Firms to charge smokers, obese more for healthcare

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Insight: Firms to charge smokers, obese more for healthcare

By Jilian Mincer
Sun Oct 30, 2011 7:19pm EDT

(Reuters) - Like a lot of companies, Veridian Credit Union wants its employees to be healthier. In January, the Waterloo, Iowa-company rolled out a wellness program and voluntary screenings.

It also gave workers a mandate - quit smoking, curb obesity, or you'll be paying higher healthcare costs in 2013. It doesn't yet know by how much, but one thing's for certain - the unhealthy will pay more.

The credit union, which has more than 500 employees, is not alone.

In recent years, a growing number of companies have been encouraging workers to voluntarily improve their health to control escalating insurance costs. And while workers mostly like to see an employer offer smoking cessation classes and weight loss programs, too few are signing up or showing signs of improvement.

So now more employers are trying a different strategy - they're replacing the carrot with a stick and raising costs for workers who can't seem to lower their cholesterol or tackle obesity. They're also coming down hard on smokers. For example, discount store giant Wal-Mart says that starting in 2012 it will charge tobacco users higher premiums but also offer free smoking cessation programs.

Tobacco users consume about 25 percent more healthcare services than non-tobacco users, says Greg Rossiter, a spokesman for Wal-Mart, which insures more than 1 million people, including family members. "The decisions aren't easy, but we need to balance costs and provide quality coverage."

For decades, workers - especially with large employers - have taken many health benefits for granted and until the past few years hardly noticed the price increases.

But the new policies could not only badly dent their take home pay and benefits but also reduce their freedom to behave as they want outside of work and make them resentful toward their employers. There are also fears the trend will hurt the lower-paid hardest as health costs can eat up a bigger slice of their disposable income and because they may not have much access to gyms and fresh food in their neighborhoods.

"It's not inherently wrong to hold people responsible," says Lewis Maltby, president of the National Workrights Institute, a research and advocacy organization on employment issues based in Princeton, New Jersey. "But it's a dangerous precedent," he says. "Everything you do in your personal private life affects your health."

Overall, the use of penalties is expected to climb in 2012 to almost 40 percent of large and mid-sized companies, up from 19 percent this year and only 8 percent in 2009, according to an October survey by consulting firm Towers Watson and the National Business Group on Health. The penalties include higher premiums and deductibles for individuals who failed to participate in health management activities as well as those who engaged in risky health behaviors such as smoking.

"Nothing else has worked to control health trends," says LuAnn Heinen, vice president of the National Business Group on Health, which represents large employers on health and benefits issues. "A financial incentive reduces that procrastination."

LACK OF JOBS

The weak economy is contributing to the change. Employers face higher health care costs - in part - because they're hiring fewer younger healthy workers and losing fewer more sickly senior employees.

The poor job market also means employers don't have to be as generous with these benefits to compete. They now expect workers to contribute to the solution just as they would to a 401(k) retirement plan, says Jim Winkler, a managing principal at consulting firm Aon Hewitt's health and benefits practice. "You're going to face consequences based on whether you've achieved or not," he says.

And those that don't are more likely to be punished. An Aon Hewitt survey released in June found that almost half of employers expect by 2016 to have programs that penalize workers "for not achieving specific health outcomes" such as lowering their weight, up from 10 percent in 2011

The programs have until now met little resistance in the courts. The 1996 Health Insurance Portability and Accountability Act (HIPAA) prevents workers from being discriminated against on the basis of health if they're in a group health insurance plan. But HIPAA also allows employers to offer wellness programs and to offer incentives of up to 20 percent of the cost for participation.

President Barack Obama's big health care reform, the 2010 Patient Protection and Affordable Care Act, will enable employers beginning in 2014 to bump that difference in premiums to 30 percent and potentially up to 50 percent.

Employers do, however, also need to provide an alternative for workers who can't meet the goals. That could include producing a doctor's note to say it is medically very difficult, or even impossible, to achieve certain goals, says Timothy Jost, a professor at the Washington and Lee School of Law. For example, a worker with asthma may not be able to participate in a company exercise program.

These wellness programs typically include a health risk assessment completed online, and on-site free medical screenings for things such as blood pressure, body mass index, and cholesterol.

