What Employees with Obesity Cost Employers. Or Do They?

May 17th, 2014 No comments »

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.)

 

Employer Wellness Issue Heats Up

May 20th, 2013 No comments »

The Equal Employment Opportunity Commission (EEOC) held a long hearing on May 8, 2013 on employer wellness programs. Opponents made a strong case that there was virtually no way that a mandatory health-contingent wellness plan could not discriminate against protected classes of workers. (See statement of Judith Lichtman) On the other hand, the more pro-business representatives argued that Congress and the Administration supported the changes in the Affordable Care Act and the programs where here to stay. It seems that all parties are urging the EEOC to provide guidances to employers.

The testimony came amid a backdrop of waiting for the final regulations from the Obama Administration. The comment period closed in January and many were expecting we would have final regulations by now. Politico reported that a group of corporate CEOs with the Business Roundtable were in Washington recently to lobby the Administration to avoid further weakening of the regulations.

Forbes magazine was reporting the CVS-Caremark was penalizing workers $600 annually if they failed to complete a health risk assessment. The article noted that most companies did not provide such stiff penalties but many were moving in that direction.

Meanwhile, several research articles provide only lukewarm support for weigh loss employer wellness programs.

A Health Affairs article by Ron Goetzel and colleagues, found only 22 % of employer health care costs could be attributed to 10 modifiable health factors (including obesity). This is actually a drop from 24.9% in 1998, even though rates of obesity have increased and costs related to obesity have gone up. Obesity contributed the most excess costs at $347 per capita. Goetzel, Pei, et al,

Another recent paper was a longitudinal study at the worker productivity in terms of absenteeism, presenteeism and job performance associated with changes in 19 modifiable well-being risks. These included physical health risks, health behavior risks, social and emotional health risks work-related risks and financial health risks.  The researchers found that, “Obesity, high cholesterol, tobacco use and excessive alcohol generally contributed to productivity changes insignificantly or unfavorable, possibly because of its multicolinearity with other risks that are closely correlated.” However, they noted that, “Health-related risk explained only a portion of the total productivity variances. For example, Riedel et al found that health risks accounted for 7.8% of the total variance in productivity impairment and acknowledged that the majority of the variation was left unexplained. Lenneman et al also found only 8.5% of the variance in productivity was contributed by health risks…We found that reductions in work-related well-being risks and financial health risks significantly contributed to improvement in productivity measures especially for measures of presenteeism and job performance that were not attributable solely to the more narrow definition of physical health.” They found modest numbers of workers were able to make improvements: 25% reduced their physical health risks 26% improved their health behaviors 16% improved their social and emotional health, 31% improved their work-related risks and 13% their financial health risks. Improvements in absenteeism, decrease in presenteeism and a modest improvement in job performance accompanied such changes. They calculated these improvements were equivalent to a savings of $468 per person per year. Shi, et al.

Ted Kyle reports in his blog that one program, Healthy Blue Living, requires obese participants to wear a pedometer which uploads their physical activity to the employer wellness program. The employees must meet daily step goals if they want to keep full health benefits. Not doing so could cost them each $2000 a year. Kyle notes (and I strongly agree) that this constitutes human experimentation without the protection of the federal regulation protecting human subjects, 45 Code of Federal Regulations Part 46. In fact, the program is not that successful. Promotional material notes that only 16% who agreed got their weight under a BMI of 30.

Yet another study published in Health Affairs looked at one hospital system’s wellness program. The program provide a substantial incentive/penalty for participation in a health risk assessment (which included automated feedback) signing a health pledge, health fairs and physician referrals. The study found a significant reduction in hospitalizations for conditions related to the conditions covered by the wellness program. However, there was an increase in medication costs. Combined with the costs of the wellness program and incentives, the authors concluded, “It is unlikely that the program saved money.” Gowrisankaran G, et al. A Hospital System’s Wellness Program Linked to Health Plan Enrollment Cut Hospitalizations But Not Overall Costs, Health Affairs 32 (3) 2013; 477-485. Gowrisankaran

