Firms to charge smokers, obese more for healthcare

Too few employees showing signs of improvement
By Jilian Mincer
||Last Updated: 10/31/2011

(Reuters) - Like a lot of companies, Veridian Credit Union wants its employees to be healthier. In January, the Waterloo, Iowa-based 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 health-care 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 per cent more health-care services than non-tobacco users, said Greg Rossiter, a spokesman for Wal-Mart, which insures more than one 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 hardest the lower-paid as health costs can eat up a bigger slice of their disposable income and they may not have much access to gyms and fresh food in their neighborhoods.

"It's not inherently wrong to hold people responsible," said Lewis Maltby, president of the National Workrights Institute, a research and advocacy organization on employment issues based in Princeton, NJ. "But it's a dangerous precedent," he said. "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 per cent of large and mid-sized companies, up from 19 per cent this year and only eight 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."

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