The programs, while voluntary, often typically offer financial benefits - including lower insurance premiums, gift cards and employer contributions to health savings accounts. For example, workers at the railroad company Union Pacific get $100 in their health savings account for completing the health assessment, $100 if they don't use tobacco and $100 if they get an annual physical (tobacco users also can get the $100 if they participate in a tobacco cessation program).

INCENTIVE TO EXERCISE

Like Wal-Mart, more employers are coming down harder on individuals who have voluntarily identified themselves as tobacco users, often during their health risk assessment. As yet, very few employers identify smokers through on-site medical screenings.

Veridian, which until now has not charged its employees for healthcare premiums, says increases to its health care costs have been unsustainable, climbing 9 percent annually for the past three years. Earlier this year, it rolled out a wellness program and free screenings, which 90 percent of workers have now completed.

As it starts charging, it will provide discounts to those making progress as it "wants to reward those who have healthy lifestyles," says Renee Christoffer, senior vice president of administration for the credit union.

Mark Koppedryer, vice president of branches at Veridian, was one of the workers who participated in the screenings. The 37-year-old father of three initially participated to show his support but was shocked to find out that he had elevated blood pressure and cholesterol scores.

His colleague, Stacy Phillips, says she used the new wellness programs to exercise more. "I knew there needed to be a change in my life," says the 35-year-old, who has lost 40 pounds since January. "This made me more aware that at some time there would be a cost."

These changes come at a time when health insurance premiums are soaring. In 2011, the average-cost of an employer-provided family plan was more than $15,000, according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust. That's 31 percent higher than five years ago. And the number is expected to climb another 5-8 percent next year, according to various estimates.

In contrast, the giant medical and research center Cleveland Clinic, which employs about 40,000 people, has seen these costs grow by only 2 percent this year because it has implemented a comprehensive wellness program that has dramatically improved the health of many workers.

The effort began several years when it banned smoking at the medical center and then refused to hire smokers. It later recognized that having a gym and weight loss classes wasn't enough to get people to participate. It made these facilities and programs free and provided lower premiums to workers who maintained their health or improved it, typically with their doctor's help.

"You don't do this overnight," says Paul Terpeluk, Medical Director of Occupational Health at the Cleveland Clinic. You have to develop a program and change the culture, he said.

INTRUSIVE

But not all programs are as well constructed and effective, says Mark A. Rothstein, a lawyer and professor at the University of Louisville School of Medicine. The wellness programs may be well-intentioned, he says, but there's not strong empirical evidence that they work and getting a weekly call about your weight or smoking habits, which is offered by some programs, could be humiliating for participants.

"What might be seen as a question to one person may be an intrusion to another," he says. That's one reason that lower-paid janitors at his school participate but, "the professors on campus consider it a privacy tax so we don't get some stranger calling us about how much we weigh."

And there are also those that no matter how much they exercise or how healthy they eat can't lose weight or lower their blood pressure or body mass index. "There are thousands and thousands of people whose paycheck is being cut because of factors beyond their control," says Maltby from the National Workrights Institute.

The programs could be especially burdensome for low-income workers, who are more likely to fail health assessment tests and less likely to have access to gyms and healthier fresh produce, says Harald Schmidt - a research associate at the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania.

"We want to use provisions to help people and not penalize people for factors beyond their control," Schmidt says. "Poorer people are often less healthy and this constitutes a potential double whammy. They are likely to face a higher burden in insurance premiums."

That's the case for Barbara Collins, a 35-year-old Wal-Mart employee - who lives in Placerville , California. She says she'll have to pay $127 every two weeks for health insurance next year, including a penalty of almost $25 because she's a smoker.

"I'll cut back on cigarettes and hopefully eventually quit," says Collins, who earned $19,000 pretax, or about $730 every two weeks, last year. "Christmas will definitely be tight this year and for years to come if this lasts," she says. "Family vacations, there's no way I can afford that.".
http://www.reuters.com/article/2011...Type=RSS&feedName=domesticNews&rpc=22&sp=true
 

Creasy Bear

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Stupid move.

What they should do is give "incentive discounts" to non-smokers and non-bloated slobs instead. It'd accomplish the exact same thing... but you wouldn't have to listen to the fatsos pissing and moaning about how the "fat tax" is an insult their tender, pudgy pride, and you wouldn't have to hear the smokers hacking and wheezing about their freedoms and rights to kill themselves and stink the joint up.
 

Mags

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I'm ok with this. Fuck fatsos and stinky smokers.
 

Ballbuster1

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Stupid move.

