Wage Penalty documented in Canada

July 13th, 2016 No comments »

We have reported several times on the “wage penalty” wherein persons, especially women, are paid less compensation than their non-obesity peers. See here and here. Now, it appears the same phenomenon is found in Canada. Research by Chu and Ohinmaa found a distinct gender bias, penalizing working women but not men for their body habitus.

EEOC Issues: Impact of the 30% penalty, worksites and persons with obesity, intrusiveness and wearables

June 24th, 2015 No comments »

Additional problems with the proposed EEOC regulation include how severe the impact of the penalty provisions can be, the hostility of workplaces to persons with obesity, including the wage penalty. Additional concerns include the use of wearable monitoring technology in employer wellness programs and deficiencies in the Notice requirements.

Impact of a 30% Penalty

The price of this program to workers is worth considering. The 30% penalty involves both the share of the health insurance premium paid by the employer and the share paid by the employee. In effect, the employer is clawing-back what the employee has already paid as their share plus a 30% surtax. This scheme may continue in the law indefinitely and the employee would pay every year. But how much of a difference does it make?

Federal Reserve Board published Report on the Economic Well-being of U.S. Households in 2013 in July 2014. The report found that 47% of respondents say that they either could not cover an emergency expense costing $400 or would cover it by selling something or borrowing the money. 31% of respondents report going without some form of medical care in the 12 months before the survey because they could not afford it. 43% of respondents with a household income under $40,000 report they would have to sell some asset or borrow money to meet a $400 emergency expense. The EEOC propose threshold is over 400% greater and will increase over time, further reducing the available household income for emergencies, health care, housing, retirement and education purposes.

Employees are also reeling from employers only offering high-deductible plans which require employees to cover out-of-pocket expenses of $6,450 for a single plan to $12,900 for family coverage before the insurance plan will cover any expenses (Bernard TS, High Health Plan Deductibles Weigh Down More Employees, New York Times,Sept. 2, 20014)

These increases come amid a bleak economic picture for millions of Americans since the Great Recession. According to an article in the New York Times, the economic picture is even more bleak now for the poor and low-income workers than it was in 2007. The poverty rate is above pre-recession levels. The number of people receiving food stamps soared from 26.3 million in 2007 to 47.6 million in 2013. Median household income is some $4,500 lower now than before the recession. (Dewan S, Schwartz ND, Parlapiano A, How the Recession Reshaped the Economy, New York Times, June 15, 2014, p,6-7)

So it is not surprising that more Americans are finding meeting basic medical care is a hardship (up to 46% from 36% in 2013), out of pocket expenses have gone up a lot (33%) (Rosenthal E, How the High Cost of Medical Care is Affecting Americans, New York Times, Dec. 12, 2014, p.30)

The result is that many have gone without medical treatment or have not filled a prescription. (CBS News, Do Americans think their health care costs are affordable? Dec. 18, 2014)

The Workplace is Generally Hostile to Overweight, Obese Americans

Multiple studies in the United States and Europe show a negative and statistically significant effect of obesity on earnings and employment. Aberett SL, Obesity and labor market outcomes, IZA World of Labor, 2014:32)

An obesity “wage penalty” has been described affecting young men. (Lundborg P, Nystedt R, Rooth DO, Body Size, skills and income: evidence from 150,000 teenage siblings, Demography 2014 Oct;51)5:1573-96) and, particularly, overweight and obese white women (Han E, Norton EC, Stearns SC, Weight and wages: fat versus lean paychecks, Health Econ 2009 May; 18(5):535-48. See also, Downey, M, The wage penalty and obesity, Downey Obesity Report, Feb. 7, 2013.

The EEOC Proposed regulation’s Notice requirements are flawed.

The EEOC proposed regulation proposes that employers must clearly explain the information to be obtained from a health risk assessment, how such information will be used, who will receive the information, restrictions on disclosure and methods used to prevent improper disclosure of medical information.

However, the EEOC proposed regulation omits from the notice requirement the most important elements of the joint HHS, Labor and Treasury regulations requiring access to reasonable alternatives to the wellness program, leaving the final decision in the hands of the employee’s physician. (See Downey Obesity Report, May 30, 2013.)

According to the Department of Labor, the employee’s physician who proposes non-mandatory weight reduction program, the employer must provide it, (FAQ, January 9, 2014).


EEOC punts on Employer Wellness Regulation

April 17th, 2015 No comments »

The Equal Employment Opportunity Commission (EEOC) has finally issued proposed amendments to the Americans with Disability Act (ADA) regarding employer wellness programs.

The proposed regulations are very disappointing. They re-define “voluntary” participation in a wellness program to mean being penalized 1/3 of an employee’s health insurance premium cost. The average cost of single coverage is $5,615, with employees paying $951 out of pocket. More and more of the cost is being shifted to employees. Many employees, especially white women, suffer a wage penalty because of their weight. And most employees’ health insurance plans do not cover the costs of FDA approved medicines for weight loss, bariatric surgery or intensive behavioral interventions.

In particular, the proposed regulations do not require employers to tell employees of the availability of alternative avenues to receive the reward or avoid the penalty. They do not require employers to leave the final word on alternative avenues with the employee’s physician, which is required in the DOL/HHS regulations. There is no obvious penalty if the employee’s personal health data is not adequately protected by the employer and personal health data is used to an employee’s detriment. On the other hand, one useful provision limits the penalty/reward to 30% of the premium cost of a single person. Obviously, this is lower than the cost of family coverage. Industry is sure to fight this limitation, as they want to increase the size of the penalty/reward.

Comments are open until June 19,2015.

