A working paper, titled “The Incidence of the Healthcare Costs of Obesity,” published on the Web site of the National Bureau of Economic Research suggests that employers are paying obese workers less in salary as a result of their higher medical costs. Traditional thought has been that the medical expenses of obese workers are passed onto their employers and co-workers, but the Stanford study suggests that obese workers pay for it themselves with lower salaries.
Since employment-based health insurance requires that employees in the same plan make the same contributions to premiums, employers then must adjust wages of obese employees to account for their greater health care costs, according to the study. Researchers made no attempt to address whether the wage disparity is fair, noted study co-author Kate Bundorf, MPH, PhD, assistant professor of health research and policy at Stanford and a fellow at the university’s Center for Health Policy/Center for Primary Care and Outcomes Research, in a press release; rather it shows that strong economic incentives exist for employers to adjust for the varying costs of providing medical benefits to different types of workers.
The study did not show any conclusions about how the pay disparity occurs. “We don’t think this is a conscious process where the employer says, ‘OK, Jane is obese, and we’re paying for her health coverage, so let’s pay her this much less in wages,'” Bundorf said, in the release. However, the finding suggests that the pay for obese insured workers rises more slowly than that of their normal-weight counterparts, which could mean that such employees may be getting smaller and less frequent net pay increases than their co-workers.
The study examined hourly wages of obese and non-obese workers with health insurance, adjusting for several factors including education, experience and job type. This comparison showed that insured obese employees earned $3.41 in 1998, less per hour than insured workers who were not classified as obese. This difference appeared to be minimal when employees are young, but grows over time. However, when wages were compared between the two sets of employees without employer-sponsored health care, the findings showed no pay differential. Researchers also examined the effect of employee weight on other benefits, including retirement plans and life insurance, and found no difference in wages there either. Therefore, the study said, the lower pay given to obese workers could be explained by their higher expected medical costs instead of outright prejudice.
The study conclusions affect a growing number of people, as the proportion of American adults classified as obese rose from 12% in 1991 to 20.9% in 2001, the release stated. Health care costs are greater for such individuals, because they are at higher risk for some chronic conditions, according to a study published in Health Affairs, which said annual medical expenditures are $732 higher on average for obese adults than for normal-weight adults.
The study was co-authored by Jay Bhattacharya, MD, PhD, assistant professor of medicine at the Center for Health Policy/Center for Primary Care and Outcomes Research.
The paper is available to download, for a fee of $5, at http://papers.nber.org/papers/w11303 .