Companies Penalizing Unhealthy Behaviors Like Smoking to Save Money
Synopsis: More Companies Penalizing Unhealthy Behaviors Like Smoking to Save $10,000/yr Per Worker. More Companies Penalizing Unhealthy Behaviors Like Smoking to Save $10,000/yr Per Worker
Main DigestMore Companies Penalizing Unhealthy Behaviors Like Smoking to Save $10,000/yr Per Worker
A new survey shows that almost half of all large companies already penalize employees' unhealthy behaviors, or plan to do so shortly, a trend likely to be accelerated by the new health reform law which permits if not encourages it, reports ASH A new survey shows that almost half of all large companies already penalize employees' unhealthy behaviors, or plan to do so shortly, a trend likely to be accelerated by the new health reform law which permits if not encourages it, reports public interest law professor John Banzhaf who has obtained two legal rulings from the federal government sanctioning this practice - which he helped develop in the 1980s - called "differential health insurance premiums." ash.org/naicspecialreport
According to the survey, 47% of nearly 600 large U.S. employers representing more than 10 million workers already use or plan to use financial penalties over the next 3 to 5 years for employees who engage in unhealthy behaviors and/or refuse to change. While most (81%) would simply increase health insurance premiums, some would also increase deductibles (17%) and/or out-of-pocket expenses (17%). Almost two thirds of these companies (64%) would target employees who smoke. www.hewittassociates.com/Intl/NA/en-US/AboutHewit...
"It's no surprise that smoking is the unhealthy behavior most likely to be targeted, since each employee who smokes can cost the company over $10,000 a year in additional health care costs, disability payments, time lost from work, etc. - for more than obesity and other similar factors." says Banzhaf, Executive Director of Action on Smoking and Health (ASH), America's first anti-smoking organization. ash.org/$12000.
But, suggests Banzhaf, it's misleading to call the surcharge a "penalty" when all that the company is doing is requiring the employee to pay a small part of the huge cost his habit imposes on others, including his fellow employees. Indeed, he suggests, it's more in the nature of a user fee than a penalty designed to punish.
Also, notes Banzhaf, since smokers make up less than 20% of the adult population, and an ever smaller percentage among college-educated people, it's easier for companies to replace any smoking employee who might quit to avoid paying a higher health insurance premium.
There are many reasons why employers are switching from offering financial incentives to encourage employees to live healthy lives to penalizing those who don't:
Many studies have shown that offering financial incentives to quit smoking or to lose weight are not very effective, especially since the size of the incentives most employers can afford are small. In sharp contrast, many studies have shown that even modest increases in the costs of smoking make people quit.
Financial penalties (disincentives) for activities like smoking can - unlike incentives - be as large as desired, and cost the employer nothing, whether or not they actually reduce the rate of smoking. If each smoking employee costs a company over $10,000 each year, a surcharge of thousands of dollars can easily be justified.
If higher smoker premiums reduce smoking, more money is available not only for shareholders but also for nonsmoking employees in the form of better health benefits or higher salaries. But even if there is little reduction in smoking, many argue that it's fairer to require smokers to pay the costs they impose on the system.
Moreover, many argue it's unfair to pay people to quit smoking but offer nothing to the great majority of employees who don't currently smoke. Forcing smokers to pay more of the costs their own habit imposes on the company - and indirectly on fellow workers - seems to many to be fairer.
Partially as a result of the many debates over health care reform, more people are embracing the concept of imposing "personal responsibility" - making people accountable for their own health choices. As the survey authors reported, "This shift in strategy [from incentives to penalties] suggests that companies are increasingly challenging employees and their dependents to be accountable for the decisions they make regarding their health."
Under a recent federal ruling Banzhaf obtained, it's OK to charge smokers more for health insurance without any percentage limitations, and without the need to meet the federal requirements of a "wellness" plan, because smoking is simply a "behavior." In contrast, because obesity is a "health status," additional premiums can be imposed only as part of a wellness plan meeting certain conditions, and then only within modest limits. ash.org/higher4smokers.html
Under the new law, as of 2014, companies may impose as much as a 50% surcharge on employees who smoke. For obesity and other health factors, the percentage increase permitted under the new health reform bill is much lower, and the cost can only be imposed as part of a qualified wellness program.
Thus, says Banzhaf, the many smaller companies which may not wish to shoulder the expense and burden of establishing a qualified wellness program may still charge much more for employees who smoke, but not for those who are obese.
As health care costs continue to escalate (from $4,793 in 2001 to $11,058 in 2010), more and more companies will be driven to adopt the only cost-cutting technique which has proven to be effective, and can be implemented at zero cost and without the complications of qualifying a wellness program - charging smokers more for their health insurance - predicts Banzhaf.
Moreover, just as complaints from nonsmokers are forcing companies to cut back on work breaks which are unfairly available only to smokers, and concerns about the unfairness of requiring nonsmoking taxpayers to shoulder the added tax burdens imposed by smoking have led to much higher state cigarette taxes, the great majority of people who do not smoke are beginning to see that charging everyone the same for health insurance is unfair because it imposes a massive financial burden on nonsmokers. Thus they will also join in pressuring companies to charge smokers more, says Banzhaf.
Meanwhile, Banzhaf will hosting the Seventh World Conference on Nonsmokers' Rights this weekend in Washington, DC, where activists from around the world will gather to plot new strategies to protect nonsmokers from both secondhand (and third hand) tobacco smoke as well as the enormous financial burden smokers impose on nonsmokers. Graduate students in the DC area who might wish to attend the Conference should contact him at: email@example.com
Action on Smoking and Health (ASH), America's first anti-smoking and nonsmokers' rights organization, serves as the legal action arm of the anti-smoking community. It is supported by tax-deductible contributions.
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