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KevinXKitchen
By BERNARD WYSOCKI JR.
Staff Reporter of THE WALL STREET JOURNAL
October 12, 2004
For years, corporations have tried to rein in their health costs by
sweet-talking employees into changing their lifestyle, dangling incentives such
as gym memberships and smoking-cessation programs.
Now, some employers are taking a tougher approach.
Union Pacific Corp. recently stopped hiring smokers in seven states as a pilot
program to weed out potential high-cost workers. General Mills Inc. imposes a
$20 a month "smokers' surcharge" on health premiums for those who inhale. One
Midwestern manufacturing giant has plans -- still undisclosed to workers -- 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. Gov.
Bob Riley is expected to put the proposal before the legislature this fall.
Such moves would seem to raise a raft of legal and ethical issues, but
employers and experts say they are the next big thing in trying to control
health costs. Employers say they are targeting smokers, the obese and those
with chronic diseases because they make up a disproportionate -- and rising --
portion of their health bill.
Jack Scanlon, senior vice president of First Health Group, a Downers Grove,
Ill., managed-care company, says that just 11.5% of the population accounts for
80% of health costs among the company's large-employer database, with the
chronically ill accounting for much of that spending.
So rather than continuing to shift the spiraling costs to all employees
equally, more employers are deciding to target the people who cost the most --
aside from catastrophic cases such as transplants -- and prodding them with a
carrot-and-stick approach.
Critics of such systems argue that charging different rates for health care is
based on a false assumption: that it's easy for people who are obese, have high
blood pressure or some other types of health issues to change their situations.
"If you require people to achieve certain outcomes, and there's no scientific
evidence this is within their control, then you open yourself to a lawsuit,"
says Linda Bergthold, a senior consultant at Watson Wyatt Worldwide, a benefits
consultant.
And some health experts believe that the stick isn't very effective. "As soon
as a doctor tells a patient you must do this, people push back," says Dean
Ornish, founder of the Preventive Medicine Research Institute in Sausalito,
Calif. "I'm in favor of incentivizing people to adhere to regimens. I'm not in
favor of punishing people. It tends to be counterproductive."
Many big employers tread carefully in imposing penalties, for fear of running
afoul of federal regulations protecting the disabled and those suffering from
health conditions. The Health Insurance Portability and Accountability Act of
1996, or HIPAA, generally prohibits employers from discriminating on the basis
of health status or "health condition" of an employee in setting premiums or
contributions. The Americans With Disabilities Act bars employers from denying
disabled people the right to participate in programs or to receive benefits.
There are some ways around HIPAA's restrictions, however. If an employer
creates a "bona fide wellness program" aimed at reducing smoking or obesity
among employees, it can apply some financial incentives and disincentives
without running afoul of HIPAA rules.
Some fear that an employee's family history or genes could some day cost them
higher premiums, although privacy laws have protected employees so far. In
2001, Burlington Northern Santa Fe Corp. settled a suit brought by the U.S.
government after it agreed to stop genetic testing of workers. Experts believe
that setting up differential treatment for employees with "unhealthy
lifestyles" is a slippery slope, and could lead to questionable attempts by
employers to charge more, for example, to recreational skydivers or people with
bad dietary habits.
The push to apply rewards and penalties is coming from top executives these
days, not from fitness-focused middle managers. "I've never seen this before.
It's sort of top down," says Helen Darling, president of the National Business
Group on Health, a coalition of major corporations.
The U.S. unit of French industrial gas giant Air Liquide, with 3,200 employees,
has cut the annual payment it makes toward 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. The idea is to catch serious and
chronic disease early. Some employees have grumbled that the Houston-based
operation has taken away benefits, but other Air Liquide employees call the
incentives a godsend.
Sharon Gammell, an Air Liquide middle manager and 30-year veteran of the
company, said the $500 incentive induced her to get a physical exam last year
right at the 12-month interval; in the past she had let her annual exam slip by
several months. Her doctors caught a fast-spreading lymphoma very early, and
treated it aggressively.
"I'm a believer that had I waited any longer, maybe I wouldn't be around right
now," says Ms. Gammell. Today, she has no signs of the cancer.
A small bank in Indiana, Bank of Geneva, recently 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 nonsmoking status.
"I sprung it on myself," says Andrew Briggs, the bank's president. "I have a
family history of high cholesterol and I like to eat too well." Mr. Briggs won
two of the four discounts, and says he has started a diet-and-exercise regimen
and is wearing a pedometer.
"If you drive erratically or if you smoke in bed, you pay more for auto or
homeowners' insurance," says Douglas Short, chief executive of Benicomp Inc., a
Fort Wayne, Ind., benefits administrator that oversees Bank of Geneva's plan.
Mr. Short says he skirted discrimination laws by formulating the
health-incentives program as a supplemental insurance plan. Benicomp has
received approval in 15 states to offer such plans.
Corporations take employees' fibbing about their health practices seriously,
though policing the workers isn't easy. General Mills says its employees who
smoke account for disproportionate rates of absenteeism, back pain and other
ailments in addition to lung cancer -- which is why it forces smokers to pay
$20 more per month for their health premiums. If a smoker lies to escape the
surcharge and then is hospitalized for a smoking-related illness, "they pay a
higher out of pocket" portion of the hospital bill, says Timothy Crimmins, vice
president of health and safety at the big Minneapolis food company.