Being Unhealthy Could Cost You—Money

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While Clarian's plan is highly unusual, a few other employers are using the stick approach, too. Western & Southern Financial Group, a Cincinnati-based insurance and financial-services provider, has been issuing employees with high BMIs a surcharge to their premiums since 2001. Depending on their scores, employees are charged a tiered fee of between $15 and $75 a month if their self-reported BMI is high, but can have those fees refunded if their numbers go down. Preventure, a provider of fitness and wellness programs for midsize to large employers, has one client in the manufacturing industry that rewards employees when their BMI falls from their baseline score and charges them more when their number rises. "We haven't seen a lot of companies do it," says Laura Gilligan, director of business development for Preventure, "but I sense it might be a trend."

What's more likely for employers who start measuring health results is that they will provide carrots. In July, UnitedHealthcare began offering a new plan targeted at small businesses called Vital Measures, which combines a high-deductible insurance plan with a supplemental plan that provides discounts for healthy outcomes. Members who choose to participate will receive $500 discounts toward their deductible for each cholesterol, blood pressure, and BMI level they meet, along with refraining from tobacco use or taking a health risk assessment.

Legal Questions

A reward-driven approach will surely be better received by employees, say benefits consultants. "The concept of penalizing for poor health is not well accepted, and a lot of employees would react badly to it," says Bruce Kelley, a consultant in the health-care practice of human resources advisory firm Watson Wyatt Worldwide. Clarian Health admits that its program is aggressive by design, and that employee reaction has been mixed, with much debate on its internal message boards. While some employees were supportive, there's been "the other reaction that this is very personal," says Wantz, with people asking, "'How dare you? This is my personal space.' There's been a lot of questions and confusion."

That's why some benefits consultants and health-care groups think many companies won't adopt a plan like Clarian's anytime soon. "People are not interested in making their employees unhappy," says Helen Darling, president of the National Business Group on Health, a nonprofit that represents large employers' health-care interests. "We're in a war for talent, and there are more than enough work-related challenges to manage people and performance that [penalizing] for something that is so complicated, so personal, so hard to deal with, just isn't the right thing to do at this point."

Others may steer clear of such aggressive plans until questions are ironed out about other legal issues besides HIPAA. Sharon Cohen, Watson Wyatt's group and health-care benefits counsel, says that "any time an employer tries to influence employee behavior and they start to become more aggressive, there are other laws that are implicated," including the Americans with Disabilities Act. She says it's not clear how the requirement of taking a health risk assessment to be eligible for an insurance plan, like Clarian's, would be seen by the Equal Employment Opportunity Commission under the ADA. Clarian's Wantz says their plan has been extensively reviewed by attorneys.

Still, Clarian's approach has already attracted interest. Wantz says it has received calls from several local companies, along with other hospital systems, interested in their approach. "The most common response from other employers," he says, "has been 'thank you.'"

McGregor is BusinessWeek's management editor.