The Optimal Employer-Sponsored Insurance Wellness Program Premium Discount Rate: Achieving the Equilibrium between Participant Enrollment and Non-Participant Insurance Drop-Out
Guarascio, Kaitlin Leigh
The Optimal Employer-Sponsored Insurance Wellness Program Premium Discount Rate: Achieving the Equilibrium between Participant Enrollment and Non-Participant Insurance Drop-OutKaitlin Guarascio, B.S.Thesis Advisor: William Encinosa, Ph.DABSTRACTPremium discounts have recently been used by employers to encourage employees to join wellness programs. However, a concern is that, to fund the wellness program, premiums may rise too high for those who do not join the wellness program. Thus, premium discounts have recently been a focus of health care reform. In this thesis, I estimate the cost-offsets of those who do not join a wellness program and the cost-savings of those who do. Balancing cost-offsets and cost-savings, I find that the optimal premium discount can range from 0% to 25% to 40% as the wellness program cost savings per enrollee range from $0 to $100 to $150. Moreover, at a 20% premium discount the net cost savings to society range from -$114 million to $762 million when wellness program per capita cost savings range from $0 to $150 (for 10 million people). At a premium discount rate of 50%, this variation is skewed to higher losses, with net cost savings now ranging from -$497 million to $758 million as wellness program per capita cost savings range from $0 to $150. Thus, implementing a wellness program can be risky if the wellness program cost savings are not well known upfront.
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