—an alcohol or substance abuse problem or obesity, for example—being charged higher premiums than others at the same income level would be required to pay. Specifically, the proposed waiver would permit the state to impose a premium of up to $5 a month for adults without a designated health problem, but those with such a condition could be charged twice that amount. Individuals who do have one of the designated health risks can qualify for the lower amount if they are actively managing their behavior, or if they have a condition beyond their control that prevents them from doing so. The medical conditions and behaviors identified that would determine enrollees’ premium levels are alcohol consumption, body weight, illicit drug use, seatbelt use and tobacco use.
In commercial health coverage available in the individual market, premiums are not permitted to vary by health status, except for tobacco use. Under the federal Public Health Service Act, as amended by the Affordable Care Act, premiums for individual health insurance are permitted to vary based only on an enrollee’s age, tobacco use, geographic area and family size. While individual market premiums can vary based on tobacco use, issuers are limited to charging a 50% surcharge, whereas the Wisconsin proposal could impose a 100% penalty on tobacco users. Further, in the individual market, there would be no way for insurers to charge more to someone with a substance abuse disorder, or who fails to use a seatbelt, or is overweight.
Employment-based group health plans have more flexibility in creating incentives for healthy behavior by their participants, but are not permitted to establish as large a differential as Wisconsin would. There are two laws that would limit this type of arrangement in a group health plan: the Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibition on health status discrimination, and the Americans with Disabilities Act of 1990 (ADA) prohibition on employers making disability-related inquiries of their employees. Both HIPAA and ADA have exceptions for wellness programs, but those exceptions would not permit the incentives/penalties proposed by Wisconsin.
Under the HIPAA wellness rule, an incentive such as this is considered a health-contingent outcome-based wellness program. Outcome-based programs must satisfy five requirements; the Wisconsin proposal does not appear to satisfy at least one and as many as three of these requirements.
First, the Wisconsin premium differential is too large—effectively a doubling of the premium for those with the targeted health behavior/condition. Second, the Wisconsin proposal may not satisfy the HIPAA requirement that the program be reasonably designed to promote health or prevent disease. Wisconsin may be intending this, but there is no indication in the proposal that the state’s Medicaid program would use the information gathered to provide care management or other services designed to promote health or prevent disease, or that it has the capacity throughout the state to provide such services to all individuals so identified. If not, the only argument that the program is designed to promote or prevent disease is that it penalizes individuals who engage in unhealthy behavior, which itself may be a medical condition, and are not trying to manage that behavior or health condition. This is unlikely to be sufficient to satisfy the “reasonable design” criterion in HIPAA. Third, the Wisconsin proposal might be viewed as not having a “reasonable alternative standard” for managing the health behavior/condition, as is required under HIPAA. This depends on whether the Medicaid program will cover the costs of the services needed to manage the condition and can assure access to such services. (For these purposes, the ADA wellness program requirements largely parallel the HIPAA requirements.)
Improving health is an important, central goal of the Medicaid program; but as more states consider using premiums to encourage healthy behaviors and to mirror private market coverage, such initiatives will need to be carefully designed both to ensure the premiums are affordable for those who will be subject to them and to avoid discrimination based on health status.
1State of Wisconsin, Draft 1115 Demonstration Waiver Amendment Application, Coverage of Adults Without Dependent Children with Income at or Below 100 Percent of the Federal Poverty Level §§ 3.4.4, 3.4.5 (2017), https://www.dhs.wisconsin.gov/badgercareplus/clawaiver-app.pdf