See EEOC press release here. See proposed regulations here. For additional information, see Ted Kyle’s blog here, and Tim Jost’s blog in Health Affairs here.

In the meantime, the federal government’s Office of Personnel Management (OPM) has told federal agencies to promote workplace wellness programs.


Gallup Survey Shows Increasing Rates of Obesity

January 30th, 2015 No comments »

The Gallup Organization and Healthways have tracked adult obesity in the United States over seven years. In their most recent report, they found that rates have continued to tick up, rising more than 2% points since 2008 reaching 27.7%. The rate for overweight and normal weight have decrease to 35.2% from 36.7% and to 35.1% from 36.1%, respectively. These results are based on self-reported results unlike the NHANES data which use clinical measurements. Significantly, rates of morbid or severe obesity  (a BMI of 40.0 or more) have reached 4%, the highest in the history of the survey. Obesity rates among seniors showed the sharpest uptick, a 4% point increase since 2008. The survey showed a relationship between obesity and lower incomes and long-term unemployment. Gallup research indicates that overall well-being predicts future obesity more than obesity predicting future well-being. Gallup suggests that weight management programs should address financial and social wellbeing.


EEOC Under Pressure for Employer Wellness Guidance

January 30th, 2015 No comments »

The Senate Health, Education, Labor and Pensions Committee (HELP) held a hearing on Jan. 29, 2016 on employer wellness programs. (See video here.) The purpose of the hearing appeared to be to put pressure on the Equal Employment Opportunity Commission (EEOC) which has recently sued several companies alleging that their wellness programs violated the Americans with Disability Act.

Ranking Democrat Patty Murray indicated that the EEOC would be issuing a proposed guidance in the near future, as reported earlier.

While billed as a debate over employer wellness programs, most of the witnesses were representatives of business groups, with the exception of one representative of the Consortium for Citizens with Disabilities, Jennifer Mathis, who gave the most detailed statement. The business representatives gave the usual pep rally cries of “these programs work” line, citing a couple of positive anecdotes and avoiding the volume of studies showing incentives and penalties do not work.


EU Court rules obesity a disability, kind of

January 5th, 2015 No comments »

The European Union Court of Justice has ruled that obesity may be considered a disability and employers may have to make accommodations. As with the ruling of the Social Security Administration in this country, the EU court ruled that obesity itself is not a disability but it can cause hindrances that can be considered a disability.

In the United States, several laws are involved. Under the Americans with Disabilities Act, morbid or severe obesity may be considered a disability, irrespective to any underlying physiological disorder. Several courts and the Equal Employment Opportunity Commission (EEOC) are re-examining this issue. (The EEOC is looking at the applicability of the ADA to employer wellness programs.)

The Social Security Administration (SSA) in 1999 issued a rule that removed obesity from its Listing of Impairments because of the wide variation in body weight and effect on employment. But the SSA continued to consider obesity as a medically determinable impairment and may be considered when combined with other impairments in determining disability. (Disclosure: I was very involved in the re-opening of this rule-making and advocated for equal treatment of cases of obesity, especially morbid obesity, in the eligibility of persons to qualify for disability income support.)

Predictably, the chorus offended at any social equity for persons with obesity manned the ramparts to warn about the dangers of treating obesity as a disability. (The decision of the American Medical Association that recognized obesity as a disease met the same kind of resistance. See here, here and here.) For example, this opinion piece by the Editorial Board of the  Chicago Tribune sees creeping European thinking infecting Americans and distorting the Americans with Disabilities Act. Woe are we if employers have to  accommodate the more than 15 million people in the US who have morbid or severe obesity! The Editorial Board mistakenly states that the basic idea of the ADA was, “empowering people who are the unfortunate victims of fate. Obesity is usually the result of individual decisions, and it can be ameliorated by individual decisions. Those facts (?) argue for leaving the government out of this realm.” As someone who lobbied for passage of the ADA,  I can attest that it was not for “unfortunate victims of fate.” It was for all persons with an actual or perceived disabling condition, even like HIV/AIDs, regardless of the contribution of individual behavior.  The ADA’s coverage of “perceived” disabling conditions easily refutes the Editorial Board’s so-called “facts.”

A contrary view is offered by Deborah A. Cohen of the Rand Corporation who points to the regulation of alcohol in the United States to successfully reduce consumption as a model. In a op-ed essay in Newsweek she states, “So long as restaurants continue to automatically serve quantities of food in excess of what customers can burn, and supermarkets promote junk foods with considerably more vigor than healthy foods, it can be anticipated that most people will eat too much and become at risk for chronic diseases.”

The EEOC will play a critical role in the evolution of considering obesity as a disabling condition. Some years ago the EEOC took the position that severe or morbid obesity was an impairment, although not obesity per se. However, in 2008, Congress enacted the Americans with Disability Amendments Act which generally broadened the definition of disability. Subsequently, the EEOC in 2011 removed from its guidances language stating, “except in rare circumstances, obesity is not considered a disabling impairment.”

We have seen that employees with obesity suffer a well-documented “wage penalty” for their condition, as well as hostility in the workplace. Offering legal protection for persons with obesity only provides the same level of equity with other persons experiencing a disability or perceived disability. It appears that the national debate over individual responsibility versus control over environmental influences will continue for sometime.


WH Considering advocate of discrimination against persons with obesity for top VA job

June 4th, 2014 No comments »

Modern Healthcare is reporting that President Obama is considering Cleveland Clinic’s Toby Cosgrove to head the troubled Department of Veterans Affairs. Dr. Cosgrove has made many public statements expressing his wish to be able to refuse to hire persons with obesity.


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.)