A Different Kind of Individual Health Mandate

According to a recent report in Health Affairs, health spending in the United States is projected to rise by 5.8% per year over the next decade.

source: CT OPM

Rising health care costs are a problem that must be brought under control.  One approach is to do what Florida's doing.  It is forcing state employees into a single HMO, removing all competition from the market while praying that the HMO won't be motivated by making a profit. 

Another is to look at what the State of Connecticut is doing.

It is betting over $100 million that its employees and retirees will respond to a different kind of “individual mandate” from the one under fire in the Affordable Care Act.  Connecticut has decided to give financial incentives to employees and retirees to manage their health.  It will also penalize financially those who do not. 

State workers overwhelmingly voted to accept the new deal earlier this month.  If the plan works, then it may signal a new path for every state hoping to cut its future health care spending.

Connecticut was motivated to undertake this challenge by its mind-boggling budget deficit.  The deficit in the coming two years was projected to be 50% higher than the entire annual state budget was just a little more than 30 years ago.

To avoid thousands of layoffs, it entered into negotiations with its unions to change salary and benefit packages.

At the bargaining table, negotiators decided not just to employ the old, failed cost-containment strategies of reducing benefits to workers and squeezing payments to providers.  They took a different approach by promoting the participation of employees and retirees in disease management and health maintenance programs. 

They created a new “Health Enhancement Program” for all Connecticut state employees and all future retirees. Those who choose to participate in the “voluntary” program will benefit financially.  Those who do not will pay higher insurance rates as a penalty.

Participants in the Health Enhancement Program will receive some excellent chronic disease management services, including free health care and drugs.  They will not have to pay any co-pays for office visits related to diabetes, asthma, heart disease, hyperlipidemia, or hypertension, as long as they adhere to the schedule of visits recommended by their health care provider.

Participants in the program will also pay reduced co-pays for drugs needed to treat these conditions.  The co-pays will be as low as zero for all diabetes prescriptions and for generic drugs used to treat the other conditions.

In return, participants will have to agree to focus on staying healthy.  They must get regular physicals, eye exams, and dental cleanings.  If they and their dependents do all these things, they will receive a cash award of $100 per year for their efforts.    

On the other side, those who choose not to participate will pay more for health insurance and health care.  They will pay an additional $100 per month for their insurance.  They will pay higher drug co-pays.  They will also pay a new $350 deductible per individual, with a $1,400 family cap, for health care services not covered by co-payments.

Connecticut is betting heavily that its employees, retirees, and their dependents will want to manage their health – and, most importantly, that it will pay off in reduced costs to the state.

In June, the Office of Policy and Management estimated that the Health Enhancement Program will save the state over $100 million annually in health care costs.  OPM believes that 50% of those eligible will choose to participate, and that this will result in a 10% reduction in health insurance claims – even though some participants will be required to visit health and dental health professionals far more often than they do now.

The penalty provisions save the state another $18 million, which the non-participants will pay out-of-pocket in higher premiums and deductibles.

There may be two big holes in the Connecticut plan that will reduce the savings to the state.  While mental health and chronic pain services are still included in health plans just as before, the Health Enhancement Program does not include them among the conditions managed in the program.

Both affect a large number of people, lead to many expensive and preventable health care encounters, and often co-occur in a patient with the covered chronic conditions.  If a patient’s unmanaged mental illness leads to a failure to comply with a diabetes disease management program, both the patient and the state will lose.

Still, the Connecticut plan goes beyond what most other states have attempted, and is well worth a try. Changing the trajectory of increasing health care costs isn’t easy.  It will be interesting to see if Connecticut’s health “mandate” proves more popular and effective than the alternatives.    

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