Precept Employee Benefits Blog

Governor Schwarzenegger is proposing an overhaul of California’s health insurance system, and one of the elements is an employer mandate to provide prevention, health promotion, and disease management programs as part of their health benefits.  This mandate would include financial incentives to encourage screening and participation by employees.  While the details of the proposal won’t be released until the whole plan is unveiled next week, early information about the proposal was reported in the Los Angeles Times (January 5, 2007, page B3).

First, the good news.  Effective disease management programs improve lives and save money, as we’ve examined.  Despite the fact that getting disease management right may be challenging, it’s hard to see that increasing demand for disease management would be a bad thing.  And hopefully a more competitive marketplace will improve transparency and the quality of the current product offerings.  Health screenings are also very cost-effective, and shifting the emphasis of our health care system from treatment to prevention and early detection is a major national priority.  Providing incentives as a way to motivate participation and support health care consumerism is also hard to argue with.

Now, the bad.  Employer mandates have a poor track record, because they create administrative hassles, drive up costs, and always have unintended consequences.  Mandates also tend to stifle innovative approaches, since the letter of law and regulations will have to be met, and improving health by changing behaviors is definitely an area of fertile experimentation that we do not want to choke off.  Also, self-insured employers will likely avoid the mandate, because of ERISA protections against state interference in their health benefits.  Effectively this legislation would impact most the small, fully insured employer who already struggles to provide health insurance, and would spare large national employers who are almost entirely self-funded.  

Still, depending on the rest of the California health insurance reform proposal to be announced next week, this might be a positive contribution.  Much will depend on the political process, since California’s legislature is strongly Democratic and may resist the Republican governor’s initiatives.  Stay tuned.