3433-vol. 6 issue 2-3.pmd - iarfc

Volume 6, Issue 2 & 3 41
typical nonsmoker’s net worth was roughly 50% higher than light smokers
and roughly twice the level of heavy smokers. In addition, there was a
statistically significant negative relationship between net worth and smoking,
which appears to harm a smoker’s wealth as well as his or her health.
Studies have also confirmed an association between obesity,
earnings, and wealth accumulation. A so-called “fat penalty” appears to
particularly affect White females. Zagorsky (2005) found a large negative
association between body mass index (BMI) and White female’s net worth, a
smaller negative association for Black women and White males, and no
relationship for Black males. In addition, large amounts of weight loss were
associated with a dramatically improved financial position. Conley and
Glauber (2005) estimated that a one percent increase in a woman’s body mass
index (BMI) is associated with a 0.6 percentage point decrease in family
income. Men, however, appear to experience no negative effects of body
mass on economic outcomes. Several organizations have estimated the
financial cost of obesity. In addition to the above-mentioned Rand Corporation
estimate of 20% to 30% higher health care costs for the moderately obese
(Rand Corporation, 2004), the Centers for Disease Control and Prevention
estimates that a 10% weight loss could reduce an overweight person’s lifetime
medical costs by $2,200 to $5,300 (U.S. Department of Health and Human
Services, 2003). Research firm RTI International estimates that obese people
spend $900 a year more in medical expenses than people of normal weight
(Andrews, 2004). The cost to employers of unhealthy behaviors, both in
health care expenses and absenteeism, is enormous. Therefore, it is not
surprising that some employers are providing wellness programs, cash
rewards, and/or health insurance premium discounts to workers who quit
smoking and lose weight.
Planning Strategies
Primary and Secondary Health Care Expenses
Primary health costs are out-of-pocket expenses for health care
services. Examples are co-payments, deductibles, and physician and hospital
bills not covered by health insurance. The amount that patients are responsible
for varies with the quality of their health coverage. The best policies
have low (e.g., $100) yearly deductibles, low (e.g., $2,000) annual co-insurance
caps (a.k.a., stop loss limits), low (e.g., $5 or $10) co-payments for prescription
drugs and office visits, high (e.g., $1 million per person or unlimited) lifetime
maximum payments, and a wide choice of medical service providers.
Secondary medical costs are expenses that are tangential to the
provision of direct medical services but can cause financial difficulty just the
same. A family medical crisis can lead to lots of seemingly small unexpected
expenses that add up. Examples include airfare, mileage, parking, and tolls to
travel to hospitals and meals eaten on the road or in hospital cafeterias. Also,