A cautious lesson in controlling health care costs in universities

Written by: Donald Heller

Primary Source: The Dean’s Blog


Earlier this summer, Penn State University announced that it was implementing a new “wellness” policy for its employees who receive health insurance through the university.  The policy was intended to help it control the rapid growth in health care costs, an affliction that many universities – and other employers – have faced in recent years.  Penn State’s current strategic plan includes controlling health care costs as one of its goals. (Disclosure: When I was employed at Penn State, I served on a university-wide committee that developed that strategic plan, and a later group that was charged with finding ways to cut the university’s expense budget – including health care costs.)

As the strategic plan states:

The rapidly rising cost of health care for Penn State employees is an area of great concern, lest these costs crowd out the available resources for competitive faculty and staff salaries and funds to pursue the University strategic academic pursuits.

It is hard to argue with this as a goal, but where Penn State has tripped up is in implementing its new wellness policy in support of this goal.  Many large organizations have opted to address the health care cost issue by putting into place incentive policies that reward employees for engaging in healthy behaviors,  This may include subsidizing the cost of gym memberships, smoking cessation programs, health screenings, or the like.

Penn State took a different direction, and instead of putting into place incentives for employees, they instead implemented a punishment-based system.  Employees were told that they had to: 1) complete a wellness profile that was created by and whose data would be stored at the commercial firm WebMD; 2) complete a preventive physical exam either with the employee’s own physician or through Penn State; and 3) complete a biometric screening, which includes tests for measurement of such things as glucose levels, cholesterol, blood pressure, and body mass index.  If the employee’s spouse or partner is covered under the Penn State plan, the spouse has to complete steps 1 and 2 as well.

So what is the punishment aspect of the program?  Employees who do not complete these three steps by this November will face a $100 per month surcharge – or $1,200 per year – on their health insurance premiums beginning in January.  It is this aspect of the program that has drawn much attention and created dissent on the part of Penn State employees.

Media including NPR, the Harvard Business Review, the Pittsburgh Tribune-Review, and the Wall Street Journal have weighed in on the controversy.  Social media is lighting up with the controversy as well, as I see continual discussion of the new policy – most with a negative slant – among my former colleagues at Penn State.  Much of the attention has been fueled by two Penn State professors, one of whom has started a petition asking the university to rescind the program – which has received more than 2,000 signatures – and a second who has suggested that employees submit “nonsense” information in their wellness profiles on WebMD.

The latter complaint relates to the invasive nature of the information collected by the WebMD survey, as described by political science professor Matthew Woessner:

The fourth page queries diet, tobacco use, drinking and my favorite “How many times in the last 6 months did you drive when you had too much to drink?” On page five, employees are asked about using illegal narcotics. . . Unlike a discussion with my trusted physician, where I can wave-off questions that may be too personal, the WebMD survey is designed such that employees are not permitted to decline any of these questions.

It is understandable that the university would want to encourage its employees to improve their health, thus leading to lower health care costs (or at least lower rates of growth).  There is some evidence however, as the authors of the Harvard Business Review article point out, that organizational wellness programs like this do not lead to the kind of savings employers are seeking.  And depending upon how they are implemented, any health care savings may be offset by the decline in employee morale.

Perhaps the part of Penn State’s policy that is most troubling is not that the university decided to use a stick rather than a carrot approach to influencing employee behavior.  What may be more disturbing is the university’s decision to require employees to share sensitive health and behavior information (“How many times in the last 6 months did you drive when you had too much to drink?”) with a third party website, one that has had its reputation for providing unbiased health information called into question.

Even if Penn State chose the stick, i.e., penalizing employees for not doing something rather than rewarding them for doing it, why could it not have allowed employees to work with their personal physician to come up with a wellness plan?  All that this would require would be to have each employee submit a signed form, or electronic equivalent, from his or her physician indicating that the employee has undergone a health screening and developed a wellness plan with the physician.  Any data thus collected would be held as part of the employee’s existing health records with her physician, protected by HIPAA.  I would think that most employees would be more comfortable with this data sharing arrangement, than they would be with being forced (under threat of a $1,200 penalty) to share their private information with a commercial, third-party provider.  As the Harvard Business Review article put it, “If you’re a general, would you rather have troops with high morale or low cholesterol?”

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Donald Heller
Donald E. Heller is Dean of the College of Education and a professor in the Department of Educational Administration at Michigan State University. Prior to his appointment in January, 2012, he was Director of the Center for the Study of Higher Education and professor of education and senior scientist at The Pennsylvania State University. He also has held a faculty appointment at the University of Michigan. His teaching and research is in the areas of educational economics, public policy, and finance, with a primary focus on issues of college access and choice for low-income and minority students. He has consulted on higher education policy issues with university systems and policymaking organizations in California, Colorado, Kansas, Massachusetts, Michigan, New Hampshire, Tennessee, Washington, Washington DC, and West Virginia, and has testified in front of Congressional committees, state legislatures, and in federal court cases as an expert witness. Before his academic career, he spent a decade as an information technology manager at the Massachusetts Institute of Technology.
Donald Heller

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