Does the stick work better than the carrot in reducing health insurance costs?
October 1, 2004
Employers have been trying to sweet talk, cajole and harangue their workers into healthier lifestyles for at least two decades now - remember the aerobics craze of the late 80s? The main corporate reason for this, of course, has been a need to con...
Employers have been trying to sweet talk, cajole and harangue their workers into healthier lifestyles for at least two decades now – remember the aerobics craze of the late 80s? The main corporate reason for this, of course, has been a need to control health insurance costs.
Yet, whether it was boosting company benefits packages to include fitness club memberships and smoking cessation programs, or going to the expense of setting up internal exercise facilities and bringing in instructors for lunch-time yoga classes, the attempts to improve employee health levels, by and large, have been in vain.
But now some employers south of the border are taking a different, much tougher approach. Before we discuss that, however, let’s take a look at some of the data that’s forcing them in that direction:
12% of workers account for 80% of health care-related expenses.
an employee who is significantly overweight can have a benefit expense more than 20% higher than a person who is not.
a tobacco user can have medical expenses almost 15% higher than a non-smoker.
an employee with depression may have health-related expenses as much as 70% higher than other employees.
Rather than continuing to expect all employees to share the health insurance premium burden equally, more employers are targeting the people who cost the most. Here are just a few examples I’ve recently read about in the Wall Street Journal:
Union Pacific Corp. recently stopped hiring smokers in seven states as a pilot program to weed out potential high-cost workers.
General Mills Inc. now imposes a $20 a month “smokers’ surcharge” on health premiums for those who smoke.
One Midwestern manufacturing giant is planning to cut short-term disability benefits for smokers by giving disabled non-smokers 90% of their regular pay while smokers receive only 60%.
In Alabama, a blue-ribbon panel appointed by the governor considered charging the state’s 200,000 public employees higher health premiums if they are obese but backed off. However, it did recommend a monthly surcharge for smokers and Governor Bob Riley is expected to put the proposal before the legislature this fall.
French industrial gas giant Air Liquide has cut the annual payment it makes towards workers’ health premiums to $1,000 from $1,500 and is forcing employees to get health-risk assessments and periodic physicals to win the remaining $500.
An Indiana bank bumped up its annual deductible to $2,500 from $500, then gave employees a chance to win back the increase; $500 each for low blood pressure, low cholesterol, non-obese body-mass index and non-smoking status.
Do these developments indicate the beginning of a significant trend in health insurance cost reduction? They certainly bear watching, particularly since the push to apply these rewards and penalties is coming from top executives. And they are of particular significance to trucking companies as some (admittedly small) studies indicate that truck drivers tend to smoke more, exercise less and make worse dietary decisions than the general working population. Our government-run health care system does to some degree mask this problem more so than is the case in the US, but no Canadian motor carrier can deny the significant increase to its health insurance costs in recent years.
Targeting high-risk groups when it comes to insurance is nothing new – you pay more for your car insurance if you’ve been caught speeding and more for house insurance if you’ve had a fire in the past, and most can see the logic behind such a practice. But a concentrated effort to target employees with “unhealthy lifestyles” raises a raft of legal and ethical questions.
Critics of such systems argue that charging different rates for health care is based on the assumption that people who are obese, smoke, have high blood pressure or some other type of health issue can change their situation. If there is no scientific evidence that is so, then companies targeting the health habits of their employees could be opening themselves to lawsuits.
There are also concerns about how far such practices could go. For example, could an employee’s family history or genes cost them higher premiums if they indicate a higher risk for some forms of cancer? In 2001, Burlington Northern Santa Fe settled a suit brought by the US government after it agreed to stop genetic testing of its workers.
At the same time, when one considers the spiraling costs of health care, should employees not be expected to shoulder some responsibility for their lifestyle choices? And if they are not, what will motivate them to change unhealthy habits?
Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry. All posts by Truck News