Is it OK to charge employees for unhealthy habits? Learn pros & cons

The debate swirls around disincentives

Charging employees for smoking, high cholesterol, and obesity. How do you think this would go over in your workplace? In a controversial move, Indiana-based Clarian Health Partners has announced a program of "disincentives" for employees with high blood pressure, high cholesterol, high body mass index, and smokers.

Initially, Clarian's 13,000 employees were offered the chance to complete a health risk assessment, with a 20-30% participation rate, which increased to 40%-50% after a $25 gift card was offered as an incentive.

In 2006, employee premium contributions were raised by $150 annually, with the increase cut by $100 if the health risk assessment was completed, and another $50 deducted for non-use of tobacco products within the previous six months. More than 90% of employees completed the health risk assessment that year.

"Most companies will raise the contribution and then tell the employee they will get an incentive if they do X, Y, and Z, which is a little like bait and switch," says Lee Campbell, MD, executive medical director of Clarian ambulatory care management. "This year, we decided to move to a program that is more transparent."

For the 2008 benefit year, the "Call to Change" program will require employees to complete the health risk assessment to be eligible for health plan benefits, including a question about use of tobacco products. "If you state that you have used them within the last six months, you will then be assessed $5 every pay period," says Campbell.

For 2009, employees will be charged $5 per pay period for each of the following: low-density lipoprotein cholesterol over 130, blood glucose levels over 120, and blood pressure higher than 140/90. If the employee's body mass index is 30 or greater, $10 will be deducted from paychecks. "We monitor the percentage of our employee population with health risks and have found reductions in every area, except for one, which is obesity," says Campbell. "That has gone up from year to year, which is one reason the assessment for that is higher."

All monies that come in will be used for employee wellness programs, says Campbell, who estimates that about one-third of its employees will meet the definition of obese. About a quarter are tobacco users.

Employees have been forewarned about the coming penalties to give them time to work on getting their numbers in acceptable ranges, says Campbell. "They have 18 months to make changes if they need to," he says. "We are going to allow updated information on a quarterly basis throughout the calendar year. If employees do reach a goal for blood pressure, for example, we will remove the assessment." If the employee loses 10% of their body weight, the charge will be reduced to $5, he adds. "That would allow people to at least start a program to allow them to get closer to their goal and receive a reduction for their efforts," says Campbell. In addition, if the employee's doctor verifies that the treatment plan is being complied with but it's too early to see results, the employee will be exempted from the charges, he adds.

About 14 of Clarian's occupational health nurses do the onsite screenings and braced themselves for a negative response after the penalties were announced, says Sherri Bertram, RN, manager of ambulatory care. "We looked at it as what we'd be up against, and it hasn't been that way at all," Bertram says. "For the most part, people have been very interested in what their numbers are and improving them."

Since the penalties were announced, participation in wellness programs has increased significantly, Campbell reports. "Most people are willing to change," he says. "We had to double the number of classes we offer in a program called Fight the Fat. We sent a health coach out to one facility, and she had 50 people sign up in one hour for weight loss management courses."

Lawsuits are likely

Clarian already has been contacted by several employers who want to implement a penalty program but are worried about the backlash, says Campbell.

"We are finding that those fears are unwarranted," he says. "Our organization has taken up the charge here," Campbell says. It's more than simply a marketing campaign, he says. We are calling for people to change, not only for individuals to improve their health, but also for employers to provide benefits in a different way," Campbell says.

Sixty-two percent of employers surveyed by New York City-based PricewaterhouseCoopers said that employees with unhealthy lifestyles, such as smoking, poor diet, and inadequate exercise, should pay more for health insurance.

Jeremy E. Gruber, JD, legal director of the National Workrights Institute, a Princeton, NJ-based employee rights group, says, I think that employers are going to be taking more and more punitive stances against employees based upon their health status."

There likely will be litigation over this issue, possibly involving privacy and discrimination claims, adds Gruber. "Unfortunately, employers are faced with the high cost of health care, and a minority, but a growing minority, are going to make the wrong decision and try to save a dollar on the backs of their employees," he says.

He points to final regulations from the U.S. Department of Labor on the Health Insurance Portability and Accountability Act (HIPAA), which in January 2007 set a rate of 20% of the cost of health insurance as the maximum surcharge an employer can charge based on an employee's health status. "This will give employers a sense of security to take more of these kinds of actions," says Gruber.

Not good long-term strategy?

Penalties may "poison the well" of employee goodwill and make it more difficult to sustain employee wellness efforts," says Larry Chapman, MPH, senior vice president of Portland, OR-based WebMD Health Services, which provides health information services to employers and health plans. Instead, he recommends using larger "carrots," such as giving employees a $600 to $1,800 reduction in annual health plan contributions for meeting certain wellness criteria.

"Every year, you want employees to re-examine key wellness issues," he says. "Using a large 'carrot' financed by employees themselves will produce sustainable long-term change," he says. However, if employers use small "carrots" such as $100 to $300, and don't get the participation they want, they may decide to use more "sticks," says Chapman.

Employees should have the choice to participate in wellness programs, but if they refuse, they need to have the consequence of paying more for their health benefits, says Chapman. "Give them the option, but make clear the consequence," he advises.

Occupational health professionals are "throwing the idea of disincentives on the table" much more than last year, says Kay N. Campbell, EdD, RN-C, COHN-S, FAAOHN, president elect of the American Association of Occupational Health Nurses (AAOHN), but she worries about morale problems. "If you happen to be the person singled out, how would you feel about it? I think you ostracize people by doing those kinds of things," she says.

Tying a health risk assessment to less contribution has been done by many companies for a long time with some fairly significant success, and this option still gives the employee a choice, says AAOHN's Campbell. "But if you are dropping people from health coverage, that really isn't giving people a choice," she says. "I can't imagine somebody won't sue [Clarian]."

For occupational health nurses, penalties mean it "becomes a huge challenge to continue to help people," says Kay Campbell. "Now you have to overcome the issue of feeling forced to do something," she says. It is almost coercion in some sense," Kay Campbell says. "Have they set up an antagonistic culture? It is an interesting dilemma," she says.


For more information on disincentives and employee wellness, contact:

  • Sherri Bertram, RN, Manager, Clarian Ambulatory Care Management, Clarian Health, 950 N. Meridian St., Suite 500, Indianapolis, IN 46204. Phone: (317) 962-6720. Fax: (317) 962-1760. E-mail:
  • Kay N. Campbell, EdD, RN-C, COHN-S, FAAOHN, GlaxoSmithKline, Global Health and Productivity, South Expansion 2483, Five Moore Drive, Research Triangle Park, NC 27709. Phone: (919) 483-2185. Fax: (919) 483-8535. E-mail:
  • Lee R. Campbell, MD, Senior Medical Director, Clarian Ambulatory Care Management, Clarian Health, 950 N. Meridian St., Suite 500, Indianapolis, IN 46204. Phone: (317) 962-4297. Fax: (317) 962-1760.
  • Larry Chapman, MPH, Senior Vice President, WebMD Health Services, 2701 NW Vaughn St., Suite 700, Portland, OR 97210. Phone: (206) 364-3448. Fax: (206) 368-9719. E-mail: Web:
  • A report on employer approaches to encourage employees to take more responsibility for their health was published by PricewaterhouseCoopers' Health Research Institute in March 2007. A full copy of the report can be downloaded at no charge at Under "Industry Sectors," click on "Healthcare." Under "Of further interest," click on "Health research institute." On the left side of the page, click on "Publications/Thought Leadership," then "Payers," and then "Tailoring the approach: Employer attitudes and healthcare strategies address distinct issues."