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Health risks will affect Graco workers' premiums

The manufacturer is leading a trend of rewarding employees who make their health a priority.

By CHEN MAY YEE, Star Tribune
Last update: October 18, 2009 - 12:13 AM

At the Minneapolis headquarters of Graco Inc., employees have been disappearing into conference rooms a lot recently.

The agenda isn't business -- it's health.

In the rooms, temporarily partitioned for privacy, they're having their blood pressure, cholesterol and height and weight measured. The readings will help determine their health premiums next year.

Graco is on the leading edge of the next trend in encouraging employees to get healthier and, presumably, hold down medical costs. Many companies already reward employees who sign up for diet, exercise or smoking cessation classes. But in Graco's case, workers actually have to keep their weight, cholesterol and blood pressure levels within a healthy range -- and not smoke -- to get a premium discount.

The idea is controversial. But since many of Americans' most common and most costly afflictions -- diabetes, heart disease, some cancers -- stem in large part from behavior, some employers are starting to argue that employees could do more to prevent them. Or pay the price.

The current debate over health care legislation in Washington is likely to fuel the controversy. Federal law already allows employers to offer premium discounts up to 20 percent on health insurance for those who take part in wellness programs, and bills in Congress could raise that to 30 percent, or as high as 50 percent.

"People who have higher risk are going to pay a little more, like auto insurance or home insurance," said Dave Delahanty, a Minneapolis-based benefits consultant at Watson Wyatt. "They're more expensive to insure."

Delahanty said he's aware of a handful of Minnesota companies that have gone as far as Graco, and predicts many will follow.

Ever-rising costs

Employers, who continue to sponsor health coverage for almost 60 percent of Americans, have struggled

Many employers also began subsidizing gym memberships and offering wellness coaching. But medical costs still went up.

Several years ago, employers began asking workers to fill out health risk questionnaires designed to predict -- and ideally avert -- health problems. Employees who filled out the form often got a lower deductible.

Even so, employers were getting only about 75 percent of employees to answer the questionnaires. Worse, they soon realized it was the remaining 25 percent who incurred the highest medical costs. In short, the sickest people weren't participating, making it harder for employers to intervene.

More recently, employers started measuring so-called "biometric'' indicators, such as blood pressure, cholesterol and height and weight, a measure of obesity.

"A lot of employers are starting to think beyond the health risk questionnaire," said Blaine Bos, a Minneapolis-based partner at the benefits consultant Mercer.

The most visible example nationally is Safeway Inc., the grocery chain. Employees who are obese and smoke, for example, pay a higher premium. If they lose weight and quit smoking within a certain time, they are reimbursed the premium difference.

The Safeway plan is voluntary and covers 74 percent of its insured, nonunion workforce. It has kept health care costs flat for four years, chief executive Steven Burd wrote recently in the Wall Street Journal.

Graco's experiment

Graco, a large Minneapolis-based manufacturer of fluid-handling equipment, prides itself on providing a generous health plan for its employees, many of whom have been with the company for years. Graco employs 1,500 people in the United States, most of them in Minnesota.

Employees are on a traditional preferred provider plan with deductibles of $250 for an individual and $500 for families. But after five years of health care costs rising 8 to 16 percent annually, Graco officials decided they had to do something more.

for years with rising health care costs. Each year, the most common response is to make employees pay a higher portion of premiums and higher deductibles and copays.