It’s sad to hear of the objections to that very sensible, if much scaled down, proposal you describe coming out of the great state of Colorado. I can only hope the legislators of that fine state ignore all those lobbyists and return to Colorado’s roots of common sense and pragmatism.

However, I have some concerns about how such a policy could be implemented. You list as among these indicators, smoking, obesity, hypertension, cholesterol, blood sugar, and alcohol. Clearly obesity is easy to measure objectively if, for example, it is based on a person’s body mass index which is a function of the person’s weight and height. While the other indicators are all readily measurable through blood tests, many of those can be disguised by taking drugs that obscure the signs of abuse as substance abusers know all too well. It’s not unnatural for people to want to pay lower insurance premiums yet get the same coverage, so doesn’t that provide an incentive for lower the measurements of the bad indicators by means other than a good diet and healthy lifestyle? Hypertension can be lowered with a wide variety of medicines, cholesterol can likewise be lowered with drugs, and traces of smoking and alcohol can be disguised with drugs. As major sporting federations have found out, some drugs can totally elude detection currently and at best can only be detected years later from old blood samples. And don’t most people who are overweight insist that they have cut back on their caloric intake to no avail and blame their “metabolism” and so would want the exceptions that you propose being available for those get a doctor’s note that says they can’t help themselves? And what about advocacy groups who might argue, for example, that a diabetic who doesn’t take his medication regularly and doesn’t test his blood sugar levels regularly should be further punished with higher premiums?

Basing a large part of the determination of the price of health insurance on factors that the insured can substantially affect makes so much sense, not only because it seems fair in concept but also because it provides a strong incentive for people to alter their behavior in a very beneficial way. But how do you stop the proliferation of advocacy groups from getting exceptions that eviscerate the very goals you are trying to achieve or stop the remaining people from trying to dupe the tests that are the backbone of your idea?

Steve responds:
As you suggest, people tend to game any system to their own advantage once they know the rules. Thus, insurers would have to be vigilant to make sure the risk factors they use are not subject to such gaming beyond some acceptable level. A significant related issue, as you suggest, could be that of outlaw doctors willing to certify anyone with any risk factor as medically unable to comply with appropriate individual control measures.
A similar problem has existed for decades in the workers comp field. Again, insurers would need to be able to apply reasonable standards for allowing exceptions, including the ability to exclude certifying doctors who can be shown to offer bogus certifications.

As for political objections to this approach, we’re seeing a raft of it coming out of the woodwork in Colorado, where a very mild version of my proposal is being opposed by consumer “representatives,” AARP, and even the American Heart Association. You read that right, the American Heart Association is opposing a bill that promotes prevention of heart disease. Is this a great country, or what?

Lower cost, better benefits, more choice, you decide.

Steve responds:
Great stuff, gratefully received by a finance geek who wishes he knew more about marketing.

Steve responds:
It is definitely political, as I’ve recently learned when testifying in favor of a weaker version of my proposal before a committee of the Colorado legislature. It is currently illegal for small employers in our state to base employee premium contributions on individual control of health risk factors, even though large employers are allowed to do it–go figure! Even so, federal law limits the amount of premium incentives to only 20%, even though obesity alone drives up medical costs by 40%.

As for companies brave enough to try this, check out Safeway’s innovative program.

Steve responds:
Re your questions: (1) For privacy reasons, I would suggest leaving it up to each individual to undergo whatever testing and measurement is necessary to show his insurer that he complies with specific health risk factors. That way, on one would ever need to reveal that he has issues with obesity or high cholesterol, only the extent to which he doesn’t. This may sound like hair-splitting to some, but if they think it through, it’s not. (2) Great question! A lot of people are able to control their cholesterol, blood sugar, and hypertension with diet and exercise alone–no medications at all. As long as insurers make it more advantageous for people to rely on drugs by incentivizing their use, however, we’re likely to maintain that unhealthy aspect of our culture in which people expect a pill to cure the woes brought on by less-than-attentive personal behavior. My full-blown proposal for health reform addresses this quite effectively, but it’s not inherent in my stand-alone prevention proposal.