Being Unhealthy Could Cost You -- Money
Clarian Health is taking a novel approach to reducing health-care costs: It's penalizing workers for indicators of poor health

By Jena McGregor

Updated: 8:00 p.m. ET Aug 5, 2007
For employees at Clarian Health, feeling the burn of trying to lose weight will take on new meaning.

In late June, the Indianapolis-based hospital system announced that starting in 2009, it will fine employees $10 per paycheck if their body mass index [BMI, a ratio of height to weight that measures body fat] is over 30. If their cholesterol, blood pressure, and glucose levels are too high, they'll be charged $5 for each standard they don't meet. Ditto if they smoke: Starting next year, they'll be charged another $5 in each check.

Clarian has been making headlines for its aggressive and unusual approach to covering escalating health-care costs. Rather than taking the more common step of giving employees incentives for merely participating in its wellness programs, such as joining a smoking cessation group or using a health coach, Clarian is actually measuring outcomes. And unlike most employers, it is penalizing workers for poor health instead of rewarding them for taking healthy steps.

But some employment lawyers and wellness program administrators believe Clarian's approach may not be so unusual in coming years. They see employers, already overwhelmed by rising health-care costs, getting more aggressive in mandating changes in employee behavior. Garry Mathiason, a senior partner at employment law firm Littler Mendelson, says more than 300 companies have requested its assistance on mandatory wellness initiatives since it released a study on the topic in April. "In reality, you only get a certain amount of participation with incentive and encouragement," he says. "The demand for [curtailing health-care costs] is so great that [employers] are willing to take the next step. It's tough love." As BusinessWeek chronicled in February, some outlier companies have even banned tobacco use for its employees altogether [see BusinessWeek.com, 2/26/07, "Get Healthy -- or Else"].

In addition, regulations that became effective July 1 could prompt cautious employers to step off the sidelines. The federal government recently issued final rules on how wellness programs could comply with the nondiscrimination conditions of the Health Insurance Portability & Accountability Act [HIPAA]. While the new regulations have been proposed for years, the final rules provide employers with some sense of security and more clarification on how much they can reward or penalize employees based on specific health results. "When you get into things that involve discrimination, employers aren't very comfortable with the words 'proposed regulation,'" says Jerry Ripperger, director of consumer health for the Principal Financial Group, a financial-services and insurance firm that offers wellness programs for large employers.

The final regulations were a major catalyst for Clarian Health's new program. Steve Wantz, Clarian's senior vice-president of administration and human resources, says his team had been considering their plan for two years, but the new regulations "gave us a lot more confidence." Another change in Indiana state law that allowed employers to offer financial incentives or surcharges to smokers in their health plans was also an impetus. After benchmarking other companies, Clarian, which had already been encouraging employees to join smoking cessation programs and take health risk tests, decided charging employees was more "transparent." Other companies "were providing what they called incentives through credits or discounts toward health premiums," says Wantz. "What we found was what those employers were doing, many times, was raising their premiums and discounting them back."

Sticks and Carrots

At Clarian, employees who have blood pressure that's above 140 over 90, blood glucose levels over 120, low-density lipoprotein cholesterol over 130, or a BMI over 29.9 could be subject to the paycheck deductions. Of the company's 13,000 employees, about 8,000 are enrolled in the company's health plan. The company estimates that as many as 34% of its employees will meet the definition of being obese, while it expects lower levels for other health measures. About 26% are tobacco users. The fines are waived for employees who can provide a doctor's note stating it's not advisable for them to try to meet the benchmark -- employees will be able to submit new notes from their doctors quarterly -- and that they are complying with the proper diet, exercise, and treatment plan.

While Clarian's plan is highly unusual, a few other employers are using the stick approach, too. Western & Southern Financial Group, a Cincinnati-based insurance and financial-services provider, has been issuing employees with high BMIs a surcharge to their premiums since 2001. Depending on their scores, employees are charged a tiered fee of between $15 and $75 a month if their self-reported BMI is high, but can have those fees refunded if their numbers go down. Preventure, a provider of fitness and wellness programs for midsize to large employers, has one client in the manufacturing industry that rewards employees when their BMI falls from their baseline score and charges them more when their number rises. "We haven't seen a lot of companies do it," says Laura Gilligan, director of business development for Preventure, "but I sense it might be a trend."

What's more likely for employers who start measuring health results is that they will provide carrots. In July, UnitedHealthcare began offering a new plan targeted at small businesses called Vital Measures, which combines a high-deductible insurance plan with a supplemental plan that provides discounts for healthy outcomes. Members who choose to participate will receive $500 discounts toward their deductible for each cholesterol, blood pressure, and BMI level they meet, along with refraining from tobacco use or taking a health risk assessment.