A second paper also published in Health Affairs reviewed randomized controlled trials of workplace wellness programs. Their review raises doubts the employees with health risk factors such as obesity and tobacco use spend more money on medical care than others. They concluded that workplace wellness programs show little evidence of saving costs through health improvements without being discriminatory.  To test the assumptions of workplace wellness programs the authors, “reviewed research on the relationships among financial incentives, behavior, health status, and medical spending. We focused on randomized controlled trials involving four conditions- smoking, hypertension, high cholesterol and obesity- that are typically included in health-contingent programs. In our review, we found mixed evidence that employees with these conditions have higher health costs than other employees, which undermines the argument that employees with the conditions are particularly effective targets for incentives. We also found little evidence that working-age people change their behavior as a result of financial incentives, particularly over the long term. These findings suggest that program savings many not, in fact, derive from health improvements. Instead, they may come from making workers with health risks pay more for their health care than workers without health risks do. If true, this conclusion would jeopardize long-standing regulatory efforts, maintained in recently proposed Affordable Care Act regulations to prevent workplace wellness from being “a subterfuge for underwriting or reducing benefits based on health status. (citations omitted) Since low-income workers disproportionately suffer from conditions typically targeted by health-contingent programs, savings arising outside of health improvement may entail hidden, regressive redistributions increasing the burden imposed on low-income workers. “

In effect, they point out, wellness plans shift costs with the most vulnerable employees, those from low income groups with the most health risks probably subsidizing the healthier workers. Horwitz, JR, Kelly, BD, DiNardo, JE, Wellness Incentives in the Workplace: Cost Savings Through Cost Shifting to Unhealthy Workers, Health Affairs, 32 (3), 2013:468-476. Horwitz

The Agency for Healthcare Research and Quality (AHRQ) has issued another independent review. This time they reviewed studies of strategies to prevent weight gain in adults. The reviewers looked at 51 trials involving 555,783 subjects with at least one year of follow-up and a weight outcome. A meaningful difference between groups was considered to be 0.5 kg of weight (1.1 pound) or 1 cm of waist circumference. They found moderate evidence that workplace programs for the prevention of weight gain in adults. One study combining diet, physical activity and environmental components resulted in meaningful and statistically significant prevention of BMI change at 12 months and another that combined internet based diet and physical activity counseling resulted in significant prevention at 24 months. However, a third study found no difference. AHRQ Strategies to Prevent Weight Gain Among Adults, Comparative Effectiveness Review No. 97, AHRQ

Also cited as, Gudzune K et al Strategies to prevent weight gain in workplace and college settings: A systematic review, Prev Med. 2013 Mar 22. Gudzune

 

Severe Obesity’s Personal, Financial Toll

May 31st, 2011 No comments »

Persons with severe or morbid obesity are hardly the lazy, indifferent people as they are often portrayed. Instead, as we see from this survey by the Canadian Obesity Network, they repeatedly try to lose weight in spite of frustrating disappointments, at great personal costs to themselves. They do not live in a bubble but realize the serious effects excess weight is causing in their careers, interpersonal relationships and self-esteem. Impact of Severe Obesity Felt Far Beyond Physical – Financial Burden and Emotional Implications Also Significant | Canadian Obesity Network

Obesity-Related Costs

September 27th, 2009 No comments »

U.S. Medical Expenditure Panel Survey (MEPS) papers on obesity

Medical Expenditure Panel Survey Home

Workers’ Compensation

Obesity and workers’ compensation: results from th…[Arch Intern Med. 2007] – PubMed Result

Disability

See Rand Report: RAND Research Brief | Obesity and Disability: The Shape of Things to Come

Impact of obesity on disability in the United States: http://www.cdc.gov/nchs/data/misc/disability2001-2005.pdf

The interaction of obesity and psychological distr…[Soc Psychiatry Psychiatr Epidemiol. 2009] – PubMed Result

Disability pension, employment and obesity status:…[Obes Rev. 2008] – PubMed Result

Obesity status and sick leave: a systematic review. [Obes Rev. 2009] – PubMed Result

The relationship between overweight and obesity, a…[Int J Obes (Lond). 2009] – PubMed Result

Sick leave and disability pension before and after…[Int J Obes Relat Metab Disord. 1999] – PubMed Result

Occupation-specific absenteeism costs associated w…[J Occup Environ Med. 2007] – PubMed Result

Economic effects in Massachusetts Overweight and obesity in Massachusetts: epidemic,…[Issue Brief (Mass Health Policy Forum). 2007] – PubMed Result

Economic costs of diabetes Economic costs of diabetes in the US in 2002. [Diabetes Care. 2003] – PubMed Result