What they should do is give "incentive discounts" to non-smokers and non-bloated slobs instead.
Never gonna happen. You could say the same thing about late fees. Give people an incentive
to pay early instead of charging more to someone that can't pay in the 1st place but that
doesn't add cash to their pockets.

I'm ok with this. Fuck fatsos and stinky smokers.
Yup. Charge more to the ones that require the most payouts.
Been working with car insurance for years.
 

Creasy Bear

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Never gonna happen. You could say the same thing about late fees. Give people an incentive
to pay early instead of charging more to someone that can't pay in the 1st place but that
doesn't add cash to their pockets.
It can easily be made into a zero sum game. It's just simple mathematics... you just tally up what you'd be gaining from the "fines" on fatties and Joe Cancers, and you gave that exact sum as a "rewards" to skinny non-smokers.

The hospital I used to work for did exactly that... they started out with "Unhealthy fine" policy on their employees, but after the fatties pissed and moaned, they did away with the "unhealthy fine", raised the base rate of health insurance premiums, and then gave the resulting gain to the skinny employees as a "Healthy reward".

In the end the situation was mathematically identical... it was relabeled for the purposes of feel-good semantics. It worked... the fatties didn't feel penalized for being fat, and the skinny people felt rewarded for being skinny. Winner winner chicken dinner(the crunchy kind of chicken for the fatties).
 

Pigdango

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It can easily be made into a zero sum game. It's just simple mathematics... you just tally up what you'd be gaining from the "fines" on fatties and Joe Cancers, and you gave that exact sum as a "rewards" to skinny non-smokers.
You're close, but remember the goal is certainly NOT a zero sum game, and it's certainly not improving people's habits or their health. The goal is to raise profits. With that in mind, the more appropriate solution would be to raise prices for everyone across the board, and deal back Non-Smokers and those who participate in "Agency Approved" Wellness programs. And of course you don't deal them anywhere near back to the previous rates. That way you not only get the extra dough from the fatties and the smokers, but from the lazy people and the people that don't want their employers or their health providers telling them how to live maaaaaaaaan. That's what my company does with their health provider. I'm not obese nor am I a smoker, but I've yet to participate in one of their Wellness Programs (which involves spending an hour on the phone every few weeks with a "Wellness Counselor") to get a $100 rebate.
 

Don the Radio Guy

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#8
Stupid move.

What they should do is give "incentive discounts" to non-smokers and non-bloated slobs instead. It'd accomplish the exact same thing... but you wouldn't have to listen to the fatsos pissing and moaning about how the "fat tax" is an insult their tender, pudgy pride, and you wouldn't have to hear the smokers hacking and wheezing about their freedoms and rights to kill themselves and stink the joint up.
I'd agree with you, but positive reinforcement hasn't worked with getting people to eat healthy or stop smoking. Maybe it's time to start punishing people where it hurts the most. The wallet. If I were the owner of a business I'd buy really cheap chairs and put very narrow doorways in all of my rooms. Fuck those fat slobs.
 

whiskeyguy

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#9
As a smoker I'm fine with this. If I cost the company more to insure I'm fine with contributing more to my insurance. The company didn't make my unhealthy decisions for me and shouldn't be responsible for paying for them. Likewise, the other employees shouldn't have their rates raised to subsidize my unhealthy habits.
 

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#10
Wait, isn't the whole point of having health insurance is to cover the things that make you unhealthy? If I was healthy I wouldn't need health insurance.
 

MayrMeninoCrash

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#11
Also isn't this the point of group healthcare? To spread the risks out? Cover a few fattys and smokers by also covering those with less health problems. If we are going to break everyone's habits down and decide what they need to pay, why not just abolish groups altogether? You might not be a smoker or a fatty, but be susceptible to heart disease, cancer or any other number of health maladies. Seems like a slippery slope to start going down.
 

whiskeyguy

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Also isn't this the point of group healthcare? To spread the risks out? Cover a few fattys and smokers by also covering those with less health problems. If we are going to break everyone's habits down and decide what they need to pay, why not just abolish groups altogether? You might not be a smoker or a fatty, but be susceptible to heart disease, cancer or any other number of health maladies. Seems like a slippery slope to start going down.
Group health care (and health care in general) spreads all risks over the entire group, so if someone is in a car accident the theory is the payments from healthy people go to that person and their $200,000 medical bills.

