Employers turn to carrot and stick to lower healthcare costs

That cigarette’s gonna cost you.

Some big companies and government agencies are trying to hold back health care costs by making employees pay a premium for their bad lifestyle choices. Smoking is a big one. What used to be a less expensive fine for coverage has now become significant.

And it’s not just smokers who are feeling the pain. To keep their health insurance costs low, employers are using a combination of wellness incentives (the carrot, and how appropriately apt that metaphor is in this context) and penalties (the stick). That means people who are overweight may also pay more in premiums for coverage.

Essentially the group health care insurance market is starting to look an awful lot like the private health insurance market. This is a huge shift. It used to be, group health would cover anyone who got their health insurance through their employer, no matter what their risk. Group health policies still do, but they are starting to pass on the costs of that insurance to employers, and employers are passing those costs on to workers.

How far will employers go?

Take a look at the Illinois division of the American Federation of State, County, and Municipal Employees. The union’s 170-member staff could choose between two plans. To qualify for the cheaper plan with better coverage and lower deductibles, employees and dependents have to submit to annual screening and health-risk assessment. Fall below certain health thresholds, or refuse (or be unable to) give up smoking, and workers are relegated to the more expensive plan.

This seems awfully draconian, and it puts the employer into the murky area of knowing too much about employees. Some benefits law experts say it has gone too far. However, this plan does not appear to be at odds with proposed federal legislation, and if that’s the case, expect to see more of it.

Wellness programs, which offer health care screening at work, flu shots, etc., offer more benign encouragement. Who doesn’t want to get into better shape, or lose weight, or generally feel more healthy? And if there are prizes, more the better.

But when the encouragement comes from the employer, which clearly has a financial stake in its employees’ well-being, instead of being merely friendly and disinterested, even the carrot starts to taste more like the stick.

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Image by Ernstl, used under a Creative Commons license.