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Do the Overweight Pull Their Weight?

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A result from Kate Bundorf that (a) I'd like to believe, (b) Seems logical in light of basic micro, but (c) Still strikes me as implausible:

Who pays the added costs associated with high rates of obesity? Most health insurance in America is purchased by employers, who negotiate a single rate to cover all of their employees. That might imply the employers (along with their slimmer workers) subsidize health expenditures on the obese. But Bundorf found otherwise. In the working paper “Incidence of the Healthcare Costs of Obesity,” published last year by the National Bureau of Economic Research, Bundorf and co-author Jay Bhattacharya, also a health economist at Stanford, compared the wages of obese and non-obese workers, taking into account whether or not the subjects had employer-sponsored health insurance.

They found that non-obese workers earn higher cash wages than their obese colleagues—but only in workplaces that offer health coverage. They concluded that employers are likely to be offering lower cash wages to obese workers to compensate for the higher cost of insuring them. In other words, the cost of being overweight is borne by the employee rather than the employer.

I've often argued that alcoholic workers internalize the cost of their reduced productivity, because employers soon see their poor performance and penalize them accordingly. And obviously, obesity is a lot easier to see than alcoholism. But are employers really clever enough to penalize the obese for driving up their firm's insurance premiums?

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KipEsquire writes:

I'm confused. I don't remember ever being weighed on the job, and as I understand it my medical records are private under HIPAA.

What's more, "obesity" is neither a bona fide medical diagnosis nor a dummy variable (e.g., the way that "diabetes" or "HIV+" are).

So where exactly are these data and studies coming from?

Kevin Newsom writes:

Some companies now have plans that link an employee's BMI (body mass index) to their premium. If your BMI is over a certain threshold, you pay more for your insurance.

Carl Shulman writes:

More plausibly, obesity is unpleasant to look at, employers discriminate against the obese, and this incidentally compensates for the insurance benefit.

Floccina writes:

Carl did you miss this '—but only in workplaces that offer health coverage' or am i missing something?

Dr. T writes:

There is a stereotype that obesity equates with laziness. A manager doing annual performance reviews of an obese worker and a slim worker may tend to underestimate the productivity of the obese employee and give a smaller (or zero) annual raise. A few years of this would result in the obese worker getting significantly less pay.

The lack of such effect in workplaces that do not offer health insurance may be due to other factors such as smaller company size and lower likelihood of annual performance reviews.

Bruce G Charlton writes:

"alcoholic workers internalize the cost of their reduced productivity"

Except in the public sector, where the cost of alcoholism is absorbed by co-workers ;=)...

Brad Hutchings writes:

I believe this. It's consistent with what I've seen in several places where I had no management responsibility but "access" to key decision makers. In small and medium companies, family size (which can determine the insurance bill for one employee) can easily affect salary. Employer has a budget for a position, and if the person filling the position costs more for insurance, they get a lower salary offer, or if it wasn't plausible to figure out their insurance burden before hiring, they don't get a raise as quickly. It's probably illegal as hell, but it happens and it should be encouraged so long as insurance is paid for with pre-tax dollars. Making such wage discrimination totally legit would encourage more employers to offer coverage. No?

another bob writes:

My experience with a couple hundred subordinates is that the best way to increase your income/salary is to change jobs proactively and fairly often.

I wonder if obese people tend not to change jobs as frequently as slimmer folks? That would be my own biased observation.

Sounds like a freakonomics-lite question.

Agent00yak writes:

So an alternative unnecessarily complicated theory would be that once fat people get a job with health insurance they are less likely to switch jobs than their more healthy counterparts. Therefore their wages are lower. Now, obsese people at companies without health insurance are greater risk takers, so no salary diffference shows up. One could take this argument farther and state that the risk taking nature of the obese people at companies without health insurance might overcome a downward salary bias that obese people tend to suffer.

R.J. Lehmann writes:


BMI is used as a metric in life insurance. Actually, it's not new at all -- actuarial tables have always included height weight, it's just recently that it's been referred to specifically as a BMI measure.

But it is not, to my knowledge (which is fairly extensive in this area) used by anyone in health insurance underwriting. Certainly not in the group setting, in any case, which is what's relevant here -- group plans by definition underwrite the enterprise, without distinction between individual insureds.

In the individual health market, which represents a much smaller piece of the health insurance pie, underwriting technology is actually a lot more crude than most imagine it to be. Rather than attempting to assign rating values to specific risk variables (which most insurers are hamstrung in getting approved by state regulators anyway, and in "community rating" states, are not allowed at all) they would just as soon use the presence of, eg, diabetes, heart disease, and so forth as exclusionary factors. If you have them, you can't get coverage, unless you live either in a guaranteed issue state, or one with a high-risk pool.

M.D. Fatwa writes:

I'm curious how Bundorf separated out the negative salary effects attributable to obesity, with the also widely researched positive effects on salary attributable to physical attractiveness. This assumes, of course, that slimmer people, as a group, will tend to have a higher proportion of "physically attractive" members, but this hardly seems unlikely. Is obesity driving down one group's wages (presumably to compensate for higher healthcare costs), or are good looks driving up the salaries of the slim group?

Fred Ghansah writes:

"More plausibly, obesity is unpleasant to look at, employers discriminate against the obese, and this incidentally compensates for the insurance benefit."

If you read the study in question, you'll see that the wage penalty is only seen in companies which provide employer-sponsored health insurance. If your explanation was correct, you would see an obesity wage penalty across all companies. Pretty convincing study, if you ask me.

The only thing I see that could trip them up is the assumption that jobs which provide health insurance and those that don't are not fundamentally different.

Regina writes:

There are many laws related to human resource management that are supposed to prevent discrimination of any kind. Employees’ physical attributes should not be an issue come payday. Slim people have health problems too and just because their slim doesn't mean their immediate family is. The whole idea of paying someone less because of healthcare is not only wrong it’s also a ridiculous way for an employer to say a buck.

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