However, when it comes to personal decisions there's a way to reduce insurance costs... by forcing those who make bad decisions to pay more of a premium that fairly reflects their burden on the group policy. Instead of making all premiums 3% higher, make the premiums of the obese and smokers 5% higher because that reflects the added strain on the policy they represent.

Like ballbuster said, that's how it works with auto insurance. A person with two DUIs pays a lot more than a housewife who hasn't gotten a ticket since 1987, because the guy with the DUIs is going to cost the insurance company more.
 

MayrMeninoCrash

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#13
Like ballbuster said, that's how it works with auto insurance. A person with two DUIs pays a lot more than a housewife who hasn't gotten a ticket since 1987, because the guy with the DUIs is going to cost the insurance company more.
That's not how it works with auto insurance - Auto insurance is typically based on individual habits not groups. Your example would have the housewife's rate increase as her neighbor collects another DUI, reflecting the overall risk of the neighborhood, and the neighborhood coming together and telling drunkards they need to shoulder more of the burden.

Personally I think it's all another cash grab. I checked my insurance to see what wellness benefits they offer, and I found out they don't offer any sort of credit for a weight-loss program, diet or exercise regimen (like a Jenny Craig or 24-hr Fitness membership) and I was prescribed Phentermine to help with appetite control and had to pay the full price for the medication. Meanwhile they happily cover their portion after co-pay on my blood pressure and blood sugar medicines. It's all backwards.....
 

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You're close, but remember the goal is certainly NOT a zero sum game, and it's certainly not improving people's habits or their health. The goal is to raise profits. With that in mind, the more appropriate solution would be to raise prices for everyone across the board, and deal back Non-Smokers and those who participate in "Agency Approved" Wellness programs. And of course you don't deal them anywhere near back to the previous rates. That way you not only get the extra dough from the fatties and the smokers, but from the lazy people and the people that don't want their employers or their health providers telling them how to live maaaaaaaaan. That's what my company does with their health provider. I'm not obese nor am I a smoker, but I've yet to participate in one of their Wellness Programs (which involves spending an hour on the phone every few weeks with a "Wellness Counselor") to get a $100 rebate.
Oh absolutely... they're most definitely looking to squeeze money, not gravy, out of the tubs of lard. They know damn well this won't motivate anybody to lose weight and/or quit smoking and they could give a fuck either way.
 

whiskeyguy

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#15
That's not how it works with auto insurance - Auto insurance is typically based on individual habits not groups. Your example would have the housewife's rate increase as her neighbor collects another DUI, reflecting the overall risk of the neighborhood, and the neighborhood coming together and telling drunkards they need to shoulder more of the burden.
But that's exactly how it works. Insurance companies use zip codes along with personal driving habits to dictate rates... so if you're in an area where people drive like morons (and thus there are a lot of accidents) the rate for the entire area rises. I don't think it's the businesses (or the "neighbors") decided how much more smokers or obese people pay in this story, but rather the insurance companies gave them an alternate rate for people with bad habits that keep the overall price down.

That's why some businesses drug test... it keeps the rates lower because the insurance companies know that it's very unlikely a drug user exists in the group. Now short of simply not hiring smokers or obese people, having alternate rates is another way to reduce the cost of insurance on the more healthy employees and the company as a whole.
 

MayrMeninoCrash

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#16
But that's exactly how it works. Insurance companies use zip codes along with personal driving habits to dictate rates... so if you're in an area where people drive like morons (and thus there are a lot of accidents) the rate for the entire area rises. I don't think it's the businesses (or the "neighbors") decided how much more smokers or obese people pay in this story, but rather the insurance companies gave them an alternate rate for people with bad habits that keep the overall price down.

That's why some businesses drug test... it keeps the rates lower because the insurance companies know that it's very unlikely a drug user exists in the group. Now short of simply not hiring smokers or obese people, having alternate rates is another way to reduce the cost of insurance on the more healthy employees and the company as a whole.
They might charge more for certain zip codes because thefts and vandalism rates are higher in that particular area, but I've never heard of a company that charged higher rates just because there are more drunk drivers in an area than average. I'd like to see your source for that info. Which cities have the worst incidence of DUI and therefore the highest insurance rates?
 

whiskeyguy

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#17
They might charge more for certain zip codes because thefts and vandalism rates are higher in that particular area, but I've never heard of a company that charged higher rates just because there are more drunk drivers in an area than average. I'd like to see your source for that info. Which cities have the worst incidence of DUI and therefore the highest insurance rates?
Just did a quick search and this page from ensurance.com was the top result. Here's a quote from the page:

