Any insurance is, by definition, discriminatory since premiums are based on actuarial determinations of risk. For example, life insurance premiums are higher for men than for women because the life expectancy of the former is less than the latter. People who are engaged in high-risk activities such as mountain climbing are also subject to higher premiums or denial of life insurance coverage. Similarly, teenagers pay considerably more for car insurance than do adults because they are a higher risk group when it comes to accident claims. Someone with prior accidents or moving violations usually pays a higher premium for car insurance than someone who is accident free.

The question that arises is whether there are certain types of “risk” that should not be subjected to higher premiums. When I was a student in England in the sixties, I paid almost double the premium for car insurance because I was an immigrant, from a “developing country” or “under-developed country”, who had no driving experience in the UK – a person born in the UK or an immigrant from a “developed country” would however not be subject to a higher premium. I was told categorically by insurance agents that because immigrants, from “developing countries” are not familiar with road conditions in the UK they are viewed as high risk and so insurance companies either do not insure them or demand a much higher premium! However, the way the policy was structured, essentially it was “people of color” who paid the higher premiums. I was upset at the time though upon reflection, if there was actuarial evidence to show that immigrants were, in fact, prone to more accidents, I guess one could argue that it is a legitimate risk factor to be taken into account in determining a premium.

In the context of the health care reform debate there are several controversial proposals and initiatives ranging from taxing unhealthy foods (such as fast foods and soda) to making people pay higher health care premiums based on lifestyles choices that people adopt.

One of these controversial proposals is for a “fat tax” to be levied on state employees in North Carolina for health insurance that the state provides its employees, if the BMI of the employee exceeds certain benchmarks. Also, smokers would have to pay higher premiums. In defending the new program Anne Rogers, director of integrated health management with the N.C. State Employees Health Plan said: “Tobacco use and poor nutrition and inactivity are the leading causes of preventable deaths in our state,” said Anne Rogers, “We need a healthy workforce in this state. We’re trying to encourage individuals to adopt healthy lifestyles.” Tobacco users get placed in a more expensive insurance plan starting in July and, for those who qualify as obese, in July 2011.

It is generally accepted that smoking cigarettes causes cancer and heart disease. There is also substantial evidence that people who are considerably overweight are prone to several serious medical conditions ranging from heart disease to hypertension to diabetes. Not eating “right” can lead to high cholesterol and other ailments. So I am fully supportive of any measures that would increase the cost to people who indulge in life choices that make them more prone to developing illnesses that in turn cause the cost of health care in the US to increase. Why should people who maintain a healthy life-style be subsidizing the health care costs of those who do not?

The arguments of those opposed to these measures are based primarily on privacy grounds and the view that life-style changes should be accomplished through education as opposed to punitive measures such as the one proposed by the state of North Carolina. I agree that there is a role for education in changing life-styles but I am convinced that this is not enough. After all, most Americans are fully aware that being over weight presents health risks but despite this obesity is increasing – not decreasing. Cigarette smoking in the US has declined over several years and education has played a role – but so has the economic disincentive to smoke that has been effected through increasingly higher taxes on a pack of cigarettes.

According to the North Carolina’s “Alabama was out front on weight testing. Starting in January, state workers will have their blood pressure, cholesterol, glucose and body mass index checked by a nurse. If they’re in a risk category, such as a body mass index of 35 or greater or a blood pressure of 160/100 or greater, they are charged an extra $25 per month on their insurance premium. If they go to a health screening, either offered by the state or by their personal physician, then the $25 is subtracted, according to Gary Matthews, chief operating officer for the Alabama State Employees Insurance Board.

North Carolina will allow state workers with a BMI of up to 40 to keep the discount, although some experts consider anyone with a BMI of 30 to be obese.”

Cleveland Clinic, the world famous hospital, has a policy whereby it will not hire any person who smokes and while watching an interview with the CEO of Cleveland Clinic, I got the distinct impression that he would have instituted a policy of not hiring overweight employees if it would pass legal muster. The CEO said that the policy was necessary to reduce the mounting cost of providing health care coverage for its employees.

Let me hasten to add that I draw a distinction between health care risks that result from life-style choices and those that are the result of genetic factors or medical ailments that some races are more prone to developing. Life-style choices are precisely that – a choice! Inherited ailments are not something that an individual has any control over.

The current proposals for health care reforms don’t come close to creating the type of changes in life-style that are needed in the US. It is politically not feasible to start taxing “unhealthy” foods because any such proposal would result in a backlash as opponents of health reform would exploit any such move. But in the long run unless there is a reversal of the obesity epidemic the US will be faced with mounting health care costs. Currently, the US spends more money, by far, per capita on healthcare than any other country in the world and yet in terms of outcomes, the US does not rank anywhere near the top.

The challenge for the US as it considers healthcare reform is what can be done to improve the overall health of Americans as part of the process.

4 Responses to “Should a “fat tax” be part of health care reform?”

  1. Peter says:

    The case against excessive use of alcohol also needs to be addressed. Overindulgence in the use of alcohol also contributes to a number of health and emotional problems. In fact ask any smoker and he/she will tell you that they smoke most when they are imbibing. Moderate smoking is not going to make one any less healthy than excessive drinking. True I have no numbers to back up the statement, but suspect that if someone one were to do some drill down statistics (since I am too lazy) this can be proved to be the case.

  2. Vivek says:

    Good point Peter A – smokers are penalized(with heavy taxes etc. on tobacco products, at least in AU). However, the costs, both social and health-wise are probably greater, with excessive drinking. I can’t imagine the AU

  3. Vivek says:

    Good point Peter A – smokers are penalized(with heavy taxes etc. on tobacco products, at least in AU). However, the costs, both social and health-wise are probably greater, with excessive drinking. I simply can’t imagine the AU govt. imposing prohibitive taxes on alcohol though!

  4. TJ says:

    I am not sure how much of a problem “excessive drinking’ is in terms of contributing to health problems. Peter, your point is well made that a smoker probably tends to smoke more when he is drinking especially with company but the only way to stop that would be to ban smoking in bars.

    The US has been remarkably successful in reducing smoking and it has been done through a combination of education, prohibiting smoking in most public settings and making the cost of smoking almost prohibitive. Education alone will not combat the obesity epidemic in the US and elsewhere. It has to be a combination of education and creating financial disincentives when it comes to “unhealthy” foods and perhaps financial incentives when it come to “healthy” foods.

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