Archive for November, 2011

Obesity and Smoking: Pay to Play?

Thursday, November 3rd, 2011

We all know that people who smoke and/or are obese tend to have more medical problems, of greater duration, compared to people with healthier lifestyles. The higher medical costs associated with smoking and obesity translate into higher cost for insurance. As a result, it is no surprise that there is a strong trend among employers to charge more for the insurance premiums of workers who smoke or who are obese.
The Insurance Journal writes that the use of premium penalties is expected to climb in 2012 to almost 40 percent of large and mid-sized companies, up from 19 percent this year and only 8 percent in 2009. An Aon Hewitt survey released in June found that almost half of employers expect by 2016 to have programs that penalize workers “for not achieving specific health outcomes” such as lowering their weight, up from 10 percent in 2011. The premium surcharges usually come hand-in-hand with incentives to quit smoking and lose weight. Unfortunately, the carrot of incentives, by themselves, have not succeeded in lowering health costs. Hence the big stick.
Taxing the Poor?
As is often the case, lower paid workers bear the brunt of the higher costs. Obesity and smoking often – but not always – accompany lower income lifestyles. Low income workers already pay a larger proportion of their income for health insurance; now they will pay more for the consequences of their smoking (a formidably taxed bad habit) and obesity (the result of poor dietary habits). The working poor often live in neighborhoods with limited fresh foods and nothing much in the way of health clubs – which they can’t afford anyway.
There is evidence that the carrot and stick approach actually works. We have written about the Cleveland Clinic, which refuses to hire smokers or obese individuals and which fosters healthy lifestyles among its 40,000 employees. The clinic has seen medical costs grow by only 2 percent this year, far below the national average of 5 to 8 percent.
The Big “But…”
The move to force people into healthy lifestyles does raise a few interesting issues.
1. In cases where obesity or other unhealthy conditions are beyond the control of the individual (genetics, specific diseases, etc.), the higher premiums might be considered discriminatory, although there has been little such litigation to date.
2. Healthy lifestyles (including regular exercise) may well result in higher medical costs for maintaining well-tuned bodies: the ever-growing incidence of knee, hip and shoulder replacements among active people.
2. The goal is to reduce medical expenses, but the leverage exists only with the principal policy holder: there is no way to force other family members to abide by the lifestyle guidelines.
3. The imposition of wellness standards can lead to legitimate privacy issues: for example, holding employees accountable for behavior away from the job (smoking, drinking, eating).
If all goes as planned, medical costs will indeed come down and people will live longer and longer lives. As people with healthy lifestyles live longer, we will have succeeded in transferring costs from private insurers (who cover working people and their families) to social security (which covers retirees). That will require a hike in social security taxes, which the working poor, among others, can ill afford. It seems that every solution carries the seeds of new problems, just as every problem gives rise to new solutions. It is a privilege, of course, just to watch the entire process as it unfolds before us.

