Regulating Wellness Through Employers: Mitigating the Knowledge Gap

Some of the behavioral changes that the Affordable Care Act seeks to bring about are prompted directly by the Act or a federal agency acting pursuant to the Act.  The “individual mandate” that people buy health insurance is one example; individuals who do not change their behavior to comply with that particular provision of the law are subject to a tax penalty imposed by the IRS.

But much of the work of the ACA is done through regulatory intermediaries that are themselves incentivized by the Act to find ways to bring about the end-user behavioral changes that the ACA is really after.  Medicaid expansion is a straightforward example–under the ACA the federal government does not provide insurance coverage to those who make less than 133% of the federal poverty line, rather, it incentivizes states to do so.  Accountable Care Organizations are another somewhat more roundabout example: the Act incentivizes doctors to form organizations that will themselves incentivize doctors to coordinate care and patients to obtain more value-maximizing services.

Like any principal-agent relationship, regulating through an intermediary has benefits and costs.  The intermediary (state, employer, insurer, doctor, etc.) may be differently positioned than the federal government to obtain information about, and influence the behavior of, the actors whose collective behavior we ultimately care about, for better or worse.  And certain intermediaries may be differently responsive to the concerns of those impacted by the policies they enact than the federal government, again for better or worse.

One difference between direct regulation and regulating through an intermediary is that in the latter case the primary regulator is cut off from the actual behavior it is regulating.  So it does not learn in the ordinary course what works and what does not.  Employer wellness programs are an important example: The ACA tries to get people to live healthier lives by directing the federal government to encourage employers to encourage their employees to make healthy decisions (exercise, quit smoking, diet, etc.).  With that attenuation comes a knowledge gap–how are those at the top to know what is working and what isn’t?

In a paper published in the Journal of Health, Politics, and Law last July (see here), Kristin Madison, Harold Schmidt, and Kevin G. Volpp explore this issue specifically in the context of wellness programs.  Madison et al. outline how a reporting requirement imposed on the regulatory intermediary (here, the employer) might be used to enable federal regulators to mitigate the information gap and craft more effective regulations despite the regulators’ distance from the behavior they actually seek to change.

One thing the Madison et al. piece makes very clear, though, is that while reporting might be used to mitigate the information deficit, it would not overcome the deficit altogether.  There are simply too many obstacles and costs to comprehensive reporting.  In employer wellness programs and likely beyond this knowledge gap is likely to be a sticky “cost” to regulating through intermediaries.  Of course, whether that cost is outweighed by the benefits that come with this form of regulation is another question altogether!

One thought to “Regulating Wellness Through Employers: Mitigating the Knowledge Gap”

  1. “… how a reporting requirement imposed …” Yadda, yadda, yadda. Indeed. Reporting requirements. There aren’t enough of them yet and the Federal Register is not thick enough yet that a month’s issue could not be studied in a lifetime, or so. While indeed you are right, principal agents could do this that and the other the underlying problem is that they generally cost more than if they left their “underlings” well alone. The current “dearth” of health insurance prior to ACA was itself an outcome of an already over-regulated insurance sector (each state had different mandatory inclusions and exclusions thus making it impossible to leverage what made the US great a few hundred years ago: a great cross-continent unified market – a thing the EU just tries to copy while the US states try to defeat it. The ACA in itself, as the Federation could not rule everything due to state prerogatives, is a potential patchwork quilt that makes life hardest for employers who work in several states. And with the reporting requirements suggested initially comes lies and the principal agent will be kept in the dark as in China. “If it works” the program will probably be read in Forbes. All those not reported there consider a failure. It’s as easy as that.

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