The incidence of obesity has increased dramatically in the U.S. Obese individuals tend to be sicker and spend more on health care, raising the question of who bears the incidence of obesity-related health care costs. This question is particularly interesting among those with group coverage through an employer given the lack of explicit risk adjustment of individual health insurance premiums in the group market. In this paper, we examine the incidence of the healthcare costs of obesity among full time workers. We find that the incremental healthcare costs associated with obesity are passed on to obese workers with employer-sponsored health insurance in the form of lower cash wages. Obese workers in firms without employer-sponsored insurance do not have a wage offset relative to their non-obese counterparts. Our estimate of the wage offset exceeds estimates of the expected incremental health care costs of these individuals for obese women, but not for men. We find that a substantial part of the lower wages among obese women attributed to labor market discrimination can be explained by the higher health insurance premiums required to cover them.
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This paper was revised on September 26, 2006
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