Legal Questions

A reward-driven approach will surely be better received by employees, say benefits consultants. "The concept of penalizing for poor health is not well accepted, and a lot of employees would react badly to it," says Bruce Kelley, a consultant in the health-care practice of human resources advisory firm Watson Wyatt Worldwide. Clarian Health admits that its program is aggressive by design, and that employee reaction has been mixed, with much debate on its internal message boards. While some employees were supportive, there's been "the other reaction that this is very personal," says Wantz, with people asking, "'How dare you? This is my personal space.' There's been a lot of questions and confusion."

That's why some benefits consultants and health-care groups think many companies won't adopt a plan like Clarian's anytime soon. "People are not interested in making their employees unhappy," says Helen Darling, president of the National Business Group on Health, a nonprofit that represents large employers' health-care interests. "We're in a war for talent, and there are more than enough work-related challenges to manage people and performance that [penalizing] for something that is so complicated, so personal, so hard to deal with, just isn't the right thing to do at this point."

Others may steer clear of such aggressive plans until questions are ironed out about other legal issues besides HIPAA. Sharon Cohen, Watson Wyatt's group and health-care benefits counsel, says that "any time an employer tries to influence employee behavior and they start to become more aggressive, there are other laws that are implicated," including the Americans with Disabilities Act. She says it's not clear how the requirement of taking a health risk assessment to be eligible for an insurance plan, like Clarian's, would be seen by the Equal Employment Opportunity Commission under the ADA. Clarian's Wantz says their plan has been extensively reviewed by attorneys.

Still, Clarian's approach has already attracted interest. Wantz says it has received calls from several local companies, along with other hospital systems, interested in their approach. "The most common response from other employers," he says, "has been 'thank you.'"

Copyright © 2007 The McGraw-Hill Companies Inc. All rights reserved.

i don't like the BMI of over 30 being held against you, because BMI is a flawed system; it doesn't take into account different things like body fat %, etc. I think at least an appeal process should be in place.

I see this as a very logical step in a company providing a health plan. If you are going to abuse the health plan by not taking care of yourself you will be penalized rather than having all users penalized. I like it.

"The fines are waived for employees who can provide a doctor's note stating it's not advisable for them to try to meet the benchmark"

but i am not going to encourage additional employer control over peoples lives.

It's not applying any control. All it's doing is making people pay for the lifestyle they choose to adopt.

Yeah, they pay when their life is shortened or they cant play catch with their son. And a company saying they will fine you if you dont conform, no matter how well you do the job, is attempting to control you- regardless of their motives.

I also think this should apply to women getting pregnant. The costs associated with pregnancy are very high, and it can be avoided.

Does anyone even think that looks appetizing? Or that it would taste good? That would quite seriously give me an upset stomach. There's about 2 weeks worth of fat in that thing.

Yeah, they pay when their life is shortened or they cant play catch with their son. And a company saying they will fine you if you dont conform, no matter how well you do the job, is attempting to control you- regardless of their motives.

It has nothing to do with a company fining you if you don't conform. Health insurance premiums are higher due to unhealthy lifestyle choices. The company either has to foot the bill or get less coverage for the rest of the employees.

Is that fair? All employees get reduced benefits because some people choose to be fat and unhealthy?

yep. I will continue to bring up the point of pregnancy. A woman doesnt have to get pregnant, and it is a very expensive period for an insurance company.

If a person is physically capable of doing their job, then they should not be punished for things they do outside of the company, unless of course it has an obvious impact on the view of the company (if you work for domino's, dont get drunk and drive around with your little triangle light on the top of the car, or if you play NFL football, dont host dog fights).

A company should not fine one person or another for reasons like this, especially based on their subjective judgements. Perhaps if the premiums are so high, some of these companies could designate an hour each day (paid, of course) to allow employees to work out at an on site gym. Sure, theyd lose some in payroll, but im sure the difference would be made up in this "healthy" lifestyle.

No matter how you spin it, this type of decision by a company is a company dictating to you how you should spend your time off the clock.

It has nothing to do with the company giving a shit about what you do off the clock. It's about them offering you healthcare benefits that you flush down the toilet by not taking care of yourself. The pregnancy comparison isn't valid. Pregnancy is not unhealthy. It is a nine month condition. Obesity, hyperlipidemia, hypertension, emphesema, Type II diabetes are chronic conditions. They are a burden on the healthcare system throughout the entire lives of the person that has them.

To be fair, maybe the company should say "Here are the terms of our health insurance policy. If you don't meet these terms, you have to pay such and such more per pay period. If you don't want our health insurance policy, you don't have to take it and you'll get such and such amount per pay period that we save"

Would that be okay? Then the employee could pay for his own benefits. The amount given by the employer would not be enough to pay for full medical coverage, obviously. Group health insurance is cheaper than individual. But at least the employee would be able to be a fat slob if they liked.

Either way you look at it, people that CHOOSE to be unhealthy should have to pay more for health insurance than those who don't. It is ridiculous for healthy people to have to pay higher premiums to cover the healthcare costs of those who live unhealthy lifestyles. You can do whatever you want with your life, until i start having to foot the bill for it.