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Health Insurance and the Lifestyle Premium

by EINSURANCE

Should smokers and the obese pay extra for health insurance?  A lot of people say yes, according to a recent Thomson Reuters-NPR Health Poll. The telephone survey of more than 3,000 people, conducted this past September, found that 58.5% of respondents believe smokers should pay more for health insurance than non-smokers, while 30.7% of respondents felt overweight and obese people should pay an extra premium for being fat.

Apparently, some employers agree. As health insurance premiums continue to rise, employers are forced to take drastic measures to contain costs.  Mega retailer Wal-Mart, for example, will begin charging smokers extra for their health insurance in 2012. The company, which insures over 1 million people, will  charge tobacco users an extra $260 to $2,340 a year for health insurance. To help workers kick the nicotine habit (and avoid the lifestyle premium), Wal-Mart will pick up the tab for smoking cessation classes.

Many other companies are following suit, suggesting that employees adopt healthier lifestyles or pay a higher price for company-provided health insurance. A survey last June by Aon Hewitt, an insurance benefits brokering and consulting firm, found that nearly 50% of employers expect to have programs in place by 2016 that penalize workers for “not achieving specific health outcomes” like losing weight or quitting smoking. That’s up from 10% of employers who have such programs now.

To encourage participation and help contain costs, many companies are offering  incentives. According
to the Kaiser Family Foundation, 80% of large firms (200 or more employees) and 65% of small firms (3 to 199 employees) provide at least one specified wellness program. About 27% of large firms and 13% of small firms offer gift cards, travel, merchandise or cash as an incentive to participate in the programs.

Are these sticks-and-carrot penalties and rewards discrimination? Maybe. Maybe not.  Although the Health Insurance Portability and Accountability Act (HIPAA) prohibits employers from discriminating against workers in group insurance plans on the basis of health, it also lets employers offer wellness
programs and incentives of up to 20% of the cost for participation. And beginning in 2014, ObamaCare will allow employers to increase that incentive to 30%. So far, the programs have met little resistance in the courts, but as they proliferate, we can expect more push-back. Some legal experts feel the pressure
to get healthy or pay more unfairly penalizes lower-income workers, who may be unable to lose weight, lower their blood pressure or adjust their body mass index to acceptable levels because they don’t have access to healthy foods, gyms and support programs. They also believe the focus on lifestyle can be seen
as an intrusion on personal freedom.  

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