Companies link health costs to employee's risk factors

CINCINNATI -- First they tried nudging. Now, as insurance costs climb, companies are penalizing workers who have high health risks such as obesity and high blood pressure or cholesterol.

Lee Morrison, 51, doesn't mind the push, which came in the form of added insurance charges from his employer, Western & Southern Financial Group.

"I knew if I wanted to be healthier and pay less, it was up to me to do something about it," said Morrison, who has lost 54 pounds and lowered his body mass index enough to earn refunds the past two years.

A small number of companies have linked health factors to what employees pay for benefits, but the practice is expected to grow now that federal rules have been finalized, spelling out what's allowed by law.

Employee advocates worry other anti-discrimination laws, such as the Americans with Disabilities Act, won't cover the person who is 20 or 30 pounds overweight.

The businesses are deducting from employees' paychecks, adding insurance surcharges or offering insurance discounts or rebates only to low-risk workers.

"Employers know they have to do something," said Garry Mathiason, a senior partner at the national employment and labor law firm Littler Mendelson, based in Boston. "I believe that in just the next two years more employers will turn to penalties to change employee behavior."

Mathiason said more than 300 companies have sought advice on creating more aggressive wellness programs since the firm released a study in April on legal issues and trends associated with requiring healthy practices.

Health-care spending in the U.S. is estimated to reach $2.2 trillion this year, with at least 54 percent of spending in the private sector, and is expected to nearly double by 2016, according to the National Coalition on Health Care.

A 2003-2004 National Health and Nutrition Examination Survey showed about two-thirds of adults in the U.S. were overweight and almost one-third obese. A U.S. surgeon general's report said health-care costs of obesity totaled more than $117 billion in 2000.

More employers have charged higher insurance premiums the past few years for tobacco-using employees. Otherwise, wellness programs had been primarily voluntary, offering in-house fitness centers and free health screenings, for instance.

But many employees of Indianapolis-based Clarian Health didn't use the programs, hospital spokesman James Wide said. In 2009 the company will start reducing pay for employees in its health plan by $10 per paycheck if their BMI -- a measurement of body fat through a height and weight ratio -- is in the obese range of more than 29.9. The deduction will be $5 per check if they don't meet required cholesterol, blood pressure or blood glucose measurements. Workers will be required to complete an annual health risk assessment and can appeal to have their fees dropped if they show improvement.

"We want more people to participate so that they can take control of their health," Wide said.

Some workers and employee advocates say companies are intruding in workers' private lives.

The National Workrights Institute says employers adopting the charges are trying to control private behavior and amassing huge amounts of personal health information.

"It's a backdoor approach to weeding out expensive employees," legal director Jeremy Gruber said.

Employers wary of risking legal problems feel more confident after federal regulations were finalized July 1 covering how wellness programs can comply with non-discrimination requirements under the Health Insurance Portability and Accountability Act. Rewards (and therefore penalties) based on health factors cannot exceed 20 percent of the total cost of employee health coverage.

Employers also are warned that they must consider other federal and state laws, including the ADA.

Businesses acknowledge they are trying to cut health-care costs but say they also want to help employees get healthier.

Cincinnati-based Western & Southern Financial Group adds between $15 and $75 monthly to the insurance cost of health plan participants according to their BMI scores. A fitness center, weight loss programs and health screenings are provided, and employees reducing their BMI receive refunds, said Noreen Hayes, senior vice president of human resources. Fifteen percent of employees who paid surcharges in 2006 received refunds this year, and about 40 percent of employees in the company's health plan pay the charges.

The surcharges help cover some of the costs the company incurs as a result of those employees' conditions, Hayes said.

Roselyn Bryant, 61, of Cincinnati, doesn't face any of the health risks but still is glad the bank where she works in the mail department doesn't charge for them.

"I think it's too harsh to charge people for things they can't always control" she said.

Helen Darling, president of the National Business Group on Health, representing more than 200 of the nation's largest employers, said most employers prefer positive incentives.

"I think it's a mistake to use penalties for something as complicated as maintaining weight in a society that does everything to make you inactive," she said. "It can make people mad, and we are in a war for talent."