Tuesday, October 10, 2006

Legal Heavyweights

We’ve blogged before about lifestyle choices and insurance. But a 30 year old Michigan law may add some heft to the argument:

Although little-used since it was enacted in 1977, Michigan's unique protection [the Elliott-Larsen Civil Rights Act] is expected to grow in ever more conflict with employer crackdowns on unhealthy behaviors.

Apparently, some Michigan employers are being sued for terminating obese employees. The rationale is that such folks are at far greater risk for heart attacks (and, one supposes, more sick time), which may not be too far off the mark:

A 2003 report by the U.S. Department of Health and Human Services estimated the cost of obesity to U.S. companies at $13 billion per year, based on $8 billion in health care costs, $2.4 billion in paid sick leave, $1.8 billion in life insurance and $1 billion in disability insurance.” (ibid)

That’s a lot of claims paid on behalf of one subset of employees. Michigan’s law is unique: federal law doesn’t really address the issue. The much-vaunted ADA (Americans with Disabilities Act) only comes into play if the affected employee suffers a disability as a result of his condition. If an employer terminates an employee before a disability occurs, he stands a pretty good chance of making it stick.

One of the benefits of group insurance is that it is “guaranteed issue;” that is, a carrier can’t decline a group because of health conditions. But the other side of that coin is that the insurer can (and do) charge a hefty premium for unhealthy groups, and a company with a lot of overweight employees certainly fits the bill. Another facet of group cover is that a carrier can’t decline a particular person, or charge one employee more than the others. The whole group subsidizes the unhealthy (e.g. obese) worker. Such is the nature of the product, and thus employers looking to trim their health insurance costs are tempted to dismiss high risk folks.

Is this a slippery slope? You bet: smokers fit this criteria, as do alcoholics and folks with high cholesterol. I suspect we’ll see more of this type of activity in the future.
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