“Unlike other recent reports on health care spending, we find that the increased spending is mostly due to unit price increases rather than changes in the quantity or intensity of services,” the report concludes.

The report by the Health Care Cost Institute (HCCI) is based on a review of health insurance claims for more than 33 million individuals covered under employer sponsored, private health insurance from 2007 to 2010 including both fully insured and self-funded benefit programs.  The dataset represents about 20 percent of all individuals younger than 65 with employer-provided coverage, according to the HCCI.

Widespread adoption of this scheme would return the nation to something akin to the “major medical” coverage model of health insurance that existed in the post World War II period until pre-paid plans such as health maintenance organizations (HMOs) became prevalent starting in the 1970s and 1980s.  Their growth created an expectation of no or minimal out of pocket costs for routine care and preventative screenings, leading the study’s authors to caution those in consumer directed health plans may forgo them, potentially leading to higher health care costs over the long term.

The authors also suggest that wider adoption of consumer directed health plans could be disruptive to the traditional health insurance and HMO markets and promote adverse selection in these product lines since healthier people may opt for consumer directed plans since their premiums tend to be lower.  A major challenge facing health insurers and plans, however, is setting premiums for consumer directed plans low enough to jibe with consumer expectations of lower, more affordable premiums in exchange for taking on first dollar exposure up to a high deductible limit.  Older albeit generally healthy people in the individual market have experienced sticker shock at rates for high deductible plans, deterring them from buying the coverage even though the premium rate reflects the actuarial risk of a catastrophic medical event.

Whatever happens in the Bay State bears watching inasmuch as its 2006 omnibus health care reforms served as a prototype for the federal Patient Protection and Affordable Care Act.

Meanwhile, CaliforniaHealthline reports a California ballot initiative that if qualified for the November 2012 ballot would have limited hospital profit margins to 25 was dropped by its sponsor, the Service Employees International Union (SEIU).  The California Hospital Association had termed the measure along with another SEIU-sponsored initiative requiring nonprofit hospitals provide at least five percent of their care on a charitable basis a “thinly veiled negotiating tactic.”

California is to be commended in recognizing that some form of intervention is required to bring down medical utilization costs among its workers where a degree of choice and control can be exercised.  The California Public Employees Retirement System (CalPERS), is one of the nation’s biggest purchasers of health benefits, so whatever the state does to demonstrably bend the cost curve is likely to serve as a national model for public and private employers as well as payers and providers as an emerging accountable care paradigm begins to take root.

However, state officials should give thoughtful consideration to how this intervention is framed and executed if it is to have more than symbolic value and actually reduce medical expenditures.  “Workplace wellness” is a misnomer insofar as the lifestyle choices that can exacerbate — and prevent — chronic conditions are made mostly outside of the workplace and involve personal decisions concerning exercise, meals and sleep.  Moreover, a 2011 survey of employers found mixed results among those that adopted workplace wellness programs in terms of tangibly improving the health status of employees.

Instead of “workplace wellness,” the focus should be simply on wellness.  It should treat employees like adults and give them the freedom to make the personal lifestyle choices they and their medical providers believe can best improve and preserve their health and fitness.  Confining employees to a cubicle for set work hours 40 hours a week and adding on more sedentary time spent commuting to and from that cubicle is hardly a health promoting activity.  It robs workers of valuable time that could be spent on activities that enhance health, particularly sustained exercise.  Nor is it necessary since Information and Communications Technology (ICT) has matured to the point knowledge state employees who are mostly knowledge and information workers can do their jobs from a home office or wherever else they can concentrate and be productive.

On this point, California’s pilot employee wellness program should incorporate a Results Only Work Environment (ROWE).  A ROWE values getting the work done over daily office attendance.  Early indications are that workplaces that adopt ROWE can achieve better health status.  A University of Minnesota study issued in December 2011 found workers in a ROWE realized increased health-related behaviors of more sleep and exercise — behaviors that can go a long way toward maintaining health and reducing medical utilization.