The Wage Penalty and Obesity

February 7th, 2013 by MorganDowney Leave a reply »

Workers who are obese receive lower wages than their non-obese peers, especially white women working in firms which provide health insurance for their employees.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits employers from varying employee contributions based on health related factors. The current HIPAA provisions provide an exception which allows employers to vary contributions if they participate in employee wellness programs. The proposed regulation under the ACA expands the amount of the penalty/incentive to up to 30% of the cost of the employee’s health insurance premium for those meeting specified biometric targets, including Body Mass Index (BMI) or related weight metric.

Since this provision broadens the exception to the non-discrimination provisions, it is important to consider the extent, insofar as it can be determined of existing discrimination against persons because of their body weight. An expansion of the HIPAA provision should then be read in context of increasing the penalty paid by some employees for their excess body weight.

The justification for the ACA provision was that employees with poor lifestyle behaviors, especially smoking and obesity, should bear more of the employer-paid health insurance costs or demonstrate their efforts in making lifestyle changes in voluntary or mandatory wellness programs. Current research indicates that this premise is not accurate.

So who are most affected by these programs?

The biometrics used in such programs, include obesity, elevated triglycerides and blood pressure, are part of what is known as the metabolic syndrome. Approximately 34% of adults meet the National Cholesterol Education Program’s criteria for the metabolic syndrome. Older males and females from 40-59 years of age are about 3 times as likely as those 20-39 to meet the criteria for the metabolic syndrome. Males and females over 60 were more than 4 and 6 times respectively to meet the criteria. Overweight and obese males were 6 and 32 times as likely as normal weight males to the meet the criteria and overweight and obese females were 5 and 17 times as likely to meet the criteria. (See, Ervin RB, Prevalence of metabolic syndrome among adults 20 years of age and over, by sex, age, race and ethnicity, and body mass index: United States, 2003-2006. National Health Statistics Reports; No. 13. National Health Statistics metabolic syndrome – PubMed Results )

The prevalence of obesity and hypertension has significantly increased in non-Hispanic Whites and non-Hispanic Blacks in both men and women. Non-Hispanic Blacks have the highest prevalence of obesity and hypertension. Diabetes is increasing overall with Mexican-Americans showing the higher rates. Smoking is declining in all groups. Romero CX, et al, Changing Trends in the Prevalence and Disparities of Obesity and Other Cardiovascular Disease Risk Factors in Three Racial/Ethnic Groups of USA Adults. Adv Prev Med. 2012:172423.

It has been long recognized that workers who are obese face discrimination in the workplace in terms of hiring and promotion. Giel KE, et al. Weight bias in work settings – a qualitative review. Obes Facts 2010 Feb;3(1):33-40.

It has also been known for some time that white female workers are paid less than their normal weight peers for the same work. This is known as the wage penalty. See Lempert D, Women’s Increasing Wage Penalties from being overweight and Obese, Department of Labor, Bureau of Labor Statistics Working Paper 414, 2007, December.

The study by Jay Bhattacharya and M. Kate Bundorf of the Stanford University School of Medicine looked at the issue: Who pays the healthcare costs associated with obesity? Using data from the National Longitudinal Survey of Youth and the Medical Expenditures Panel Survey, they made some startling findings:

  1. Workers who are obese and who receive health insurance through their employers earn lower wages than their non-obese peers.

  2. Workers who are obese and at firms not providing health insurance earn about the same as their thinner colleagues.

  3. A substantial part of these wage penalties at firms offering insurance can be explained by the difference between obese and non-obese in expected medical care costs.

  4. The obese with employer-sponsored health coverage bear the full cost of the incremental medical care associated with obesity, approximately $732.

Thus, their study finds that while it is nominally employers who pay for health insurance premiums, it is really employees who bear the cost of employer-sponsored insurance.  Further, the wages of obese workers are lower than those of their normal weight peers, and in the case of white women, the relationship appears to be causal.  It is obese white women who bear the burden of lower wages due in part to the higher costs of insuring these workers. In firms providing employer based health insurance, obese women experience a wage penalty of $2.64 per hour. The penalty comes out to $5,784, above the average individual health insurance premium or 1/3 of a family premium.   In firms which do not provide health insurance, there is no significant wage penalty.

Not surprisingly, men and women with obesity report a higher percentage of common medical conditions, including diabetes, asthma, hypertension, non-specific joint pain and arthritis. Women with obesity are nearly 10% more likely to have arthritis than their non-obese peers, while for men with obesity, the differential is only 6%. It is only for arthritis that obese individuals spend more than thin individuals. They state, “For female workers with arthritis, the medical expenditure difference between obese and thin individuals is $1,956; for male workers with arthritis, the difference is $1,224. Clearly, differences between men and women are an important part of the reason why obese female workers spend so much more on medical care than thin female workers, while obese male workers spend about the same as thin male workers.” The authors calculate the yearly wage penalty on obese women employed in firms providing health insurance is $5,784. Bhattacharya J, Bundorf, MK, The incidence of the healthcare costs of obesity, Journal of Health Economics 2009 May;28(3):649-58.

Two points from this study are critical. First, women with obesity already pay their health insurance premium through a reduction in wages. Thus, a mandatory health contingent program in which the employee is penalized for not attaining an employer determined health metric, such as BMI, actually has the worker paying up to 130% of the health insurance premium. It is this figure which is the true impact of the proposed rule.

Second, the medical conditions of men and women with obesity such as asthma, arthritis, hypertension, etc. can make physical activity difficult or impossible, due to both the physical limitations of such conditions as well as the time and out-of-pocket costs of managing these conditions.

The wage penalty may actually be higher, especially for both men and women at the upper end of the BMI spectrum. In a paper published in 2011, Lisa Powell and colleagues found that a one-unit increase in BMI is directly associated with 1.83% lower hourly wages for women. Late-teen obesity is indirectly associated with 3.5% lower hourly wage for both men and women. Therefore, the wage penalty is significantly larger than previous studies indicated. Han E, Norton EC, Powell LM, Direct and indirect effects of body weight on adult wages. Economics & Human Biology 2011 Dec;4(11):381-392.

The wage penalty may explain the greater perception of employment discrimination among persons with obesity. In one study, results indicate that women are over 16 times more likely than men to perceive employment related discrimination and identify weight as the basis for their discriminatory experience. In addition, overweight respondents were 12 times more likely than normal weight respondents to report weight-related employment discrimination, obese respondents 37 times more likely, and severely obese respondents more than 100 times more likely. Roehling M, Roehling P, Pichler S, The relationship between body weight and perceived weight-related employment discrimination: the role of sex and race. Journal of Vocational Behavior, 71; 2 (Oct 2007);300-318.


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