Cavalcade of Risk #143: The Mister Rogers’ Neighborhood Edition

Wednesday, November 2nd, 2011

Welcome to Cavalcade of Risk #143. In searching to see if the number 143 had any particular significance, we stumbled on an interesting bit of trivia about the late lamented children’s hero, Mr. Rogers. For the last 30 years of his life, he maintained his weight at exactly 143 pounds. According to writer Tom Junod, Rogers found beauty in the number because, “the number 143 means ‘I love you.’ It takes one letter to say ‘I’ and four letters to say ‘love’ and three letters to say ‘you.’ One hundred and forty-three.” There are a lot of interesting facts associated with Mr. Rogers. Did you know that every one of his famous sweaters was knitted by his Mom? Learn more in 15 reasons Mr. Rogers was best neighbor ever. The world would probably be a lot less risky a place if we all took Mr. Rogers’ message of respect to heart.
Moving on to our entries this week, we begin with some good news that we can all revel in. In his post Remember: I’ll Drink to That!, Henry Stern of InsureBlog tells us that moderate tippling may reduce our risk of Dementia. We’re not sure Mr. Rogers would approve, but pass the Bloody Mary, please.
At Risk Management Monitor, Emily Holbrook notes that Thailand’s worst flooding in five decades has affected companies in every industry, from automotive to technology to pharmaceuticals and beyond. She demonstrates Thailand importance in global supply chains in her post about the 5 companies hit hardest by the Thailand floods.
If Doctors were aware of the actual costs of healthcare being incurred when they provide treatment, would that help in controlling costs? Louise Norris of Colorado Health Insurance Insider examines a physician’s cost control suggestion in her post about real time tracking of healthcare costs.
Russell Hutchinson covers the insurance equivalent of the last mile: actually ensuring that coverage will work for you by covering the proper handling of the policy and how the proceeds will feed into your estate management plans. See Insurance and the Filing Cabinet at Chatswood Consulting Moneyblog.
Despite the fact that millions of children are uninsured, many of these children are eligible for Medicaid/CHIP. Jason Shafrin, The Healthcare Economist, examines trends in participation in these public insurance programs in his post about state governments providing health insurance to more children.
David Williams offers his thoughts on the risk-reward tradeoff related to prostate-specific antigen testing in his post a few observations on the PSA testing debate at Health Business Blog.
Are on-line video doctor visits are a cost effective way to increase access to health care? In his post about virtual medical office visits, Dr. Jaan Sidorov points out that this form of telemedicine has the additional advantage of offering a lower cost alternative for insured beneficiaries who already enjoy high access.
In which industry are you most at risk of suffering an on-the-job injury: construction, manufacturing, mining, or nursing homes? Find out in our Pop Quiz here on Workers Comp Insider
Eric Turkewitz of New York Personal Injury Law Blog presents a real-world case of an insurer playing the odds and losing in his post about a insurer being slammed for bad faith as the Judge cites “A Few Good Men”.
Jacob looks at five common life insurance mistake and how to void them at My Personal Finance Journey.
FMF says there are standards that every policy should uphold as well as additional, more personal considerations to take into account when buying long-term care insurance. He offers guidance for the basics in buying long-term care insurance at Free Money Finance.
Should the Federal Insurance Office release insurers’ statutory financial data to the public in a manner similar to that used by the SEC with its EDGAR tool? R.J. Lehmann tackles this topic in FIO, FOIA and a free market in insurance data posted at Out of the Storm News.
Super Saver makes the case that while the short term downside risk of the stock market is high, the long term downside risk is still low in his post Is it Different this Time? at My Wealth Builder.

Highest injury rate POP quiz: construction, manufacturing, mining, or nursing homes?

Tuesday, November 1st, 2011

Pop quiz:
Match the Injury Incident Rate per 100 Full Time Equivalents (#1 through #4) with the industry (A, B, C, D)
1. 8.6
2. 5.6
3. 4.8
4. 3.5
A. building construction
B. coal mines, underground workers
C. nursing home workers
D. tire manufacturing workers
Answers: 1-C, 2-B, 3-D, 4-A
Yes, you read that right. Nursing home workers are at higher risk of injury than underground coal miners, construction workers, and tire manufacturers. And the picture is pretty much the same when you talk about serious injuries that result in lost time. “The lost-time/ restricted duty injury case rate for nursing home workers is 5.6 per 100 FTEs, compared to 3.7, 3.3 and 1.7 for these same sub-industries, respectively.”
At The Pump Handle, Celeste Monforton posts about new data that reveals that nursing home workers face an extraordinarily high rate of on-the-job injuries.
Of the 16 million US workers employed in health care and social assistance, more than 3 million are employed in US nursing and residential care facilities. In comparison, Monforton notes that about 17.1 million people were employed in manufacturing and construction. OSHA focused approximately 78% of its inspections on these two industries, and less than 2% on healthcare workers. She notes that there are different standards or triggers to prompt inspections in these industries. “Manufacturing plants on the targeting list, for example, aren’t selected for a possible inspection unless their DART rate* is 7.0 per 100 FTEs or greater. Nursing homes in contrast, have to have a DART rate of 16 per 100 FTEs or greater to “make the cut” for a possible inspection.
*DART: days away from work, restricted-duty or transfer to a different job
Related
NCCI study on safe lifting programs for long-term care facilities