Pennsylvania State University is defending a controversial employee wellness initiative that uses penalties as incentives to encourage compliance with the “optional” program.
Under the new plan to encourage healthier living and save the college money, employees must follow strict rules or pay—$75 for smoking, $100 for not getting biometric screenings, and up to $100 for spouses eligible for health insurance from their own employers. School employees must also release large amounts of self-reported medical data to third-party website WebMD, which is working with the school’s insurance company.
In recent public relations campaigns, Penn State cited skyrocketing medical costs—13 percent for next year, without changes—and its generous deductibles of only $250. The university did not say how much of the 13 percent is due to the Affordable Care Act, which many employers blame for driving up costs. Earlier this week, UPS announced Obamacare will add 4 percent to its usual cost increases, up to 11.25 percent for next year. UPS will no longer cover spouses eligible for insurance from their own employers. Although it doesn’t cut such coverage, Penn State does penalize it.
The university claims it has tried using rewards instead of penalties in its wellness program, but they did not lower costs. Lee Samuel Finn, a professor of physics and astronomy, decried the intrusion into employees’ private lives: “What we’re talking about here is reducing someone’s compensation because they smoke, and that’s not a whole lot different than telling someone we’re not going to hire you because we don’t like the way you live your life.”
But that’s exactly what the University of Pennsylvania Health System has done elsewhere in the state, refusing to hire smokers. Penn State’s decision, though harsher than many, may simply reflect a new market reality: As healthcare costs take up larger portions of employer budgets, employees’ actions at the dinner table, and elsewhere, affect the bottom line. No man is an island.
The Penn State policy is not necessarily a result of expected Obamacare cost hikes. Administrators first began discussing the idea in 2008, officials say, breaking the news to employees in 2011. That was before the Jerry Sandusky case took over headlines involving the school and before the government released solid estimates of Obamacare’s effects.
One of Obamacare’s direct effects on Penn State is decreased restrictions on these types of penalties. This year, incentives for wellness programs, which are gaining popularity in the private sector, can total 20 percent of the cost of coverage. That cap will rise to 30 percent next year under Obamacare. Smokers can face up to a 50 percent “incentive” to quit.
Obamacare effects on the Pennsylvania market as a whole are typical of many states’ expectations. Most states are bracing for rate hikes as stakeholders anticipate the ultimate balance of costs and savings in the rewritten market. The Lehigh Valley Business news service reported some Pennsylvania insurance brokers have warned of rate hikes as high as 30 percent. Each state’s prior laws mean Obamacare affects states differently. New York’s pre-Obamacare laws were so bad that though premiums for some will fall 50 percent, they’ll still be some of the worst in the nation. The new government-run insurance exchanges are scheduled to launch Oct. 1.