Financial penalties for unhealthy behaviors: Ethical considerations

Writing in Health Affairs (Financial Penalties For The Unhealthy? Ethical Guidelines for Holding Employees Responsible For Their Health) Steven D. Pearson and Sarah R. Lieber make a brave attempt at laying out ethical guidelines for companies establishing employee health incentive programs that include penalties. Their framework is good and they raise a number of interesting points. Ultimately, however, I don’t find their reasoning compelling.

The authors discuss:

  • Ethical foundations for penalty programs
  • Selecting targets for penalties
  • Administration of penalties

The main ethical foundation the authors cite is “economic harms.” They say:

The primary principle supporting employers’ use of penalty programs is that employees should be held responsible if, through their voluntary actions, they harm fellow employees. Given that costs are shared, an unhealthy employee will drive up costs for others who are contributing to the collective pool… The impact of unhealthy behavior and its attendant outcomes is significant… Such costs burden fellow employees by leading to lower wages and higher premiums for group insurance coverage.

This doesn’t make all that much sense to me. Companies are owned by shareholders seeking to increase the value of their equity, not by employees who contribute to a “collective pool.” An unhealthy behavior may drive up costs, but it’s not clear that such behaviors actually harm other employees. Total compensation is based mainly on market rates, not what other employees cost the company. And if we’re going to start justifying penalties on the “economic harms” basis, why focus just on health behaviors? There’s probably more significant harm done to companies by employees that are lazy or make poor decisions at work.

The authors make some good points in the section on selecting targets for penalties. For example, they suggest that people shouldn’t be penalized for the presence of nicotine (since it’s an addictive substance) but they could be penalized for failing to enter a smoking cessation program. They also suggest “accommodation for fundamental behavior” and here again I disagree.

Another ethical criterion for penalty programs is the exclusion of penalties for “unhealthy” types of behavior that society acknowledges to be fundamental elements of personal freedom and identity. Holding employees responsible for the costs of any behavior that increases health care costs would undermine the liberty of choosing for oneself how to live one’s life.

For example, penalties should not be considered for behavior such as sexual activity, bearing children, and most recreational activities and sports. Although these types of behavior may entail increased health risks and costs, they are widely accepted in our society as critical components of self-expression, free choice, and personal identity. Admittedly, it is a matter of judgment whether some activities that increase risks and costs, such as “extreme” sports, are worthy of accommodation on this basis.

I understand what the authors are saying, but it’s a bit rich to carve out such broad exclusions. Why should employees be penalized for smoking or being overweight but not for having unprotected sex with multiple partners? Bearing children is fine but has a direct impact on health care costs by increasing the number of dependents and generating significant medical costs for mom. Those costs are likely to be a lot higher than the $670 in extra costs cited for the typical obese employee. The authors acknowledge that judgments are required but still want to push through this “ethical approach.”

As the authors write in the section on discrimination:

It is hard not to notice that all of the early penalty programs target employees who are obese and employees who smoke.

I’ll be somewhat surprised if many employers push beyond punishing obese people who don’t try to lose weight and smokers who don’t try to quit. It seems quite possible that the whole concept of punishing unhealthy behaviors through financial penalties on health insurance will fail to become widespread, once employers realize that attempts to be ethical put them in tough territory. I won’t mind if that’s what happens.

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