Where you live helps insurance actuaries assess your risk for accidents. Your ZIP Code and its loss history (which includes factors such as your area’s claims history, crime rate, and number of drivers) help determine your auto insurance rate. This explains why drivers in large cities like Los Angeles and New York have to pay higher auto insurance premiums than drivers in rural areas.
Including the area's claim history means they consider the driving habits of the area overall. For example, if they have 45 drunk drivers to every 1,000 insured in one area, as opposed to 12 in another zip code, the rates will probably be higher. Same with speeding, total number of accidents, weather-caused accidents, road conditions, and so on.

http://www.esurance.com/insurance-resources/rates-zip
 

Creasy Bear

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But that's exactly how it works. Insurance companies use zip codes along with personal driving habits to dictate rates... so if you're in an area where people drive like morons (and thus there are a lot of accidents) the rate for the entire area rises. I don't think it's the businesses (or the "neighbors") decided how much more smokers or obese people pay in this story, but rather the insurance companies gave them an alternate rate for people with bad habits that keep the overall price down.
I pay less to insure two cars in Indianapolis than I did on just one of the same exact cars when I lived on Long Island... less then half... instantly.

It's not just a matter of driving habits either. It's also the litigation climate of certain areas. Everybody on Long Island walks around with a rabid Jew lawyer in their back pockets... and it affects ALL insurance rates; home, auto, medical, etc...
 

Creasy Bear

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#20
don't these health insurance companies know that some people are genetically larger that others and that is a healthy weight for them?
It's not a matter of size... it's proportion... BMI. You can be big and healthy, but you can't(generally, statistically, physiologically speaking) be fat and healthy.
 

Norm Stansfield

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#21
Wait, isn't the whole point of having health insurance is to cover the things that make you unhealthy?
The point of health insurance is to pass risks onto the insurer. Same as the point of every other insurance. Smokers, fat people, older people, etc have higher risks, therefor it should cost more to pass it onto an insurer.

It should have nothing whatsoever to do with "bad behavior" or "incentives to be better" etc. The economic justification (the math) should be enough to charge everyone who is unhealthy in any way (chosen or unlucky) more for their insurance.
 

JonBenetRamsey

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#22
It's not a matter of size... it's proportion... BMI. You can be big and healthy, but you can't(generally, statistically, physiologically speaking) be fat and healthy.
the bmi is a bullshit scale. it was made about 100 years ago with data that was wrong for that time.
 

jimmyslostchin

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#23
the bmi is a bullshit scale. it was made about 100 years ago with data that was wrong for that time.
Even if BMI is a fucked up scale, there's a healthy amount of body fat, and an unhealthy amount. You don't have to be a dietitian to know which is which.
 

Creasy Bear

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the bmi is a bullshit scale. it was made about 100 years ago with data that was wrong for that time.
It's not bullshit. It may not be pinpoint accurate, but it's a damned good indicator of how much blubber a person is carrying. You grant a margin of error at 5% for determining who's a fatty for insurance purposes and that puts you well outside the margin of error of an electronic BMI analyzer... new technology... not 100 year old data. And even if you spot them 5%, trust me, they'll still be PLENTY of people popping porker on the Flab-O-Meter.



BMI's for people who are heavily muscled may give a false fat reading, but look around, how many people do you see walking around with that "problem"? It'd only apply to a tiny percentage of females, and musclebound galoot dudes would have no problem rectifying a false fat reading... one glance at them would explain the situation. Any non-retarded tech operating a BMI analyzer could spot the difference between a bodybuilder and a blubber butt and record the results accordingly.



boydaway... I registered a 19% on the Flab-O-Meter during my insurance screening a coupla months back.

Just braggin'

Not too bad for an ol' relic like myself.
 
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#25
We had a guy in my power school class who was on remedial PT because of the BMI. He was in the best shape of anyone I've ever fucking known. He didn't mind the remedial because he would have been working out during that time anyway, he actually ended up leading the class. Hell, I think I'm considered obese by some scales at 6'4" 220.

Anyway, I think a much better indicator for these companies is what type of company they're insuring. Real Estate companies, Oil Companies, Stock Brokerages, etc, those mother fuckers are going to have a heart attack by 60. I know, my entire family's in that category.