What Employees with Obesity Cost Employers. Or Do They?

May 17th, 2014 by MorganDowney Leave a reply »

A new study in the American Journal of Health Promotion sets out to estimate the costs of obesity to employers, using a database of nearly 30,000 employees from different employers over 3 years. Researchers looked at workdays lost owing to illness and disability, medical, short-term disability and workers’ compensation claims. Not surprisingly, they found the probability of disability, workers’ compensation claims, and number of days missed owing to any cause increase with BMI above 25, as do total employer costs. The probability of a short-term disability claim increases faster for employees with hypertension, hyperlipidemia, or diabetes. Normal weight employees cost on average $3,830 per year in covered medical, sick day, short-term disability, and workers’ compensation claims combined; morbidly obese employees cost more than twice that amount, or $8,067, in 2011 dollars.

Without the benefit of the full text, it appears that the paper may be misleading if it does not address  the Wage Penalty. Economists  have found that employers who offer health insurance pass on the excess costs to obese employees by way of lower wages.

A study by Jay Bhattacharya and M. Kate Bundorf of the Stanford University School of Medicine looked at the issue. They made some startling findings:

  1. Obese workers who receive health insurance through their employers earn lower wages than their non-obese peers.

  2. Obese workers who are uninsured 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.

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. In firms which do not provide health insurance, there is no significant wage penalty.

Not surprisingly, obese men and women report a higher percentage of common medical conditions, including diabetes, asthma, hypertension, non-specific joint pain and arthritis. Obese women are nearly 10% more likely to have arthritis than their non-obese peers, while for obese men, 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.

The wage penalty may actually be higher, especially for both men and women at the upper end of the BMI spectrum, 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.

Another recent study of the negative association between BMI and wages found the wage gap is larger in occupations requiring interpersonal skills with presumably more social interactions. This wage penalty increases as employees get older. This study demonstrates that being overweight and obese penalizes the probability of employment across all race and gender groups except for black men and women. Han E, Norton ED, Stearns SC, Weight and Wages: Fat Versus Lean Paychecks, Health Econ 2009; 18:535-548 Weight and wages: fat versus lean paychecks. [Health Econ. 2009] – PubMed Result

Therefore, it is not costs the employer actually pays since they are passed on to the employees. They may also be passing on other costs which have not been studied, such as employee share of disability insurance or life insurance, or reducing the amount of life insurance available to employees with obesity. Additionally, employees with obesity are likely to experience a hostile workplace which may cost overweight and obese employees with obesity promotions and bonuses and impede weight loss efforts. (See also this article.)

 

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