Companies Reward Workers for Their Healthy Behavior

Published November 1, 2007

Instead of penalizing workers for unhealthy behaviors, a growing number of companies are rewarding them for giving up smoking and controlling obesity.

Clarian Health, an Indiana-based hospital chain, revised plans announced this summer to require smokers to pay $5 more out of each paycheck for their coverage than nonsmokers. Similarly, obese workers would have paid $30 from each paycheck until meeting certain body mass index (BMI) and cholesterol standards, starting in 2009.

After discussions with employees and human resources executives, the company in late August switched to an incentive plan instead.

“The revised plan continues to put the health of our employees at the forefront and encourages them to make ‘a personal call to change,'” company spokesman James Wide said.

Employee Incentives

Clarian will now offer employees incentives on their health insurance premiums for meeting standards for known health risks, such as smoking, high BMI, and elevated blood pressure.

“Basically, it will work like this: When employees reach these set goals, they will receive money back on their paycheck as a line item,” Wide explained. “For example, instead of a $5 deduction for high blood pressure, employees that reach the benchmarks will now receive $5 back.

“We believe this approach will help decrease the cost of health care and serve as a model to inspire individuals and organizations to develop and implement innovative ways to improve the health of patients, the public, and their employees,” Wide said.

Several large companies, including Pitney Bowes, IBM, and Dell, already reward employees for participating in programs promoting healthy behavior, rather than penalizing them for failure to reach benchmarks.

At Pitney Bowes, for example, employees earn up to $225 in a year for eating right, exercising, and not smoking.

Good Business

Free-market experts say these plans make good business sense.

“In general, I believe that insurance companies should be allowed to charge different premiums based on any factors,” said Arnold Kling, an adjunct scholar at the Cato Institute in Washington, DC.

However, “a regulator might want to require the company to show evidence that justifies the premium differential,” Kling noted.

Lifetstyle Choices

Devon Herrick, a senior fellow at the National Center for Policy Analysis in Dallas, agrees.

“Nearly two-thirds of health expenditures are related to lifestyle choices such as smoking, high cholesterol, hypertension, and lack of physical activity,” Herrick explained. But implementing penalties could pose problems for insurers unless they can prove certain health conditions generate higher costs than others.

For instance, Herrick said, high cholesterol and high blood pressure often lead to heart disease later in life, when patients are enrolled in government programs such as Medicare.

“A health insurer charging more for obesity or high cholesterol might find itself under attack for singling out obese people,” Herrick said. “I imagine most will move to a system where healthy behaviors are rewarded rather than unhealthy behaviors penalized.”

Dr. Sanjit Bagchi ([email protected]) writes from India.

For more information …

“Firms dock pay of obese, smokers,” by Gregory Lopes, The Washington Times, August 13, 2007:

“Employer to Obese Employees: Shape Up Or Pay Up,” NBC5.COM, August 10, 2007: